1. Material Accounting Policies
Statement of Compliance
These financial statements have been prepared in
accordance with Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies Act, 2013 and
amendments thereto. The financial statements have also
been prepared in accordance with the relevant presentation
requirements of the Companies Act, 2013. The Company
adopted Ind AS from 1st April, 2016.
Basis of Preparation
The financial statements are prepared in accordance with
the historical cost convention, except for certain items that
are measured at amortised cost or fair value, as explained
in the accounting policies.
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 Company 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 financial statements
is determined on such a basis, except for share-based
payment transactions that are within the scope of
Ind AS 102 - Share-based Payment, leasing transactions
that are within the scope of Ind AS 116 - Leases, and
measurements that have some similarities to fair value
but are not fair value, such as net realisable value in
Ind AS 2 - Inventories or value in use in Ind AS 36 -
Impairment of Assets.
The preparation of financial statements in conformity
with Ind AS requires management to make judgements,
estimates and assumptions that affect the application of the
accounting policies and the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the year. Actual
results could differ from those estimates. The estimates
and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period; they are recognised in the period
The Company is a diversified conglomerate with
businesses spanning Fast-Moving Consumer Goods
(Cigarettes & Cigars, Foods, Personal Care Products,
Education & Stationery Products, Safety Matches and
Agarbattis), Paperboards, Paper and Packaging, and
Agri Business.
of the revision and future periods if the revision affects both
current and future periods.
Operating Cycle
All assets and liabilities have been classified as current
or non-current as per the Company's normal operating
cycle and other criteria set out in the Schedule III to the
Companies Act, 2013 and Ind AS 1 - Presentation of
Financial Statements 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 identified twelve months as its operating
cycle.
Property, Plant and Equipment
Property, plant and equipment (PP&E) are stated at cost of
acquisition or construction less accumulated depreciation
and accumulated impairment, if any. For this purpose,
cost includes deemed cost which represents the carrying
value of PP&E recognised as at 1st April, 2015 measured
as per the previous Generally Accepted Accounting
Principles (GAAP).
Cost is inclusive of inward freight, import duties &
non-refundable taxes and incidental expenses related
to acquisition. In respect of major projects involving
construction, related pre-operational expenses form part of
the value of assets capitalised. Expenses capitalised also
include applicable borrowing costs for qualifying assets,
if any. All upgradation / enhancements are charged off
as revenue expenditure unless they bring similar significant
additional benefits.
An item of PP&E is derecognised upon disposal or when
no future economic benefits are expected to arise from
the continued use of asset. Any gain or loss arising on the
disposal or retirement of an item of PP&E is determined as
the difference between the sales proceeds and the carrying
amount of the asset and is recognised in Statement of
Profit and Loss.
Depreciation of these assets commences when the assets
are ready for their intended use, which is generally on
commissioning. Items of PP&E are depreciated in a manner
that amortizes the cost (or other amount substituted for
cost) of the assets after commissioning, less its residual
value, over their useful lives as specified in Schedule II of
the Companies Act, 2013 on a straight-line basis. Land is
not depreciated.
PP&E's residual values, useful lives and method of
depreciation are reviewed at each Balance Sheet date
and changes, if any, are treated as changes in accounting
estimate.
Goodwill and Other Intangible Assets
Goodwill
Goodwill arising on Business Combination is carried at
cost less any accumulated impairment losses.
Goodwill is annually tested for impairment. Impairment
loss, if any, to the extent the carrying amount exceeds the
recoverable amount is charged off to the Statement of Profit
and Loss as it arises and is not reversed. For impairment
testing, goodwill is allocated to Cash Generating Unit (CGU)
or group of CGUs to which it relates, which is not larger
than an operating segment, and is monitored for internal
management purposes.
On disposal of the CGU or group of CGUs, attributable
amount of goodwill is included in the determination of the
profit or loss recognised in the Statement of Profit and Loss.
Other Intangible Assets
Other Intangible Assets that the Company controls and from
which it expects future economic benefits are capitalised
upon acquisition and measured initially:
a. for assets acquired in a business combination, at fair
value on the date of acquisition.
b. for separately acquired assets, at cost comprising
the purchase price (including import duties and
non-refundable taxes) and directly attributable costs to
prepare the asset for its intended use.
Internally generated assets for which the cost is clearly
identifiable are capitalised at cost. Research expenditure is
recognised as an expense when it is incurred. Development
costs are capitalised only after the technical and commercial
feasibility of the asset for sale or use has been established.
Thereafter, all directly attributable expenditure incurred to
prepare the asset for its intended use are recognised as the
cost of such assets. Internally generated brands, websites
and customer lists are not recognised as intangible assets.
The carrying value of intangible assets includes deemed
cost which represents the carrying value of intangible
assets recognised as at 1st April, 2015 measured as per
the previous GAAP.
After initial recognition, an intangible asset is carried at
its cost less accumulated amortization and / or impairment
losses.
The useful life of an intangible asset is considered finite
where the rights to such assets are limited to a specified
period of time by contract or law (e.g. patents, licences,
trademarks, franchise and servicing rights) or the likelihood
of technical, technological obsolescence (e.g. computer
software, design, prototypes) or commercial obsolescence
(e.g. lesser known brands are those to which adequate
marketing support may not be provided). If, there are no
such limitations, the useful life is taken to be indefinite.
Intangible assets that have finite lives are amortized over
their estimated useful lives by the straight-line method
unless it is practical to reliably determine the pattern of
benefits arising from the asset. An intangible asset with
an indefinite useful life is not amortized. However, it is
annually tested for impairment. Amortization expenses and
impairment losses and reversal of impairment losses are
included in the 'Depreciation and amortization expense' in
the Statement of Profit and Loss.
The estimated useful lives of intangible assets of the
Company with finite lives are as follows:
The useful lives of intangible assets are reviewed annually to
determine if a reset of such useful life is required for assets
with finite lives and to confirm that business circumstances
continue to support an indefinite useful life assessment for
assets so classified. Based on such review, the useful life
may change or the useful life assessment may change from
indefinite to finite. The impact of such changes is accounted
for as a change in accounting estimate.
Investment Property
Properties that are held for long-term rental yields and / or
for capital appreciation are classified as investment
properties. Investment properties are stated at cost of
acquisition or construction less accumulated depreciation
and impairment, if any. Depreciation is recognised using
the straight-line method so as to amortise the cost of
investment properties over their useful lives as specified
in Schedule II of the Companies Act, 2013. Freehold land
and properties under construction are not depreciated.
Transfers to, or from, investment properties are made at
the carrying amount when and only when there is a change
in use.
An item of investment property is derecognised upon
disposal or when no future economic benefits are expected
to arise from the continued use of asset. Any gain or loss
arising on the disposal or retirement of an item of investment
property is determined as the difference between the sales
proceeds and the carrying amount of the property and is
recognised in the Statement of Profit and Loss.
Income received from investment property is recognised
in the Statement of Profit and Loss on a straight-line basis
over the term of the lease.
Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying
amount of assets or CGU exceeds their recoverable
amount.
Recoverable amount is higher of an asset's fair value less
costs of disposal and its value in use. Value in use is the
present value of estimated future cash flows expected to
arise from the continuing use of an asset or CGU and from
its disposal at the end of its useful life.
Impairment losses recognised in prior years are reversed
when there is an indication that the impairment losses
recognised no longer exist or have decreased. Such
reversals are recognised as an increase in carrying
amounts of assets to the extent that it does not exceed the
carrying amounts that would have been determined (net of
amortization or depreciation) had no impairment loss been
recognised in previous years.
Inventories
Inventories are stated at lower of cost and net realisable
value. The cost is calculated on weighted average method.
Cost comprises expenditure incurred in the normal course
of business in bringing such inventories to their present
location and condition and includes, where applicable,
appropriate overheads based on normal level of activity.
Net realisable value is the estimated selling price less
estimated costs for completion and sale.
Obsolete, slow moving and defective inventories are
identified from time to time and, where necessary, a
provision is made for such inventories.
Foreign Currency Transactions
The functional and presentation currency of the Company
is Indian Rupee.
Transactions in foreign currency are accounted for at
the exchange rate prevailing on the transaction date.
Gains / losses arising on settlement, as also on translation
of monetary items are recognised in the Statement of
Profit and Loss.
Exchange differences arising on monetary items that, in
substance, form part of the Company's net investment in
a foreign operation (having a functional currency other
than Indian Rupee) are recognised in other comprehensive
income and accumulated in Foreign Currency Translation
Reserve.
Derivatives and Hedge Accounting
Derivatives are initially recognised at fair value and are
subsequently remeasured to their fair value at the end
of each reporting period. The resulting gains / l osses are
recognised in Statement of Profit and Loss immediately
unless the derivative is designated and effective as a
hedging instrument, in which case the resulting gain / loss
is recognised as per the hedge accounting principles
stated below.
The Company complies with the principles of hedge
accounting where derivative contracts and / or non-derivative
financial assets / liabilities that are permitted under
applicable accounting standards are designated as hedging
instruments. At the inception of the hedge relationship,
the Company documents the relationship between the
hedging instrument and the hedged item, along with the
risk management objectives and its strategy for undertaking
hedge transaction, which can be a fair value hedge or a
cash flow hedge.
(i) Fair value hedges
Changes in fair value of the designated portion of
hedging instruments that qualify as fair value hedges
are recognised in the Statement of Profit and Loss
immediately, together with any changes in the fair value
of the hedged asset or liability that are attributable to the
hedged risk. Such fair value changes are recognised in
the line item relating to the hedged item in the Statement
of Profit and Loss.
Hedge accounting is discontinued when the hedging
instrument is derecognised, expires or is sold,
terminated, or exercised, or when it no longer qualifies
for hedge accounting. The fair value adjustment to the
carrying amount of the hedged item arising from the
hedged risk is included in the Statement of Profit and
Loss from that date.
(ii) Cash flow hedges
The effective portion of changes in the fair value
of hedging instruments that are designated and
qualify as cash flow hedges is recognised in the
other comprehensive income and accumulated as
'Cash Flow Hedge Reserve'. The gains / losses relating
to the ineffective portion are recognised immediately in
the Statement of Profit and Loss.
Amounts previously recognised and accumulated
in other comprehensive income are reclassified to
profit or loss when the hedged item affects the Statement
of Profit and Loss. However, when the hedged item
results in the recognition of a non-financial asset,
such gains / losses are transferred from equity (but not
as reclassification adjustment) and included in the initial
measurement cost of the non-financial asset.
Hedge accounting is discontinued when the hedging
instrument is derecognised, expires or is sold,
terminated, or exercised, or when it no longer qualifies
for hedge accounting. Any gains / losses recognised
in other comprehensive income and accumulated in
equity at that time remain in equity and is reclassified
when the underlying transaction is ultimately
recognised. When an underlying transaction is no longer
expected to occur, the gains / losses accumulated in
equity are recognised immediately in the Statement of
Profit and Loss.
Investment in Subsidiaries, Associates and Joint
Ventures
Investment in subsidiaries, associates and joint ventures
are carried at cost less accumulated impairment, if any.
Financial instruments, Financial assets, Financial
liabilities and Equity instruments
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions
of the relevant instrument and are initially measured at fair
value except for trade receivables that do not contain a
significant financing component, which are measured at
transaction price.
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 on initial recognition of
financial assets or financial liabilities. Purchase or sale 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 when the Company commits to purchase
or sell the asset.
Financial Assets
Recognition: Financial assets include Investments, Trade
Receivables, Advances, Security Deposits, Cash and cash
equivalents. Such assets are initially recognised at fair value
or transaction price, as applicable, when the Company
becomes party to contractual obligations. The transaction
price includes transaction costs unless the asset is being
fair valued through the Statement of Profit and Loss.
Classification: Management determines the classification
of an asset at initial recognition depending on the purpose
for which the assets were acquired. The subsequent
measurement of financial assets depends on such
classification.
Financial assets are classified as those measured at:
(a) amortised cost, where the financial assets are held
solely for collection of cash flows arising from payments
of principal and / or interest.
(b) fair value through other comprehensive income
(FVTOCI), where the financial assets are held not only
for collection of cash flows arising from payments of
principal and interest but also from the sale of such
assets. Such assets are subsequently measured at fair
value, with unrealised gains and losses arising from
changes in the fair value being recognised in other
comprehensive income.
(c) fair value through profit or loss (FVTPL), where the
assets are managed in accordance with an approved
investment strategy that triggers purchase and sale
decisions based on the fair value of such assets.
Such assets are subsequently measured at fair value.
Unrealised gains and losses arising from changes in
the fair value, including interest income and dividend
income, if any, are recognised in 'other income' in the
Statement of Profit and Loss in the period in which they
arise.
Trade Receivables, Advances, Security Deposits, Cash
and cash equivalents etc. are classified for measurement
at amortised cost while investments may fall under any
of the aforesaid classes. However, in respect of particular
investments in equity instruments that would otherwise
be measured at fair value through profit or loss, an
irrevocable election at initial recognition may be made to
present subsequent changes in fair value through other
comprehensive income.
Impairment: The Company assesses at each reporting
date whether a financial asset (or a group of financial
assets) such as investments, trade receivables, advances
and security deposits held at amortised cost and financial
assets that are measured at fair value through other
comprehensive income are tested for impairment based
on evidence or information that is available without undue
cost or effort. Expected credit losses are assessed and loss
allowances recognised if the credit quality of the financial
asset has deteriorated significantly since initial recognition.
Reclassification: When and only when the business
model is changed, the Company shall reclassify all affected
financial assets prospectively from the reclassification date
as subsequently measured at amortised cost, fair value
through other comprehensive income or fair value through
profit or loss without restating the previously recognised
gains, losses or interest and in terms of the reclassification
principles laid down in the Ind AS relating to Financial
Instruments.
Derecognition: Financial assets are derecognised when
the right to receive cash flows from the assets has expired,
or has been transferred, and the Company has transferred
substantially all of the risks and rewards of ownership.
Concomitantly, if the asset is one that is measured at:
(a) amortised cost, the gain or loss is recognised in the
Statement of Profit and Loss;
(b) fair value through other comprehensive income, the
cumulative fair value adjustments previously taken to
reserves are reclassified to the Statement of Profit and
Loss unless the asset represents an equity investment,
in which case the cumulative fair value adjustments
previously taken to reserves are reclassified within
equity.
Income Recognition: Interest income is recognised in the
Statement of Profit and Loss using the effective interest
method. Dividend income is recognised in the Statement
of Profit and Loss when the right to receive dividend is
established.
Financial Liabilities
Borrowings, trade payables and other financial liabilities
are initially recognised at fair value and are subsequently
measured at amortised cost. Any discount or premium on
redemption / settlement is recognised in the Statement of
Profit and Loss as finance cost over the life of the liability
using the effective interest method and adjusted to the
liability figure disclosed in the Balance Sheet.
Financial liabilities are derecognised when the liability is
extinguished, that is, when the contractual obligation is
discharged, cancelled or on expiry.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount
is included 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.
Equity Instruments
Equity instruments are recognised at the value of the
proceeds, net of direct costs of the capital issue.
Revenue
Revenue is measured at the transaction price that the
Company receives or expects to receive as consideration
for goods supplied and services rendered, net of returns
and estimates of variable consideration such as discounts
to customers. Revenue from the sale of goods includes
Excise Duties and National Calamity Contingent Duty
which are payable on manufacture of goods but excludes
taxes such as VAT and Goods and Services Tax which are
payable in respect of sale of goods and services.
Revenue from the sale of goods and services is recognised
when the Company performs its obligations to its customers
and the amount of revenue can be measured reliably and
recovery of the consideration is probable. The timing of such
recognition in case of sale of goods is when the control over
the same is transferred to the customer, which is mainly
upon delivery and in case of services, in the period in which
such services are rendered.
Government Grant
The Company may receive government grants that require
compliance with certain conditions related to the Company's
operating activities or are provided to the Company
by way of financial assistance on the basis of certain
qualifying criteria.
Government grants are recognised when there is
reasonable assurance that the grant will be received upon
the Company complying with the conditions attached to the
grant. Accordingly, government grants:
(a) related to or used for assets, are deducted from the
carrying amount of the asset.
(b) related to incurring specific expenditures are taken to
the Statement of Profit and Loss on the same basis and
in the same periods as the expenditures incurred.
(c) by way of financial assistance on the basis of certain
qualifying criteria are recognised in the Statement of
Profit and Loss as they become receivable.
In the unlikely event that a grant previously recognised is
ultimately not received, it is treated as a change in estimate
and the amount cumulatively recognised is expensed in the
Statement of Profit and Loss.
Dividend Distribution
Dividends paid (including income tax thereon, if any) are
recognised in the period in which the interim dividends are
approved by the Board of Directors, or in respect of the final
dividend when approved by the shareholders.
Employee Benefits
Short-term employee benefits are expensed in the period
in which the employee renders the related service on an
undiscounted basis. A liability is recognised for the amount
expected to be paid within twelve months, if the Company
has a present legal or constructive obligation to pay the
same as a result of past service provided by the employee
and the obligation can be reliably estimated.
The Company makes contributions to both defined benefit
and defined contribution schemes which are mainly
administered through duly constituted and approved Trusts.
Provident Fund contributions are in the nature of defined
contribution scheme. In respect of employees who are
members of constituted and approved trusts, the Company
recognises contribution payable to such trusts as an expense
including any shortfall in interest between the amount of
interest realised by the investment and the interest payable
to members at the rate declared by the Government of
India. In respect of other employees, provident funds are
deposited with the Government administered funds and
recognised as expense.
The Company makes contribution to defined contribution
pension plan. The contribution payable is recognised as an
expense, when an employee renders the related service.
The Company also makes contribution to defined benefit
pension and gratuity plan. The cost of providing benefits
under the defined benefit obligation is calculated by
independent actuary using the projected unit credit method.
Service costs and net interest expense or income is
reflected in the Statement of Profit and Loss. Gain or Loss
on account of remeasurements are recognised immediately
through other comprehensive income in the period in which
they occur.
The employees of the Company are entitled to compensated
leave for which the Company records the liability based on
actuarial valuation computed using projected unit credit
method. These benefits are unfunded.
Actual disbursements made under the Workers' Voluntary
Retirement Scheme are accounted as revenue expenses.
Employee Share Based Compensation
Stock Options
Equity settled Stock Options are granted to eligible
employees under the ITC Employee Stock Option Schemes
('ITC ESOS'), as may be decided by the Nomination &
Compensation Committee / Board. Further, eligible
employees of the Company have been granted equity
settled Stock Options under the ITC Hotels Special Purpose
Employee Stock Option Scheme ('ITChL SP EsOs'),
in terms of the 'Scheme of Arrangement between the
Company and ITC Hotels Limited, and their respective
shareholders and creditors'.
Under Ind AS, the cost of equity settled Stock Options is
recognised based on the fair value of Stock Options as on
the grant date.
The fair value of Stock Options granted to the employees of
the Company is recognised as employee benefits expense
in the Statement of Profit and Loss over the period in which
the performance and / or service conditions are fulfilled with a
corresponding credit in equity for ITC ESOS and recognised
as a financial liability for ITCHL SP ESOS. The fair value of
Stock Options, net of recoveries, granted to employees on
deputation and to employees of the group companies is
considered as capital contribution / investment.
The Company generally recovers the fair value of Stock
Options from such group companies, as applicable. It may,
if recommended by the Corporate Management Committee
and approved by the Audit Committee, decide not to seek
such recovery from:
(a) wholly owned subsidiaries who need to conserve
financial capacity to sustain their business and growth
plans and to address contingencies that may arise,
taking into account the economic and market conditions
then prevailing and opportunities and threats in the
competitive context.
(b) other companies not covered under (a) above, who
need to conserve financial capacity to sustain their
business and growth plans and where the quantum of
reimbursement is not material - the materiality threshold
being ' 5 Crores for each entity for a financial year.
Stock Appreciation Linked Reward (SAR) Plan
Cash Settled SAR units are granted to eligible employees
under the ITC Employee Cash Settled Stock Appreciation
Linked Reward Plan ('ITC ESARP'), as may be decided by
the CMC / Nomination & Compensation Committee / Board.
For such Cash Settled SAR units, a liability is initially
measured at fair value on the grant date and is subsequently
remeasured at each reporting period, until settled. The
fair value of ITC ESARP units granted is recognised as
employee benefits expense in the Statement of Profit and
Loss over the period in which the performance and / or
service conditions are fulfilled for employees of the
Company. In case of ITC ESARP units granted to
employees on deputation and to employees of the group
companies, the Company generally recovers the fair value
of ITC ESARP units from the concerned group companies.
Leases
The Company assesses at contract inception whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if it conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Company as a Lessee
Right-of-use (ROU) assets are recognised at inception of a
contract or arrangement for significant lease components
at cost less lease incentives, if any. ROU assets are
subsequently measured at cost less accumulated
depreciation and accumulated impairment losses, if any.
The cost of ROU assets includes the amount of lease
liabilities recognised, initial direct cost incurred and lease
payments made at or before the lease commencement date.
ROU assets are generally depreciated over the shorter of
the lease term and estimated useful lives of the underlying
assets on a straight-line basis. Lease term is determined
based on consideration of facts and circumstances that
create an economic incentive to exercise an extension
option, or not to exercise a termination option. Lease
payments associated with 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)
and low value leases (i.e., where the value of the underlying
asset, when new, in order of magnitude is ' 5 lakhs or
less) are charged to the Statement of Profit and Loss on a
straight-line basis over the term of the relevant lease.
The Company recognises lease liabilities measured at the
present value of lease payments to be made on the date
of recognition of the lease. Such lease liabilities do not
include variable lease payments (that do not depend on
an index or a rate), which are recognised as expense in
the periods in which they are incurred. Interest on lease
liability is recognised using the effective interest method.
Lease liabilities are subsequently increased to reflect the
accretion of interest and reduced for the lease payments
made. The carrying amount of lease liabilities is also
remeasured upon modification of lease arrangement or
upon change in the assessment of the lease term. The
effect of such remeasurements is adjusted to the value of
the ROU assets.
Company 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. Where the Company is a
lessor under an operating lease, the asset is capitalised
within property, plant and equipment or investment property
and depreciated over its useful economic life. Payments
received under operating leases are recognised in the
Statement of Profit and Loss on a straight-line basis over
the term of the lease.
Taxes on Income
Taxes on income comprise current taxes and deferred
taxes. Current tax in the Statement of Profit and Loss is
provided as the amount of tax payable in respect of taxable
income for the period using tax rates and tax laws enacted
during the period, together with any adjustment to tax
payable in respect of previous years.
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities and
the amounts used for taxation purposes (tax base), at the
tax rates and tax laws enacted or substantively enacted by
the end of the reporting period.
Deferred tax assets are recognised for the future tax
consequences to the extent it is probable that future
taxable profits will be available against which the deductible
temporary differences can be utilised.
Income tax, insofar as it relates to items disclosed under
other comprehensive income or equity, is disclosed
separately under other comprehensive income or equity,
as applicable.
Deferred tax assets and liabilities are offset when there is
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 offset where the entity has a legally enforceable right to
offset and intends either to settle on net basis, or to realize
the asset and settle the liability simultaneously.
Claims
Claims against the Company not acknowledged as debts
are disclosed after a careful evaluation of the facts and
legal aspects of the matter involved.
Provisions
Provisions are recognised when, as a result of a past
event, the Company has a legal or constructive obligation;
it is probable that an outflow of resources will be required
to settle the obligation; and the amount can be reliably
estimated. The amount so recognised is a best estimate
of the consideration required to settle the obligation at the
reporting date, taking into account the risks and uncertainties
surrounding the obligation.
In an event when the time value of money is material, the
provision is carried at the present value of the cash flows
estimated to settle the obligation.
Operating Segments
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision-maker (CODM). The CODM, who is responsible
for allocating resources and assessing performance of the
operating segments, has been identified as the Corporate
Management Committee.
Segments are organised based on businesses which
have similar economic characteristics as well as exhibit
similarities in nature of products and services offered,
the nature of production processes, the type and class of
customer and distribution methods.
Segment revenue arising from third party customers is
reported on the same basis as revenue in the financial
statements. Inter-segment revenue is reported on the basis
of transactions which are primarily market led. Segment
results represent profits before finance charges, unallocated
corporate expenses and taxes.
“Unallocated Corporate Expenses” include revenue and
expenses that relate to initiatives / costs attributable to the
enterprise as a whole.
Financial and Management Information Systems
The Company's Accounting System is designed to unify
the Financial and Cost Records and also to comply with the
relevant provisions of the Companies Act, 2013, to provide
financial and cost information appropriate to the businesses
and facilitate Internal Control.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the
reporting period end. Although these estimates are based
upon management's best knowledge of current events and
actions, actual results could differ from these estimates.
The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
A. Judgements in applying accounting policies
The judgements, apart from those involving estimations
(see note B below), that the Company has made in the
process of applying its accounting policies and that have
a significant effect on the amounts recognised in these
financial statements pertain to useful life of intangible
assets. The Company is required to determine whether
its intangible assets have indefinite or finite life which is
a subject matter of judgement. Certain trademarks have
been considered of having an indefinite useful life taking
into account that there are no technical, technological or
commercial risks of obsolescence or limitations under
contract or law. Other trademarks have been amortised
over their useful economic life. Refer notes to the financial
statements.
B. Key sources of estimation uncertainty
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty at the
end of the reporting period that may have a significant risk
of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
1. Useful lives of property, plant and equipment,
investment property and intangible assets:
As described in the material accounting policies,
the Company reviews the estimated useful lives of
property, plant and equipment, investment property
and intangible assets at the end of each reporting
period and the impact of changes in the estimated
useful life is considered in the period in which the
estimate is revised.
2. Fair value measurements and valuation
processes:
Some of the Company's assets and liabilities
are measured at fair value for financial reporting
purposes. In estimating the fair value of an asset or a
liability, the Company uses market-observable data
to the extent it is available. Where Level 1 inputs
are not available, the Company engages third party
valuers, where required, to perform the valuation.
Information about the valuation techniques and
inputs used in determining the fair value of various
assets, liabilities and share based payments are
disclosed in the notes to the financial statements.
3. Actuarial Valuation:
The determination of Company's liability towards
defined benefit obligation to employees is made
through independent actuarial valuation including
determination of amounts to be recognised in
the Statement of Profit and Loss and in Other
Comprehensive Income. Such valuation depends
upon assumptions determined after taking into
account inflation, seniority, promotion and other
relevant factors such as supply and demand factors
in the employment market. Information about such
valuation is provided in the notes to the financial
statements.
|