2. MATERIAL ACCOUNTING POLICIES
2A. Statement of compliance and basis of preparation
(i) Statement of Compliance
The Standalone financial statements of the Company
have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under
the Companies (Indian Accounting Standards)
Rules, 2015 (as amended from time to time) and
presentation requirements of Division III of Schedule
III to the Companies Act, 2013 (as amended from
time to time), (Ind AS compliant Schedule III), as
applicable to the SFS.
(ii) Basis of preparation and presentation
The 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 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, leasing transactions that are within the scope
of Ind AS 116, and measurements that have some
similarities to fair value but are not fair value, such as
net realisable value in use in Ind AS 36.
In addition, for financial reporting purposes, fair
value measurements are categorised 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
assets or liability.
The Standalone financial statements are presented
in INR and all values are rounded to the nearest lacs
(INR 00,000), except when otherwise indicated.
The Company has prepared the financial statements
on the basis that it will continue to operate as a going
concern.
2B. Summary of material accounting policies
(i) Cash and cash equivalents
Cash comprises cash on hand and demand deposits
with banks. Cash equivalents are short-term balances
(with an original maturity of three months or less from
the date of acquisition) and highly liquid investments
that are readily convertible into known amounts of
cash and which are subject to insignificant risk of
changes in value.
(ii) Cash flow statement
Cash flows are reported using indirect method,
whereby Profit/(loss) before tax reported under
Statement of Profit and loss is adjusted for the effects
of transactions of non-cash nature and any deferrals or
accruals of past or future cash receipts or payments.
The cash flows from operating, investing and financing
activities of the Company are segregated based on
available information.
(iii) Property, plant and equipment
All the items of property, plant and equipment are
stated at historical cost net of cenvat credit less
depreciation and impairment losses. Historical cost
includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset's
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 Company 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 profit or loss during the
reporting period in which they are incurred.
Depreciation is recognised so as to write off the cost
of assets less their residual values over their useful
lives, using the straight-line method. The estimated
useful life is taken in accordance with Schedule II
to the Companies Act, 2013. 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.
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 or loss.
(iv) Impairment of non financial assets
At the end of each reporting period, the Company
reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those
assets have suffered an impairment loss. 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). When it is not possible to
estimate the recoverable amount of an individual
asset, the Company estimates the recoverable
amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent
basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units,
or otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
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 profit or loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that
would have been 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.
(v) Revenue recognition
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price 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 Company as
part of the contract.
Income from services
Revenue from shared services contracts are
recognised over the period of the contract as and
when services are rendered.
Interest
Interest income on all financial assets, mandatorily
required to be measured at FVTPL, is recognised
using the contractual interest rate.
Dividend
Dividend income is recognised when the Company's
right to receive dividend is established by the
reporting date.
(vi) Financial instruments
Financial assets and financial liabilities are recognised
when the Company 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 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 profit or loss are recognised
immediately in profit or loss.
Investment in subsidiary
A subsidiary is an entity controlled by the Company.
Control exists when the Company has power over the
entity, is exposed, or has rights to variable returns
from its involvement with the entity and has the
ability to affect those returns by using its power over
the entity. Power is demonstrated through existing
rights that give the ability to direct relevant activities,
those which significantly affect the entity's returns.
Investments in subsidiary are carried at cost less
impairment. Cost comprises price paid to acquire the
investment and directly attributable cost.
Impairment of investments
The Company reviews its carrying value of investments
carried at cost annually, or more frequently when there
is indication for impairment. If the recoverable amount
is less than its carrying amount, the impairment loss
is recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the
carrying amount of the Investment is increased to the
revised estimate of its recoverable amount, so that
the increased carrying amount does not exceed the
cost of the Investment. A reversal of an impairment
loss is recognised immediately in Statement of Profit
or Loss.
Financial assets
All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases
or sales of financial assets that require delivery of
assets within the time frame established by regulation
or convention in the marketplace.
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.
Classification of financial assets
Debt instruments that meet the following conditions
are subsequently measured at amortised cost (except
for debt instruments that are designated as at fair
value through profit or loss on initial recognition):
• 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 that are
solely payments of principal and interest on the
principal amount outstanding.
Debt instruments that meet the following conditions
are subsequently measured at fair value through other
comprehensive income (except for debt instruments
that are designated as at fair value through profit or
loss on initial recognition):
• the asset is held within a business model
whose objective is achieved both by collecting
contractual cash flows and selling financial
assets; and
• the contractual terms of the instrument give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
Interest income is recognised in profit or loss for
FVTOCI debt instruments. For the purposes of
recognising foreign exchange gains and losses,
FVTOCI debt instruments are treated as financial
assets measured at amortised cost. Thus, the
exchange differences on the amortised cost are
recognised in profit or loss and other changes in the
fair value of FVTOCI financial assets are recognised in
other comprehensive income and accumulated under
the heading of 'Reserve for debt instruments through
other comprehensive income'. When the investment
is disposed of, the cumulative gain or loss previously
accumulated in this reserve is reclassified to profit or
loss.
All other financial assets are subsequently measured
at fair value.
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 or loss and is included in the "Other income"
line item.
Investments in equity instruments at FVTOCI
On initial recognition, the Company 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 profit or 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
Company 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.
Financial assets at fair value through profit or loss
(FVTPL)
Investments in equity instruments are classified as
at FVTPL, unless the Company irrevocably elects on
initial recognition to present subsequent changes
in fair value in other comprehensive income for
investments in equity instruments which are not held
for trading.
Debt instruments that do not meet the amortised cost
criteria or FVTOCI criteria (see above) are measured
at FVTPL. In addition, debt instruments 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 debt instruments 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 Company 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 remeasurement recognised in profit
or loss. The net gain or loss recognised in profit or 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 Company's 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.
Impairment of financial assets
The Company applies the expected credit loss model
for recognising impairment loss on financial assets
measured at amortised cost, lease receivables, trade
receivables and other contractual rights to receive
cash or other financial assets and financial guarantees
not designated as at FVTPL.
For trade receivables or any contractual right to
receive cash or another financial assets that result
from transactions that are within the scope of Ind AS
115, the Company 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 Company 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.
Derecognition of financial assets
The Company derecognises a financial asset when
the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership
of the asset to another party. If the Company neither
transfers nor retains substantially all the risks and
rewards of ownership and continues to control the
transferred asset, the Company recognises its retained
interest in the asset and an associated liability for
amounts it may have to pay. If the Company retains
substantially all the risks and rewards of ownership of
a transferred financial asset, the Company continues
to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety,
the difference between the asset's carrying amount
and the sum of the consideration received and
receivable and the cumulative gain or loss that had
been recognised in other comprehensive income
and accumulated in equity is recognised in profit or
loss if such gain or loss would have otherwise been
recognised in profit or loss on disposal of that financial
asset.
On derecognition of a financial asset other than
in its entirety (e.g. when the Company retains an
option to repurchase part of a transferred asset), the
Company allocates the previous carrying amount of
the financial asset between the part it continues to
recognise under continuing involvement, and the part
it no longer recognises on the basis of the relative fair
values of those parts on the date of the transfer. The
difference between the carrying amount allocated
to the part that is no longer recognised and the sum
of the consideration received for the part no longer
recognised and any cumulative gain or loss allocated
to it that had been recognised in other comprehensive
income is recognised in profit or loss if such gain
or loss would have otherwise been recognised in
profit or loss on disposal of that financial asset. A
cumulative gain or loss that had been recognised in
other comprehensive income is allocated between the
part that continues to be recognised and the part that
is no longer recognised on the basis of the relative fair
values of those parts.
(vii)Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company
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.
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 Company entity are recognised at the
proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments
is recognised and deducted directly in equity. No gain
or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own
equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at
amortised cost using the effective interest method or
at FVTPL.
a) Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL
when the financial liability is either contingent
consideration recognised by the Company 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
Company 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 Company
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 Company's 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.
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising on
remeasurement recognised in profit or loss.
The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial
liability and is included in the 'Other income' line
item.
However, for non-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 liability's credit
risk in other comprehensive income would create
or enlarge an accounting mismatch in profit or
loss, in which case these effects of changes in
credit risk are recognised in profit or loss. The
remaining amount of change in the fair value
of liability is always recognised in profit or loss.
Changes in fair value attributable to a financial
liability's credit risk that are recognised in other
comprehensive income are reflected immediately
in retained earnings and are not subsequently
reclassified to profit or loss.
b) 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 net carrying
amount on initial recognition.
c) Derecognition of financial liabilities
The Company derecognises financial liabilities
when, and only when, the Company's 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 (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 derecognised and
the consideration paid and payable is recognised
in profit or loss.
(viii)Employee benefit costs
Employee benefits include provident fund, gratuity
fund and compensated absences.
Retirement benefits 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. Remeasurement, comprising actuarial gains
and losses, the effect of the changes to the asset
ceiling (if applicable) and the return on plan assets
(excluding net interest), is reflected immediately in
the balance sheet with a charge or credit recognised
in other comprehensive income in the period in which
they occur. Remeasurement recognised in other
comprehensive income is reflected immediately in
retained earnings and is not reclassified to profit or
loss. Past service cost is recognised in profit or 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:
a. service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
b. net interest expense or income; and
c. remeasurement
The Company presents the first two components of
defined benefit costs in profit or loss in the line item
'Employee benefits expense'. Curtailment gains and
losses are accounted for as past service costs.
The retirement benefit obligation recognised in the
balance sheet represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus
resulting from this calculation is limited to the present
value of any economic benefits available in the form
of refunds from the plans or reductions in future
contributions to the plans.
A liability for a termination benefit is recognised at the
earlier of when the entity can no longer withdraw the
offer of the termination benefit and when the entity
recognises any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to
employees in respect of wages and salaries, annual
leave and sick leave in the period the related service is
rendered at the undiscounted amount of the benefits
expected to be paid in exchange for that service.
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 Company in respect of services provided
by employees up to the reporting date.
(ix) Segment information
The Company determines reportable segment based
on information reported to the Chief Operating
Decision Maker (CODM) for the purposes of resource
allocation and assessment of segmental performance.
The CODM evaluates the Company's performance
and allocates resources based on an analysis of various
performance indicators by business segments. The
accounting principles used in the preparation of the
financial statements are consistently applied to record
revenue and expenditure in individual segments.
(x) Leases
The Company's lease asset classes primarily consist
of leases for 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. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether :
(i) the contract involves the use of an identified
asset
(ii) the Company has substantially all of the
economic benefits from use of the asset through
the period of the lease and
(iii) the Company has the right to direct the use of the
asset.
At the date of commencement of the lease, the
Company recognises Right-of-Use (ROU) asset and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
12 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 ROU 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.
ROU 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.
The lease liability is initially measured at amortized
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 ROU asset if the Company changes its
assessment of whether it will exercise an extension or
a termination option.
Lease liability and ROU assets have been separately
presented in the balance sheet and lease payments
have been classified as financing cash flows.
(xi) Earnings per share
Basic earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect
of exceptional items, if any) by the weighted average
number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing
the profit / (loss) after tax (including the post tax
effect of exceptional items, if any) as adjusted for
dividend, interest and other charges to expense or
income (net of any attributable taxes) relating to
the dilutive potential equity shares, by the weighted
average number of equity shares considered for
deriving basic earnings per share and the weighted
average number of equity shares which could have
been issued on the conversion of all dilutive potential
equity shares. Potential equity shares are deemed
to be dilutive only if their conversion to equity
shares would decrease the net profit per share from
continuing ordinary operations. Potential dilutive
equity shares are deemed to be converted as at the
beginning of the period, unless they have been issued
at a later date. The dilutive potential equity shares are
adjusted for the proceeds receivable had the shares
been actually issued at fair value (i.e. average market
value of the outstanding shares). Dilutive potential
equity shares are determined independently for each
period presented. The number of equity shares and
potentially dilutive equity shares are adjusted for
employee share options and bonus shares, if any, as
appropriate.
(xii)Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
Current tax (refer note 25)
The tax currently payable is based on taxable profit
for the year. Taxable profit differs from net profit as
reported in profit or loss 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 Company's liability
for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end
of the reporting period. A provision is recognised
for those matters for which the tax determination is
uncertain but it is considered probable that there will
be a future outflow of funds to a tax authority. The
provisions are measured at the best estimate of the
amount expected to become payable. The assessment
is based on the judgement of tax professionals within
the Company supported by previous experience in
respect of such activities and in certain cases based
on specialist independent tax advice.
Deferred tax
Deferred tax is the tax expected to be payable or
recoverable on 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, and is accounted
for using the liability method. Deferred tax liabilities
are generally recognised for all taxable temporary
differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits
will be available against which deductible temporary
differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises
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.
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 profits
will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is
settled or the asset is realised based on tax laws and
rates that have been enacted or substantively enacted
at the reporting date. 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. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same
taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
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 recognized in other comprehensive income or
directly in equity respectively.
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