1.1.2 Summary of material accounting policies
a) 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 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 Company has identified twelve months as its
operating cycle.
b) Foreign currencies
The Company's financial statements are presented
in INR, which is also the parent Company's
functional currency. The Company determines
the functional currency and items included in the
financial statements of each entity are measured
using that functional currency.
Transactions and Balances
Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date
the transaction first qualifies for recognition.
However, for practical reasons, the Company uses
monthly 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 the settlement
of monetary items or on restatement of the
Company's monetary items at rates different
from those at which they were initially recorded
during the period, or reported in previous financial
statements, are recognized as income or as
expenses in the period in which they arise.
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).
c) Fair value measurement
The Company measures financial instruments,
such as, derivatives and certain investments at
fair value at each reporting/ balance sheet date.
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date. The fair value
measurement is based on the presumption that
the transaction to sell the asset or transfer the
liability takes place either:
• In the principal market for the asset
or liability, or
• In the absence of a principal market, in
the most advantageous market for the
asset or liability
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
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
• 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 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.
d) Revenue recognition and other Income
Revenue from contracts with customers is
recognised when control over 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.
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 Company as part of the contract. Revenue
excludes taxes collected from customers.
If the consideration in a contract includes a
variable amount, 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 Company applies the
most likely amount method or the expected value
method to estimate the variable consideration
in the contract. The selected method that best
predicts the amount of variable consideration
is primarily driven by the number of volume
thresholds contained in the contract. The most
likely amount is used for those contracts with a
single volume threshold, while the expected value
method is used for those with more than one
volume threshold. The Company then applies the
requirements on constraining estimates in order
to determine the amount of variable consideration
that can be included in the transaction price and
recognised as revenue.
The Company applies the practical expedient
to not to disclose the amount of the remaining
performance obligations for contracts with
original expected duration of less than one year.
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
and credit risks.
Goods and Service Tax (GST)/ is not received
by the Company on its own account. Rather, it
is tax collected on behalf of the government.
Accordingly, it is excluded from revenue.
Contract asset represents the Company's right
to consideration in exchange for services that the
Group has transferred to a customer when that
right is conditioned on something other than the
passage of time.
When there is unconditional right to receive cash,
and only passage of time is required to do invoicing,
the same is presented as Unbilled receivable.
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier)
from a customer before the Company transfers
the related goods or services and the Company
is under an obligation to provide only the goods
or services under the contract. Contract liabilities
are recognised as revenue when the Company
performs under the contract (i.e., transfers control
of the related goods or services to the customer).
The specific recognition criteria described below
must also be met before revenue is recognised:
Interest income
For all debt instruments measured at amortised
cost, interest income is recorded using the
effective interest rate (ElR). 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 Company 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 other income in the
statement of profit and loss.
Dividends
Revenue is recognised when the company's right
to receive the payment is established, which is
generally when shareholders approve the dividend.
e) Taxes
Current 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 income tax is measured at the amount
expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961.
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.
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 is
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.
Appendix C to Ind AS 12, Income Taxes dealing
with accounting for uncertainty over income tax
treatments does not have any material impact on
financial statements of the Company.
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
and associates, 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 and associates, 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
profit or loss is recognised outside profit or loss.
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 and only if it has a legally enforceable
right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by
the same taxation authority on either the same
taxable entity or different taxable entities which
intend either to settle current tax liabilities and
assets on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each
future period in which significant amounts of
deferred tax liabilities or assets are expected to
be settled or recovered.
GST/ value added taxes paid on acquisition of
assets or on incurring expenses
Expenses and assets are recognised net of the
amount of GST/ value added taxes 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.
f) 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.
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