3. Summary of significant accounting policies
a) Overall consideration
The standalone financial statements have been prepared
using the significant accounting policies and measurement
bases summarised below. These were used throughout all
periods presented in the financial statements.
Basis of preparation
The standalone financial statements have been prepared on
a going concern basis under the historical cost basis except
for the following -
• Certain financial assets and liabilities which have been
measured at fair value (refer note 40 for further details);
and
• Share based payments which are measured at fair value
of the options at the grant date.
The financial statements of the Company are presented
in Indian Rupees ('), which is also its financial currency
and all amounts disclosed in the financial statements and
notes have been rounded off to the nearest crore as per the
requirements of schedule III to the Act, unless otherwise
stated.
b) current versus non-current classification
The Company presents assets and liabilities in the balance
sheet based on current/non-current classification. An asset
is classified 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 classified as 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.
All other liabilities are 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. Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
c) Foreign currency translation
initial recognition
Transactions in foreign currencies are recorded on initial
recognition in the functional currency at the exchange rates
prevailing on the date of the transaction.
Measurement at the balance sheet date
Foreign currency monetary items of the Company,
outstanding at the balance sheet date are restated at the
year-end rates. Non-monetary items which are carried
at historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the
transaction. 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.
Treatment of exchange difference
Exchange differences that arise on settlement of monetary
items or on reporting at each balance sheet date of the
Company's monetary items at the closing rate are recognised
as income or expenses in the period in which they arise.
d) Revenue recognition
Sale of goods
Revenue from the contracts with customers is recognised
when control of the goods is transferred to the customer
at an amount that reflects the consideration to which the
Company expects to be entitled in exchange for those
goods. Sales, as disclosed, are net of trade allowances,
rebates, goods and service tax, and amounts collected on
behalf of third parties.
The Company considers 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 services to a customer,
excluding amounts collected on behalf of third parties
(for example, indirect taxes). In respect of contracts
with customers that contain a financing component i.e.
when payment by a customer occurs significantly before
performance and the fair value of goods provided to the
customer at the end of the contract term exceeds the
advance payments received, interest expense is recognized
on recognition of a contract liability over the contract period
and is presented under the head finance costs in statement
of profit and loss and total transaction price including
financing component is recognized when control of the
goods is transferred to the customer.
Satisfaction of performance obligations
The Company's revenue is derived from the single
performance obligation to transfer primarily gold and
diamond products under arrangements in which the
transfer of control of the products and the fulfilment of
the Company's performance obligation occur at the same
time. Revenue from the sale of goods is recognised when
the Company has transferred control of the goods to the
buyer and the buyer obtains the benefits from the goods,
the potential cash flows and the amount of revenue (the
transaction price) can be measured reliably, and it is
probable that the Company will collect the consideration to
which it is entitled to in exchange for the goods.
When either party to a contract has performed, an entity
shall present the contract in the balance sheet as a contract
asset or a contract liability, depending on the relationship
between the entity's performance and the customer's
payment. In respect of sale of goods at prices that are yet
to be fixed at the year end, adjustments to the provisional
amount billed to the customers are recognised based on the
year end closing gold rate.
interest and dividend income
Interest income is recognised on an accrual basis using the
effective interest method. Dividends are recognised at the
time the right to receive the payment is established. Other
income is recognised when no significant uncertainty as to
its determination or realisation exists.
e) (i) property, plant and equipment
Recognition and initial measurement
Freehold land is carried at historical cost. All other items
of property, plant and equipment are stated at their
cost of acquisition less accumulated depreciation and
impairment losses, if any. The cost comprises purchase
price, borrowing cost if capitalisation criteria are met
and directly attributable cost of bringing the asset
to its working condition for the intended use. Capital
expenditure incurred on rented properties is classified
as 'Leasehold improvements' under property, plant and
equipment.
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. All
other repair and maintenance costs are recognised in
statement of profit and loss as incurred.
Subsequent measurement (depreciation and useful
lives)
Depreciation on property, plant and equipment is
provided on written-down value, computed on the
basis of useful lives (as set out below) prescribed in
Schedule II of the Act:
An intangible asset is a non-monetary, identifiable
item without any physical substance that is within the
control of an entity and is capable of generating future
economic benefits for the entity.
Recognition and initial measurement
Intangible assets are recognised as per the cost model.
As per the cost model an intangible asset is carried at
its own cost less accumulated amortisation and any
accumulated impairment losses after initial recognition.
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. All
other repair and maintenance costs are recognised in
statement of profit and loss as incurred.
Subsequent measurement (amortisation and useful
lives)
Amortisation of intangible assets is provided on
straight-line basis, computed on the basis of useful
lives estimated by the management. The useful life of
an intangible asset would include the renewal period(s)
only if there is enough evidence to support the renewal
by the entity without a significant cost.
Leasehold improvements have been amortised over the
estimated useful life of the assets or the period of lease,
whichever is lower. The residual values, useful lives and
method of depreciation and amortisation are reviewed
at each financial year end and adjusted prospectively, if
appropriate.
De-recognition
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 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
derecognised.
(ii) intangible assets
de-recognition
An item of intangible asset 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 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 derecognised.
f) Leases
The company as a lessee
The Company's lease asset classes primarily consist of
property leases. 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
recognizes a 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 twelve months or less
(short-term leases) and low value leases. For these short¬
term and low value leases, the Company recognizes the
lease payments as an operating expense on a straight-line
basis over the term of the lease.
Certain lease arrangements include 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 recognized 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.
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 re-measured with a
corresponding adjustment to the related right of use asset if
the Company changes its assessment whether it will exercise
an extension or a termination option.
g) impairment of non-financial assets
At each reporting date, the Company assesses whether
there is any indication based on internal/external factors,
that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of
the asset. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which
the asset belongs is less than its carrying amount, the
carrying amount is reduced to its recoverable amount
and the reduction is treated as an impairment loss and
is recognised in the statement of profit and loss. All
assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer
exist. An impairment loss is reversed if the asset's or cash¬
generating unit's recoverable amount exceeds its carrying
amount.
h) Financial instruments
Financial assets
initial recognition and measurement
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions
of the financial instrument and are measured initially at fair
value adjusted for transaction costs.
Subsequent measurement
i. financial instruments at amortised cost - the
financial 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. All the debt
instruments of the Company are measured at amortised
cost.
ii. Mutual funds - All mutual funds in scope of Ind AS
109 are measured at fair value through profit and loss
(FVTPL).
De-recognition of financial assets
A financial asset is primarily de-recognised when the right
to receive cash flows from the asset have expired or the
Company has transferred its right to receive cash flows from
the asset.
Financial liabilities
initial recognition and measurement
All financial liabilities are recognised initially at fair value
and transaction cost that is attributable to the acquisition
of the financial liabilities is also adjusted. These liabilities are
classified as amortised cost.
Subsequent measurement
Subsequent to initial recognition, these liabilities are
measured at amortised cost using the effective interest
method. These liabilities include borrowings.
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.
Compound financial instruments
Compound financial instruments are separated into
liability and equity components based on the terms of the
contract. On issuance of the said instrument, the liability
component is arrived by discounting the gross sum at a
market rate for an equivalent non-convertible instrument.
This amount is classified as a financial liability measured
at amortised cost until it is extinguished on conversion or
redemption. The remainder of the proceeds is recognised as
equity component of compound financial instrument. This
is recognised and included in shareholders' equity, net of
income-tax effects, and not subsequently re-measured.
Derivative contracts and hedge accounting
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.
Embedded derivatives
An embedded derivative is a component of a hybrid
(combined) instrument that also includes a non-derivative
host contract - with the effect that some of the cash flows
of the combined instrument vary in a way similar to a
standalone derivative. An embedded derivative causes some
or all of the cash flows that otherwise would be required by
the contract to be modified according to a specified variable.
The Company enters into purchase gold contract, in which
the amount payable is not fixed based on gold price on the
date of purchase, but instead is affected by changes in gold
prices in future. Such transactions are entered into to protect
against the risk of gold price movement in the purchased
gold. Accordingly, such unfixed payables are considered to
have an embedded derivative. The Company designates the
gold price risk in such instruments as hedging instruments,
with gold inventory considered to be the hedged item. The
hedged risk is gold prices in USD.
At the inception of a hedge relationship, the Company
formally designates and documents the hedge relationship
to which the Company wishes to apply hedge accounting
and the risk management objective and strategy for
undertaking the hedge. The documentation includes the
Company's 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 entity will assess the
effectiveness of changes in the hedging instrument's fair
value in offsetting the exposure to changes in the hedged
item's fair value attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting
changes in fair value and are assessed on an ongoing basis
to determine that they actually have been highly effective
throughout the financial reporting periods for which they
were designated.
Changes in fair value of the hedging instrument attributable
to the risk hedged is recorded as part of the carrying value of
the hedged item.
other derivatives
The Company also uses foreign exchange forward contracts
to hedge its exposure towards foreign currency. These
foreign exchange forward contracts are not used for
trading or speculation purposes. A derivative contract is
recognised as an asset or a liability on the commitment
date. Outstanding derivative contracts as at reporting date
are fair valued and recognised as financial asset/financial
liability, with the resultant gain/(loss) being recognised in
the statement of profit and loss.
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.
i) 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 for financial assets.
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 Company expects to receive.
When estimating the cash flows, the Company 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.
Trade receivables
The Company applies approach permitted by Ind AS
109, financial instruments, which requires expected
lifetime losses to be recognised from initial recognition of
receivables.
Other financial assets
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 and if credit risk has increased significantly,
impairment loss is provided.
j) inventories
Raw Material: Lower of cost or net realisable value. Cost is
determined on first in first out ('FIFO') basis.
Work in progress: At cost determined on FIFO basis upto
estimated stage of completion.
Finished goods: Lower of cost or net realisable value.
Cost is determined on FIFO basis, includes direct material
and labour expenses and appropriate proportion of
manufacturing overheads based on the normal capacity for
manufactured goods.
Stock in trade: Lower of cost or net realisable value. Cost is
determined on first in first out ('FIFO') 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.
k) Taxes on income
Tax expense recognised in the statement of profit and
loss comprises the sum of deferred tax and current tax
not recognised in Other Comprehensive Income ('OCI') or
directly in equity.
Current income-tax is measured at the amount expected
to be paid to the tax authorities in accordance with the
Indian Income-tax Act 1961. 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
OCI or in equity).
Deferred income-tax is calculated using the liability
method. Deferred tax liabilities are generally recognised
in full for all taxable temporary differences. Deferred tax
assets are recognised to the extent that it is probable that
the underlying tax loss, unused tax credits or deductible
temporary difference will be utilised against future taxable
income. This is assessed based on the Company's forecast of
future operating results, adjusted for significant non-taxable
income and expenses and specific limits on the use of any
unused tax loss or credit. 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 the statement of profit and loss is recognised outside
the statement of profit and loss (either in OCI or in equity).
l) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand
deposits with banks/corporations and short-term highly
liquid investments (original maturity less than three months)
that are readily convertible into known amount of cash and
are subject to an insignificant risk of change in value.
m) cash flow statement
Cash flows are reported using the indirect method, whereby
profit before tax 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 the available information.
n) post-employment, long term and short term employee
benefits
Defined contribution plans
Provident fund benefit is a defined contribution plan under
which the Company pays fixed contributions into funds
established under the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952. The Company has no
legal or constructive obligations to pay further contributions
after payment of the fixed contribution.
Defined benefit plans
Gratuity is a post-employment benefit defined under
The Payment of Gratuity Act, 1972 and is in the nature
of a defined benefit plan. The liability recognised in the
financial statements in respect of gratuity is the present
value of the defined benefit obligation at the reporting
date, together with adjustments for unrecognised actuarial
gains or losses and past service costs. The defined benefit/
obligation is calculated at the end of each reporting period
by an independent actuary using the projected unit credit
method.
Actuarial gains and losses arising from past experience and
changes in actuarial assumptions are credited or charged
to the OCI in the year in which such gains or losses are
determined.
Other long-term employee benefits
Liability in respect of compensated absences 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 the
statement of profit and loss in the year in which such gains
or losses are determined.
Short-term employee benefits
Expense in respect of other 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.
o) Share based payments
Employee stock option plan
The fair value of options granted under Employee Stock
Option Plan is recognised as an employee benefits expense
with a corresponding increase in equity. The total amount to
be expensed is determined by reference to the fair value of
the options. The total expense is recognised over the vesting
period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of
options that are expected to vest based on the non-market
vesting and service conditions. It recognises the impact of
the revision to original estimates, if any, in the statement of
profit and loss, with a corresponding adjustment to equity.
p) operating expenses
Operating expenses are recognised in the statement of
profit and loss upon utilisation of the service or as incurred.
q) Borrowing costs
Borrowing costs directly attributable to the acquisitions,
construction or production of a qualifying asset are
capitalised during the period of time that is necessary to
complete and prepare the asset for its intended use or sale.
Other borrowing costs are expensed in the period in which
they are incurred and reported in finance costs.
r) 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:
• 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.
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