5 MATERIAL ACCOUNTING POLICY
INFORMATION
The material accounting policy information in regard to
preparation of the Standalone Financial Statements is
given below:
5.1 Basis of Preparation and Measurement
These Standalone Financial Statements have been
prepared on going concern basis following accrual
system of accounting. The assets and liabilities have been
measured at historical cost or at amortised cost or at fair
value as applicable at the end of each reporting period. The
functional currency of the Company is Indian Rupees (H).
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.
Fair value measurements are categorised into Level 1,
2 or 3 as per Ind AS requirement, which are described
as follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset
or liability.
5.2 Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits. The
Company considers cash equivalents as all short-term
balances (with an original maturity of three months or less
from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash
and which are subject to an insignificant risk of changes
in value.
5.3 Financial Instruments
Financial assets and financial liabilities are recognised
when the Company becomes a party to the contractual
provisions of the financial instruments.
On initial recognition, financial assets and financial
liabilities are recognised at fair value plus / minus
transaction cost that is attributable to the acquisition
or issue of financial assets and financial liabilities. In
case of financial assets and financial liabilities which are
recognised at fair value through profit and loss (FVTPL),
its transaction costs are recognised in Statement of Profit
and Loss.
5.3.1 Financial Assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a settlement 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.
After initial recognition, financial assets are subsequently
measured in their entirety at either amortised cost
or fair value, depending on the classification of the
financial assets.
(i) Classification and Measurement of
Financial Assets (other than Equity
instruments)
(a) Financial Assets at Amortised Cost:
Financial assets that meet the following conditions
are subsequently measured at amortised cost using
Effective Interest Rate method (EIR):
• 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 asset give rise on
specified dates to cash flows that are Solely
Payments of Principal and Interest (SPPI) on the
principal amount outstanding.
Effective Interest Rate (EIR) method
The effective interest rate method is a method of
calculating the amortised cost of financial asset and
of allocating interest income over the expected life.
The company while applying EIR method, generally
amortises any fee, transaction costs and other
premiums or discount that are integral part of the
effective interest rate of a financial instrument.
Income is recognised in the Statement of Profit and
Loss on an effective interest rate basis for financial
assets other than those classified as at FVTPL.
EIR is determined at the initial recognition of the
financial asset. EIR is subsequently updated at
every reset, in accordance with the terms of the
respective contract.
Once the terms of financial assets are renegotiated,
other than market driven interest rate movement,
any gain / loss measured using the previous EIR as
calculated before the modification, is recognised in
the Statement of Profit and Loss in period during
which such renegotiations occur.
(b) Financial Assets at Fair Value Through Other
Comprehensive Income (FVTOCI)
A financial asset is measured at FVTOCI if both the
following conditions are met:
• The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial asset; and
• The 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.
All fair value changes are recognised in Other
Comprehensive Income (OCI) and accumulated
in Reserve.
(c) Financial Assets at Fair Value Through Profit or Loss
(FVTPL)
A financial asset is measured at FVTPL unless it is
measured at amortised cost or FVTOCI, with all
changes in fair value recognised in Statement of
Profit and Loss.
Business Model
An assessment of business model for managing
financial assets is fundamental to the classification
of a financial asset. The Company determines
the business model at a level that reflects how
financial assets are managed together to achieve
a particular business objective of generating cash
flows. The Company's business model assessment
is performed at a higher level of aggregation
rather than on an instrument-by-instrument basis.
The Company is in the business of providing loans
across power, logisitics & infrastructure sector and
such loans are managed to realise the contractual
cash flows over the tenure of the loan. Further, other
financial assets may also be held by the Company to
collect the contractual cash flows.
(ii) Classification, Measurement and
Derecognition of Equity Instruments
All equity investments other than in subsidiaries,
joint ventures and associates are measured at
fair value. Equity instruments which are held for
trading are classified as at FVTPL. For all other equity
instruments, the Company at initial recognition
makes an irrevocable election to classify it as
either FVTOCI or FVTPL. The Company makes such
election on an instrument-by-instrument basis.
An equity investment classified as FVTOCI is
initially measured at fair value plus transaction
costs. Subsequently, it is measured at fair value
and, all fair value changes are recognised in Other
Comprehensive Income (OCI) and accumulated
in Reserve. There is no recycling of the amounts
from OCI to Statement of Profit and Loss, even
on sale of investment. However, the Company
transfers the cumulative gain / loss within equity.
Equity instruments included within the FVTPL
category are measured at fair value with all changes
recognised in the Statement of Profit and Loss. "
Investment in equity shares of subsidiaries, joint
ventures and associates are accounted at cost, less
impairment if any.
(iii) Impairment of Financial Assets
Subsequent to initial recognition, the Company
recognises expected credit loss (ECL) on financial
assets measured at amortised cost as required
under Ind AS 109 'Financial Instruments'. The
Company presents the ECL charge or reversal
(where the net amount is a negative balance for a
particular period) in the Statement of Profit and
Loss as "Impairment on financial instruments" and
as a cumulative deduction from gross carrying
amount in the Balance Sheet, wherever applicable.
The impairment requirements for the recognition and
measurement of ECL are equally applied to financial
asset measured at FVTOCI except that ECL is recognised
in Other Comprehensive Income and is not reduced
from the carrying amount in the Balance Sheet.
(a) Impairment of Loan Assets and commitments under
Letter of Comfort (LoC) & Letter of Undertaking (LoU):
The Company measures ECL on loan assets at an
amount equal to the lifetime ECL if there is credit
impairment or there has been significant increase in
credit risk (SICR) since initial recognition. If there is no
SICR as compared to initial recognition, the Company
measures ECL at an amount equal to 12-month ECL.
When making the assessment of whether there has
been a SICR since initial recognition, the Company
considers reasonable and supportable information,
that is available without undue cost or effort. If the
Company measured loss allowance as lifetime ECL in
the previous period, but determines in a subsequent
period that there has been no SICR since initial
recognition due to improvement in credit quality, the
Company again measures the loss allowance based
on 12-month ECL.
ECL is measured on individual basis for credit
impaired loan assets, and on other loan assets
it is generally measured on collective basis using
homogenous groups.
The Company measures impairment on
commitments under LoC & LoU on similar basis as in
case of Loan assets.
(b) Impairment of financial assets, other than
loan assets:
ECL on financial assets, other than loan assets,
is measured at an amount equal to life time
expected losses.
(iv) De-recognition 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
along with all the substantial risks and rewards
of ownership of the asset to another party. The
renegotiation or modification of the contractual
cash flows of a financial asset can also lead to
derecognition of the existing financial asset.
On de-recognition of a financial asset in its entirety,
the difference between the asset's carrying amount
and the sum of the consideration received &
receivable, and the cumulative gain or loss that
had been recognised in Other Comprehensive
Income and accumulated in Equity, is recognised
in Statement of Profit and Loss if such gain or loss
would have otherwise been recognised in Statement
of Profit and Loss on disposal of that financial asset.
5.3.2 Financial Liabilities
(i) All financial liabilities other than derivatives and
financial guarantee contracts are subsequently
measured at amortised cost using the effective
interest rate (EIR) method.
EIR is determined at the initial recognition of the
financial liability. EIR is subsequently updated for
financial liabilities having floating interest rate, at the
respective reset date, in accordance with the terms
of the respective contract.
(ii) Financial guarantee
A financial guarantee issued by the Company is
initially measured at fair value and, if not designated
as at FVTPL, is subsequently measured at the
higher of:
• t he best estimate of expenditure required to
settle any financial obligation arising as a result
of the guarantee; and
• the amount initially recognised less, when
appropriate, the cumulative amount of income
recognised in the Statement of Profit and Loss.
(iii) De-recognition of financial liabilities
The Company derecognises financial liabilities when,
and only when, the Company's obligations are
discharged, cancelled or have expired. The difference
between the carrying amount of the financial liability
derecognised and the consideration paid & payable
is recognised in Statement of Profit and Loss.
5.3.3 Derivative Financial Instruments
(i) The Company enters into a variety of derivative
financial instruments to manage its exposure to
interest rate and foreign exchange rate risks.
(ii) Under hedge accounting, an entity can designate
derivative contracts either as cash flow hedge or
fair value hedge. The Company designates certain
derivative contracts as cash flow hedge or fair
value hedge.
(iii) To qualify for hedge accounting, the
hedging relationship must meet all of the
following requirements:
• There is an economic relationship between the
hedged item and the hedging instrument.
• The effect of credit risk does not dominate
the value changes that result from that
economic relationship.
• The hedge ratio of the hedging relationship is
the same as that resulting from the quantity
of the hedged item that the Company actually
hedges and the quantity of the hedging
instrument that the Company actually uses to
hedge that quantity of hedged item.
(iv) Cash flow hedge
The hedging instruments which meets the qualifying
criteria for hedge accounting are designated as cash
flow hedge. The effective portion of changes in the
fair value of derivatives that are designated and
qualify as cash flow hedges is recognised in Other
Comprehensive Income. The change in intrinsic value
of hedging instruments is recognised in 'Effective
Portion of Cash Flow Hedges'. The amounts recognised
in such reserve are reclassified to the Statement of
Profit or Loss when the hedged item affects profit
or loss. Further, the change in fair value of the time
value of a hedging instruments is recognised in 'Cost
of Hedging Reserve'. The amounts recognised in such
reserve are amortised to the Statement of Profit and
Loss on a systematic basis. The gain or loss relating
to ineffective portion is recognised immediately in
Statement of Profit and Loss.
(v) Fair Value hedge
The Company remeasures the hedged item for fair
value changes attributable to the hedged risk (i.e.
changes in the benchmark rate). Such fair value
hedge adjustment are recognised in the statement
of profit or loss at end of every reporting period. The
change in fair value of the underlying hedged item
on account of attributable hedged risk (benchmark
rate) is offset by corresponding change in fair value
of the derivative (Fixed to Float IRS).
(vi) Hedge accounting is discontinued when the hedging
instrument expires, or terminated, or exercised, or
when it no longer qualifies for hedge accounting.
(vii) Derivatives, other than those designated under hedge
relationship, are initially recognised at fair value at the
date the derivative contracts are entered into and are
subsequently re-measured to their fair value at the
end of each reporting period. The resulting gain or
loss is recognised in Statement of Profit and Loss.
5.4 Offsetting of Financial Assets and Financial
Liabilities
Financial Assets and Financial Liabilities are offset and
the net amount is presented in the balance sheet when
currently there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle
on a net basis or to realise the assets and settle the
liabilities simultaneously.
5.5 Property, Plant and Equipment (PPE) and
Depreciation
(i) Items of PPE are initially recognised at cost.
Subsequent measurement is done at cost less
accumulated depreciation and accumulated
impairment losses, if any, except for freehold land
which is not depreciated. An item of PPE retired from
active use and held for disposal is stated at lower of
its book value or net realisable value.
(ii) I n case of assets put to use, capitalisation is done
on the basis of bills approved or estimated value of
work done as per contracts where final bill(s) is/are
yet to be received / approved, subject to necessary
adjustment in the year of final settlement.
(iii) Cost of replacing part of an item of PPE is recognised
in the carrying amount of the item if it is probable
that the future economic benefits embodied within
the part will flow to the Company and its cost can
be measured reliably. The carrying amount of the
replaced part is derecognised. Maintenance or
servicing costs of PPE are recognised in Statement of
Profit and Loss as incurred.
(iv) Under-construction PPE is carried at cost, less any
recognised impairment loss. Such PPE items are
classified to the appropriate categories of property,
plant and equipment when completed and ready for
intended use. Depreciation of these assets, on the
same basis as of other assets, commences when the
assets are ready for their intended use.
(v) Depreciation is recognised so as to write-off the
cost of assets less their residual values as per
written down value method, over the useful lives as
prescribed in Schedule II to the Companies Act, 2013,
except for cell phones where useful life has been
estimated by the Company as 2 years. Residual value
is estimated as 5% of the original cost of PPE.
(vi) Depreciation on additions to/deductions from PPE
during the year is charged on pro-rata basis from /
up to the date on which the asset is available for use/
disposed.
(vii) An item of PPE 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 de-recognition of an item of
PPE is determined as the difference between the net
disposal proceeds and the carrying amount of the
asset and is recognised in the Statement of Profit
and Loss.
(viii) I tems of PPE costing up to H 5000/- each are fully
depreciated, in the year of purchase.
5.6 Intangible Assets and Amortisation
(i) Intangible assets with finite useful lives that
are acquired separately are recognised at cost.
Cost includes any directly attributable incidental
expenses necessary to make the assets ready for
its intended use. Subsequent measurement is
done at cost less accumulated amortisation and
accumulated impairment losses, if any. Amortisation
is recognised on a straight-line basis over their
estimated useful lives.
(ii) Expenditure incurred which are eligible for
capitalisation under intangible assets is carried as
Intangible Assets under Development till they are
ready for their intended use.
(iii) Estimated useful life of intangible assets with finite
useful lives has been estimated by the Company as
5 years.
(iv) An intangible asset is derecognised on disposal, or
when no future economic benefits are expected
from use or disposal. Gains or losses arising from de¬
recognition of an intangible asset, measured as the
difference between the net disposal proceeds and
the carrying amount of the asset, and are recognised
in the Statement of Profit and Loss when the asset
is derecognised.
5.7 Leases
For recognition, measurement and presentation of lease
contracts, the Company applies the principles of Ind AS
116 'Leases'.
(i) The Company as a lessee
The Company at inception of a contract assesses,
whether the contract is, or contains, a lease. A
contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset
for a period of time in exchange for consideration.
To assess whether a contract conveys the right to
control the use of an identified asset, the Company
assesses whether
(a) the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease, and
(b) the Company has the right to direct the use of the
identified asset.
The Company at inception of a lease contract recognises
a Right-of-Use (RoU) asset at cost and a corresponding
lease liability, except for leases with term of less than
twelve months (short-term) and low-value assets which
are recognised 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 (RoU) assets are initially recognised
at cost, which comprise the initial amount of the lease
liability adjusted for any lease payments made at or before
the inception date of the lease plus any initial direct costs,
less any lease incentives received. They are subsequently
measured at cost less any accumulated depreciation and
accumulated impairment losses. The right-of-use asset
is depreciated using the straight-line method from the
commencement date over the shorter of lease term or
useful life of right-of-use assets.
The lease liability is initially measured at amortised cost
at the present value of future lease payments. The lease
payments are discounted using the interest rate implicit
in the lease or, if not readily determinable, using the
Company's incremental borrowing rates in the country of
domicile of the leases.
Lease liabilities are re-measured with a corresponding
adjustment to the related right-of-use (RoU) asset if
the Company changes its assessment if whether it will
exercise an extension or a termination option.
Lease liability and RoU asset is separately presented in
the Balance Sheet. Interest expense on lease liability is
presented separately from depreciation on right of use
asset as a component of finance cost in the Statement of
Profit and Loss. Lease payments for the principal portion
are classified as Cash flow used in financing activities and
lease payments for the interest portion are classified as
Cash flow used in operating activities.
(ii) The Company as a lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Contracts in which all
the risks and rewards of the lease are substantially
transferred to the lessee are classified as a finance
lease. All other leases are classified as operating
leases. For operating leases, rental income is
recognised on a straight-line basis over the term of
the relevant lease.
Amount due from lessee under finance leases is
recognised as receivable at an amount equal to the
net investment of the Company in the lease. Finance
income on the lease is allocated to accounting
periods so as to reflect a constant periodic rate of
return on the Company's net investment outstanding
in respect of lease at the reporting date.
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