2 Significant Accounting Policies
The significant accounting policies applied by
the Company in the preparation of its standalone
Ind AS financial statements are listed below. Such
accounting policies have been applied consistently
to all the periods presented in these financial
statements, unless otherwise stated.
2.1 Basis of preparation of financial statements
The financial statements of the Company have been
prepared in accordance with Indian Accounting
Standards (Ind AS) notified under Companies (Indian
Accounting Standards) Rules, 2015 (as amended
from time to time) and presentation requirements
of, unless otherwise stated.
a) Statement of compliance
These financial statements of the Company are
prepared and presented in accordance with
Indian Accounting Standards ("Ind AS”) notified
under the Companies (Indian Accounting
Standards) Rules, 2015, as amended and other
relevant provision of the Act as amended from
time to time and presentation requirements
of Division II of Schedule III to the Companies
Act, 2013, (Ind AS compliant Schedule III), as
applicable to the financial statements.
b) Functional and presentation currency
The financial statements are presented in
Indian Rupees ('INR') and all values are rounded
to nearest lakhs upto two decimal places
(INR 00,000), except when otherwise indicated.
C) Basis of measurement
The financial statements have been prepared
on a historical cost basis, except for the following
assets and liabilities:
(i) Derivative Instruments
(ii) Certain financial assets and liabilities that
are measured at fair value
Historical cost is generally based on the fair
value of the consideration given in exchange
for goods and services as at the date of
respective transactions.
2.2 Use of estimates
The preparation of the financial statements in
conformity with Ind AS requires management to
make estimates, judgments and assumptions.
These estimates, judgments and assumptions
affect the application of accounting policies and
the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at
the date of the financial statements and reported
amounts of revenues and expenses during the
year. Application of accounting policies that require
critical accounting estimates involving complex and
subjective judgments and the use of assumptions
in these financial statements have been disclosed
in Note 2.3. Accounting estimates could change
from period to period. Actual results could differ
from those estimates. Appropriate changes in
estimates are made as management becomes
aware of changes in circumstances surrounding the
estimates. Changes in estimates are reflected in the
financial statements in the period in which changes
are made and, if material, their effects are disclosed
in the notes to the financial statements.
2.3 Critical accounting estimates, assumptions
and judgements
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period
in which the estimate is re vised and future periods
affected. The Company based its assumptions
and estimates on parameters available when
the financial statements were prepared. Existing
circumstances and assumptions about future
developments, however, may change due to market
changes or circumstances arising that are beyond
the control of the Company. Such changes are
reflected in the assumptions when they occur.
Significant judgements and estimates relating to
the carrying values of assets and liabilities include,
determination of estimated projected cost and
revenue in long term contracts, determination of
term of lease contracts, fair value measurement,
impairment of goodwill, provision for employee
benefits and other provisions, recoverability
of deferred tax assets and commitments
and contingencies.
2.3.1 Estimates and assumptions
a) . Property, plant and equipment
Property, Plant and Equipment represent
a significant proportion of the asset base
of the Company. The charge in respect
of periodic depreciation is derived after
determining an estimate of an asset's
expected useful life and the expected
residual value at the end of its life. The useful
lives and residual values of Company's
assets are determined by management
at the time the asset is acquired and
reviewed periodically, including at each
financial year end. The lives are based on
historical experience with similar assets
as well as anticipation of future events,
which may impact their life, such as
changes in technology.
b) . Provision for employee benefits
The cost of the defined benefit gratuity &
leave encashment plan and the present
value of the gratuity & leave encashment
obligation are determined using actuarial
valuations. An actuarial valuation involves
making various assumptions that may
differ from actual developments in the
future. These include the determination of
the discount rate, future salary increases
and mortality rates. Due to the complexities
involved in the valuation and its long¬
term nature, a defined benefit obligation
is highly sensitive to changes in these
assumptions. All assumptions are reviewed
at each reporting date. The parameter
most subject to change is the discount
rate. In determining the appropriate
discount rate for plans operated in
India, the management considers the
interest rates of government bonds in
currencies consistent with the currencies
of the postemployment benefit obligation.
The mortality rate is based on publicly
available mortality tables. Those mortality
tables tend to change only at interval in
response to demographic changes. Future
salary increases and gratuity increases
are based on expected future inflation rate
and past trends.
c) . Provision for litigations and contingencies
The provision for litigations and
contingencies are determined based on
evaluation made by the management of
the present obligation arising from past
events the settlement of which is expected
to result in outflow of resources embodying
economic benefits, which involves
judgements around estimating the
ultimate outcome of such past events and
measurement of the obligation amount.
Due to the judgements involved in such
estimations the provisions are sensitive to
the actual outcome in future periods.
d) . Provision
Significant estimates are involved in the
determination of provisions related to
liquidated damages, onerous contracts
and warranty provision. The Company
records a provision for onerous sales
contracts when current estimates of total
contract costs exceed expected contract
revenue. Warranty provision is determined
based on the historical trend of warranty
expense for the same types of goods
for which the warranty is currently being
determined, after adjusting for unusual
factors related to the goods that were sold
or based on specific warranty clause in an
agreement. Such estimates are reviewed
annually for any material changes in
assumptions and likelihood of occurrence.
The provision for warranty, liquidated
damages and onerous contracts is
based on the best estimate required to
settle the present obligation at the end of
reporting period.
e) . Impairment of non-financial assets
Impairment exists when the carrying value
of an asset or cash generating unit (cgu)
exceeds its recoverable amount, which
is the higher of its fair value less costs of
disposal and its value in use. The fair value
less costs of disposal calculation is based
on available data from binding sales
transactions, conducted at arm's length, for
similar assets or observable market prices
less incremental costs for disposing of the
asset. The value in use calculation is based
on a Discounted Cash Flow (DCF) model.
The cash flows are derived from the budget
and do not include restructuring activities
that the Company is not yet committed to
or significant future investments that will
enhance the asset's performance of the
CGU being tested. The recoverable amount
is sensitive to the discount rate used for the
DCF model as well as the expected future
cash-inflows and the growth rate used for
extrapolation purposes.
f) . Taxes
The Company uses estimates and
judgements based on the relevant rulings
in the areas of allocation of revenue, costs,
allowances and disallowances which is
exercised while determining the provision for
income tax. Uncertainties exist with respect to
the interpretation of tax regulations, changes
in tax laws, and the amount and timing
of future taxable income. Given the wide
range of business relationships differences
arising between the actual results and the
assumptions made, or future changes to
such assumptions, could necessitate future
adjustments to tax income and expense
already recorded. The Company establishes
provisions, based on reasonable estimates.
The amount of such provisions is based
on various factors, such as experience of
previous assessments and interpretations
of tax regulations by the Company.
g) . Leases: whether an arrangement contains
a lease
The Company determines the lease term
as the agreed tenure of the lease, together
with any periods covered by an option to
extend the lease if it is reasonably certain
to be exercised, or any periods covered
by an option to terminate the lease, if it is
reasonably certain not to be exercised. After
the commencement date, the Company
reassesses the lease term if there is a
significant event or change in circumstances
that is within its control and affects its ability
to exercise or not to exercise the option to
renew or to terminate (e.g., construction
of significant leasehold improvements or
significant customisation to the leased asset)
.4 Current and 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 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 assets and liabilities have been classified as current
or non- current as per the Company's operating cycle
and other criteria set out in Schedule III to the Companies
Act, 2013. Based on the nature of products and the
time between the acquisition of assets for processing
and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle as 12
months for the purpose of current and non- current
classification of assets and liabilities, except for long¬
term contracts. The projects business comprises
long-term contracts which have an operating cycle
exceeding one year. For classification of current
assets and liabilities related to projects business, the
Company uses the duration of the individual life cycle
of the contract as its operating cycle.
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;
Advance tax paid is classified as current assets
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
2.5 Foreign Currency
Functional currency
The functional currency of the Company is
the Indian Rupee.
Transactions and translations Initial recognition
transactions in foreign currencies are recorded by
the Company at their respective functional currency
spot rates at the date the transaction first qualifies
for recognition.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
date. The gains or losses resulting from such
translations are recognised in the statement of
profit and loss.
Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured
at fair value are translated at the exchange
rate prevalent at the date when the fair value
was measured. Non-monetary assets and non¬
monetary liabilities denominated in a foreign
currency and measured at historical cost are
translated at the exchange rate prevalent at the
date of the transaction.
Transaction gains or losses realized upon settlement
of foreign currency transactions are included in
determining net profit for the period in which the
transaction is settled. Revenue, expense and cash flow
items denominated in foreign currencies are translated
into the relevant functional currencies using the
exchange rate in effect on the date of the transaction.
2.6 Revenue Recognition
Revenue from contracts with customers is
recognised when control of the goods or 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 goods
or services. Revenue is recognised to the extent that
it is probable that the economic benefits will flow
to the Company and the revenue can be reliably
measured, regardless of when the payment is being
made. Revenue is measured at the fair value of the
consideration received or receivable, taking into
account contractually defined terms of payment
and excluding taxes or duties collected on behalf of
the government. 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 inventory and credit risks.
The Company considers whether there are
other promises in the contract that are separate
performance obligations to which a portion of
the transaction price needs to be allocated if any.
In determining the transaction price for the sale
of goods, the Company considers the effects of
variable consideration, the existence of significant
financing components, non-cash consideration,
and consideration payable to the customer (if any).
Revenue is stated exclusive of goods and service tax
and net of trade and quantity discount.
Liquidated damages / penalties are provided for as
per the contract terms wherever there is a delayed
delivery attributable to the Company.
a) Revenue from the sale of goods
Revenues are recognised when the significant
risks and rewards of ownership of the goods
have passed to the buyer, usually on delivery
of the goods. Revenue from the sale of
goods is measured at the fair value of the
consideration received or receivable, net of
returns and allowances, trade discounts and
volume rebates.
b) Revenue from sale of services
Revenue from services rendered over a period
of time, such as annual maintenance contracts,
are recognised on straight line basis over the
period of the performance obligation.
c) Income from development services
Revenue from the development services is
recognised as per the contract terms and when
accrued. When the contract outcome cannot
be measured reliably, revenue is recognised
only to the extent that the expenses incurred
are eligible to be recovered.
d) Export benefits
Export incentives receivable are accrued for,
when the right to receive the credit is established
and there is no significant uncertainty regarding
the realisability of the incentive.
e) Other income
Interest income is recognised on time
proportion basis.
Fair value gain on financial instruments is
recognized using the effective interest method.
2.7 Income tax
Income tax expense comprises current and deferred
income tax. Income tax expense is recognized in net
profit in the statement of profit and loss.
a) Current tax
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
in the countries where the Company operates
and generates taxable income.
Management periodically evaluates positions
taken in the tax returns with respect to situations
in which applicable tax regulations are subject
to interpretation and considers whether it is
probable that a taxation authority will accept
an uncertain tax treatment. The Company
shall reflect the effect of uncertainty for each
uncertain tax treatment by using either most
likely method or expected value method,
depending on which method predicts better
resolution of the treatment.
The Company offsets tax assets and tax
liabilities, where it has a legally enforceable
right to set off the recognized amounts and
where it intends either to settle on a net basis,
or to realize the asset and settle the liability
simultaneously.
b) Deferred tax
Deferred tax assets and liabilities are measured
using tax rates and tax laws that have been
enacted or substantively enacted by the
balance sheet date and are expected to apply
to taxable income in the years in which those
temporary differences are expected to be
recovered or settled. The effect of changes in
tax rates on deferred tax assets and liabilities is
recognized as income or expense in the period
that includes the enactment or the substantive
enactment date.
A deferred tax asset is recognized to the extent
that it is probable that future taxable profit
will be available against which the deductible
temporary differences and tax losses
can be utilized.
Deferred tax relating to items recognised
outside profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Deferred tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.
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.
2.8 Property, plant and equipment
Recognition and measurement
Freehold Land is carried at historical cost, all other
item of property, plant and equipment is measured
at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Cost includes
expenditures that are directly attributable to the
acquisition of the asset. Such cost includes the cost
of replacing part of the plant and equipment and
borrowing costs for long-term construction projects
if the recognition criteria are met. When significant
parts of property, plant and equipment are required
to be replaced at intervals, the Company depreciates
them separately based on their specific useful lives.
Likewise, when a major inspection is performed, its
cost is recognised in the carrying amount of the
property, plant and equipment as a replacement if
the recognition criteria are satisfied.
All other repair and maintenance costs are
recognised in statement of profit or loss as incurred.
The Company identifies and determines cost of each
component/ part of property, plant and equipment
separately, if the component/ part has a cost which
is significant to the total cost of the property, plant
and equipment and has useful life that is materially
different from that of the remaining asset. These
components are depreciated over their useful lives;
the remaining asset is depreciated over the life of
the principal asset.
Advances paid towards the acquisition of property,
plant and equipment outstanding at each balance
sheet date is classified as capital advances and
cost of assets not ready for use at the balance sheet
date are disclosed under capital work- in- progress
is stated at cost less accumulated impairment loss.
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 are derecognised
when replaced. All other repairs and maintenance are
charged to statement of profit and loss during the
reporting period in which they are incurred.
a) Depreciation
The Company depreciates property, plant and
equipment over their estimated useful lives
using the Written Down method. Depreciation
on additions (disposals) is provided on a pro¬
rata basis i.e. from (up to) the date on which
asset is ready for use (disposed of).
Lease hold property are depreciated on straight
line basis over shorter of the asset's useful life
and their lease term unless the entity expects to
use the asset beyond the lease term.
The estimated useful lives of assets are as follows:
The useful lives have been determined based on
technical evaluation done by the management's
expert which are in line those specified by Schedule
II to the Companies Act 2013. The residual values
are not more than 5% of the original cost of the
asset. The depreciation methods, assets' residual
values and useful lives are reviewed, and adjusted
if appropriate, at the end of each reporting period.
Advances paid towards the acquisition of
property, plant and equipment outstanding at
each Balance Sheet date is classified as capital
advances under Other Non-Current Assets and
the cost of assets not put to use before such date
is disclosed under 'Capital work-in-progress'.
The cost and related accumulated depreciation
are eliminated from the financial statements
upon sale or retirement of the asset and the
resultant gains or losses are recognized in the
Statement of Profit and Loss.
2.9 Intangible Assets
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets
are amortized over their respective individual
estimated useful lives on a written down basis,
from the date that they are available for use. The
estimated useful life of an identifiable intangible
asset is based on a number of factors including the
effects of obsolescence, demand, competition, and
other economic factors (such as the stability of the
industry, and known technological advances), and
the level of maintenance expenditures required to
obtain the expected future cash flows from the asset.
Amortization methods and useful lives are reviewed
periodically including at each financial year end. The
estimated useful lives for intangible assets are 3 years.
2.10 Inventories
Inventories consist of raw materials, work-in¬
progress, finished goods, stock-in-trade and stores
an spares. Inventories are measured at the lower
of cost and net realisable value. However, materials
and other items held for use in the production of
inventories are not written down below cost if the
finished goods in which they will be incorporated are
expected to be sold at or above cost.
The cost of various categories of inventories is
arrived at as follows:
Stores, spares, raw materials, components and
stock-in-trade - at rates determined on the moving
weighted average method.
Goods in Transit - at actual cost. Work-in-progress
and finished goods - at full absorption cost method
which includes direct materials, direct labour and
manufacturing overheads. Cost is determined on
weighted average method.
Cost includes expenditures incurred in acquiring
the inventories, production or conversion costs and
other costs incurred in bringing them to their existing
location and condition.
Provision for obsolescence is made wherever
necessary. Net realisable value is the estimated
selling price in the ordinary course of business, less
estimated costs of completion and the estimated
costs necessary to make the sale.
The factors that the Company considers in
determining the provision for slow moving, obsolete
and other non-saleable inventory include estimated
shelf life, planned product discontinuances, price
changes, ageing of inventory and introduction of
competitive new products, to the extent each of
these factors impact the Company's business and
markets. The Company considers all these factors
and adjusts the inventory provision to reflect its
actual experience on a periodic basis.
2.11 Financial instruments
A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
2.11.1Initial recognition
The Company recognizes financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument. All
financial assets and liabilities are recognized
at fair value on initial recognition, except for
trade receivables which are initially measured
at transaction price. Transaction costs that are
directly attributable to the acquisition or issue
of financial assets and financial liabilities, that
are not at fair value through profit or loss, are
added to the fair value on initial recognition.
2.11.2 Subsequent measurement
a). Non-derivative financial instruments
(i) Financial assets carried at amortised
cost
A financial asset is subsequently
measured at amortised cost if it is
held within a business where the
objective is to hold the asset in order
to collect contractual cash flows and
the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding
(ii) Financial assets at fair value through
other comprehensive income
A financial asset is subsequently
measured at fair value through
other comprehensive income if
it is held within a business where
the objective is achieved by both
collecting contractual cash flows
and selling financial assets and the
contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments
of principal and interest on the
principal amount outstanding. The
Company has made an irrevocable
election for its investments which
are classified as equity instruments
to present the subsequent changes
in fair value in other comprehensive
income based on its business model.
Further, in cases where the Company
has made an irrevocable election
based on its business model, for its
investments which are classified as
equity instruments, the subsequent
changes in fair value are recognized
in other comprehensive income.
(iii) Financial assets at fair value through
profit or loss
A financial asset which is not classified
in any of the above categories are
subsequently fair valued through
profit or loss.
(iv) Financial liabilities
Financial liabilities are initially measured
at fair value, net of transaction costs,
and are subsequently measured at
amortised cost, using the effective
interest rate method where the time
value of money is significant. Interest
bearing bank loans, overdrafts are
initially measured at fair value and are
subsequently measured at amortised
cost using the effective interest rate
method. Any difference between the
proceeds (net of transaction costs)
and the settlement or redemption of
borrowings is recognised over the term
of the borrowings in the statement of
profit and loss.
For trade and other payables maturing
within one year from the balance
sheet date, the carrying amounts
approximate fair value due to the
short maturity of these instruments.
Financial liabilities are subsequently
carried at amortized cost using the
effective interest method, For trade
and other payables maturing within
one year from the balance sheet date,
the carrying amounts approximate
fair value due to the short maturity of
these instruments.
Effective interest method
The effective interest method is a
method of calculating the amortised
cost of a financial instrument and of
allocating interest income or expense
over the relevant period. The effective
interest rate is the rate that exactly
discounts future cash receipts or
payments through the expected life
of the financial instrument, or where
appropriate, a shorter period.
An equity instrument is any contract
that evidences a residual interest in the
assets of the Company after deducting
all of its liabilities. Equity instruments
are recorded at the proceeds received,
net of direct issue costs.
Off-setting of financial instruments
Financial assets and financial
liabilities are offset and the net
amount is reported in the standalone
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.
b). Derivative financial instruments
This category has derivative financial
assets or liabilities which are not
designated as hedges.
Derivatives not designated as hedges
are recognized initially at fair value
and attributable transaction costs are
recognized in the statement of profit
and loss when incurred. Subsequent to
initial recognition, these derivatives are
measured at fair value through profit or
loss and the resulting exchange gains
or losses are included in other income /
expenses. Assets/ liabilities in this category
are presented as current assets/current
liabilities if they are either held for trading
or are expected to be realized within 12
months after the balance sheet date.
2.11.3 Impairment of Financial Assets
For trade receivables only, the Company
applies the simplified approach permitted by
Ind AS 109 Financial Instruments, which requires
expected lifetime losses to be recognized from
initial recognition of the receivables.
2.11.4 Derecognition of Financial Assets
A financial asset is derecognised only when
- The Company has transferred the
rights to receive cash flows from the
financial asset ; or
- Retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay
the cash flows to one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised. Where the entity has not
transferred substantially all risks and rewards of
ownership of the financial asset, the financial
asset is not derecognised.
Where the entity has neither transferred a
financial asset nor retains substantially all
risks and rewards of ownership of the financial
asset, the financial asset is derecognised if
the Company has not retained control of the
financial asset. Where the Company retains
control of the financial asset, the asset is
continued to be recognised to the extent of
continuing involvement in the financial asset
2.12 Fair value measurement
The Company measures financial instruments 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 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 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 minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements are
categorized 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 categorization (based on the lowest level
input that is significant to fair value measurement as
a whole) at the end of each reporting period.
The Company has a team comprising of members
of senior management that determines the policies
and procedures for both recurring fair value
measurement, such as derivative instruments and
unquoted financial assets measured at fair value,
and for nonrecurring measurement, such as assets
held for distribution in discontinued operations.
External valuers are involved for valuation of
significant assets, such as properties and unquoted
investments and financial assets, and significant
liabilities, such as contingent consideration. Selection
criteria include market knowledge, reputation,
independence and whether professional standards
are maintained.
2.13 Investment Properties
Property that is held for long term rental yields or
for capital appreciation or for both, and that is not
occupied by the Company, is classified as investment
property. Investment property is measured initially at
its cost, including related transaction cost and where
applicable, borrowing costs. Subsequent to initial
recognition, investment properties are stated at cost
less accumulated depreciation and accumulated
impairment loss, if any
Investment properties are de-recognised either
when they have been disposed off or when they
are permanently withdrawn from use and no future
economic benefit is expected from their disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognised
in Statement of Profit and Loss in the period of
de-recognition.
2.14 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.
2.15 Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease. That is, if
the contract conveys the right to control the use of
an identified asset for a period of time in exchange
for consideration.
2.15.1 Company as a lessee
The Company's lease asset classes primarily
comprise of lease for land, buildings and
vehicles. 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.
i) Right-of- use assets
The Company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made at
or before the commencement date less any
lease incentives received. Right of-use assets
in the nature of buildings are depreciated on
a straight-line basis over the shorter of the
lease term and the estimated useful lives of
the underlying asset. The right-of-use assets
comprising of land is depreciated based on
the lease term.
If ownership of the leased asset transfers
to the Company at the end of the lease
term or the cost reflects the exercise of a
purchase option, depreciation is calculated
using the estimated useful life of the asset.
The right-of-use assets are also
subject to impairment.
ii) Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease
term. The lease payments include fixed
payments (including in substance fixed
payments) less any lease incentives
receivable, variable lease payments that
depend on an index or a rate, and amounts
expected to be paid under residual value
guarantees. The lease payments also
include the exercise price of a purchase
option reasonably certain to be exercised
by the Company and payments of penalties
for terminating the lease, if the lease term
reflects the Company exercising the option
to terminate. Variable lease payments that
do not depend on an index or a rate are
recognised as expenses (unless they are
incurred to produce inventories) in the
period in which the event or condition that
triggers the payment occurs.
In calculating the present value of
lease payments, the Company uses
its incremental borrowing rate at the
lease commencement date because
the interest rate implicit in the lease
is not readily determinable. After the
commencement date, the amount of
lease liabilities is increased to reflect the
accretion of interest and reduced for
the lease payments made. In addition,
the carrying amount of lease liabilities
is remeasured if there is a modification,
a change in the lease term, a change
in the lease payments (e.g., changes to
future payments resulting from a change
in an index or rate used to determine
such lease payments) or a change in the
assessment of an option to purchase the
underlying assetIn calculating the present
value of lease payments, the Company
uses its incremental borrowing rate at
the lease commencement date because
the interest rate implicit in the lease is not
readily determinable.
2.15.2 Company as a Lessor
Leases in which the Company does not transfer
substantially all the risks and rewards incidental
to ownership of an asset are classified as
operating leases. Rental income arising is
accounted for on a straight-line basis over
the lease terms. Initial direct costs incurred in
negotiating and arranging an operating lease
are added to the carrying amount of the leased
asset and recognised over the lease term on
the same basis as rental income. Contingent
rents are recognised as revenue in the period in
which they are earned.
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