2 Material accounting policies
2.1) Basis of preparation of Financial Statements
(i) Statement of compliance
These financial statements have been prepared
in accordance with the Indian Accounting
Standards (Ind AS) notified under Section 133 of
the Companies Act, 2013 ('the Act'), read with
Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015, as amended from time
to time, and other relevant provisions of the Act,
along with applicable guidelines issued by the
Securities and Exchange Board of India (SEBI).
The accounting policies have been applied
consistently across all periods presented, except
where a newly issued standard is adopted for the
first time or where a revision to an existing standard
necessitates a change in the previously applied
accounting policy.
(ii) Basis of measurement
The financial statements have been prepared
on an accrual basis and under the historical cost
convention, except for the following items which are
measured on an alternative basis:
• Certain financial assets are measured at fair
value or at amortised cost, depending on their
classification in accordance with Ind AS 109;
• Defined benefit plans are recognised as a net
defined benefit asset or liability, being the present
value of the defined benefit obligation less the
fair value of plan assets, with remeasurements
recognised in other comprehensive income;
• Share-based payments are measured at the
fair value of the options at the grant date in
accordance with Ind AS 102; and
• Right-of-use assets are initially recognised at
the present value of lease payments that are
not paid at the commencement date, adjusted
for any lease payments made at or before the
commencement date, lease incentives received
and initial direct costs, if any.
>.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 satisfies any
of the following criteria:
• 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 and 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 satisfies any of the
following criteria:
• 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 operating cycle is the time between the acquisition of
assets for processing and their realisation in Cash and Cash
equivalents. The Company has identified twelve months as
its operating cycle for the purpose of classification of assets
and liabilities as current and non-current.
b) Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker. The Chairman has been identified as
being the Chief Operating Decision Maker and he is
responsible for allocating the resources, assess the
financial performance and position of the Company and
makes strategic decisions. Refer note 26 for the segment
information presented.
c) Foreign currency
(i) Functional and presentation currency
Items included in the financial statements are
measured using the currency of the primary economic
environment in which the entity operates ('the
functional currency'). The financial statements are
presented in Indian rupee (INR), which is Company's
functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the dates of the respective transactions.
Exchange differences arising on settlement of such
transactions and on translation of monetary assets
and liabilities denominated in foreign currencies at
year end exchange rates are generally recognised in
profit or loss. They are deferred in equity if they relate
to qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the
net investment in a foreign operation. A monetary
item for which settlement is neither planned nor
likely to occur in the foreseeable future is considered
as a part of the entity's net investment in that foreign
operation.
Non-monetary items that are measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value was
determined. The resulting exchange differences on
assets and liabilities carried at fair value are reported
as part of the fair value gain or loss. For example,
translation differences on non- monetary assets and
liabilities such as equity instruments held at fair value
through profit or loss are recognised in profit or loss
as part of the fair value gain or loss and translation
differences on non-monetary assets such as equity
investments classified as FVOCI are recognised in
other comprehensive income.
d) 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.
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
(refer note 23) .
e) Property, plant and equipment
Freehold land is carried at historical cost. All other items of
property, plant and equipment are stated at historical cost
less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items.
When significant parts of 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 plant and
equipment as a replacement if the recognition criteria are
satisfied. All other repairs and maintenance are charged
to profit or loss during the reporting period in which they
are incurred.
On transition to Ind AS, the Company elected to continue
with the carrying value of all of its Property, Plant and
Equipment recognised as at 1st April, 2015 ("transition
date") measured as per the previous GAAP and use that
carrying value as its deemed cost as of the transition date.
Depreciation methods, estimated useful lives and
residual value
Depreciation on Property , Plant & Equipment is
provided on straight-line basis at the rates arrived at
based on the useful lives prescribed in Schedule II of
the Companies Act, 2013. The company follows the
policy of charging depreciation on pro-rata basis on
the assets acquired or disposed off during the year.
The residual values are not more than 5% of the original
cost of the asset. The assets' residual values and useful lives
are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset's carrying amount is written down
immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing
proceeds with carrying amount. These are included in
Statement of profit or loss when the assets is derecognised .
Estimated useful life :
- R & D Equipment 10 years
- EDP Equipment 3 years
- Office Equipment 5 years
- Furniture & Fixture 10 years
f) Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with a
finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate,
and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite
lives is recognised in the statement of profit and loss unless
such expenditure forms part of carrying value of another
asset. Estimated useful lives by major class of finite life
intangible assets are as follows:
Estimated useful life :
Software 6 - 10 years
(i) Computer software
Costs associated with maintaining software
programmes are recognised as an expense as
incurred. Development costs that are directly
attributable to the design and testing of identifiable
and unique software products controlled by the
Company are recognised as intangible assets when
the following criteria are met:
- It is technically feasible to complete the software so
that it will be available for use
- Management intends to complete the software and
use or sell it
- There is an ability to use or sell the software
- It can be demonstrated how the software will
generate probable future economic benefits
- Adequate technical, financial and other resources
to complete the development and to use or sell the
software are available and;
- The expenditure attributable to the software during
its development can be reliably measured
Directly attributable costs that are capitalised as
part of the software include employee costs and an
appropriate portion of relevant overheads.
Capitalised development costs are recorded as
intangible assets and amortised from the point at
which the asset is available for use.
On transition to Ind AS, the Company has elected to
continue with the carrying value of all of its intangible
assets recognised as at April 01, 2015, measured as
per the previous GAAP, and use that carrying value as
the deemed cost of such intangible assets.
(ii) Amortisation methods and periods
Intangible assets with finite useful live are amortised
over their respective individual estimated useful
lives (6-10 years in case of computer softwares) on
a straight line basis.
(iii) Research and development
Research expenditure and development
expenditure that do not meet the criteria in (i)
above are recognised as an expense as incurred.
Development costs previously recognised as an
expense are not recognised as an asset in the
subsequent period.
g) Capital work in progress and intangible assets under
development
Capital Work-in-Progress represents Property, Plant and
Equipment that are not ready for their intended use as
at the balance sheet date. Projects under commissioning
and other CWIP/ intangible assets under development
are carried at cost, comprising direct cost, related
incidental expenses and attributable borrowing cost
Advances given to acquire property, plant and equipment
are recorded as non-current assets and subsequently
transferred to CWIP on acquisition of related assets
h) Impairment of non-financial assets
The Company assesses, at each reporting date, whether
there is any indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Company estimates the asset's
recoverable amount. An asset's recoverable amount is
the higher of an asset's or cash-generating unit's (CGU)
fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or Group
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent
market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed
budgets and forecast projections, which are prepared
separately for each of the Company's CGUs to which
the individual assets are allocated. These budgets and
forecast projections generally cover a period of five years.
For longer periods, a long-term growth rate is calculated
and applied to project future cash flows after the fifth year.
For assets excluding goodwill, an assessment is made at
each reporting date to determine whether there is an
indication that previously recognised impairment losses
no longer exist or have decreased. If such indication exists,
the company estimates the asset's or CGU's recoverable
amount. A previously recognised impairment loss is
reversed only if there has been a change in the assumptions
used to determine the asset's recoverable amount since
the last impairment loss was recognised. The reversal
is limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in
the statement of profit or loss unless the asset is carried at
a revalued amount, in which case, the reversal is treated
as a revaluation increase.
i) Inventories
Raw materials and stores, work-in-progress, traded
and finished goods are stated at the lower of cost and
net realisable value. Cost of raw materials comprises
cost of purchase. Cost of work-in-progress and finished
goods comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis of
normal operating capacity. Cost of inventories also include
all other cost incurred in bringing the inventories to their
present location and condition. Costs are assigned to
individual items of inventory on the basis of first-in-first-out
basis. Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable value
is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the
estimated costs necessary to make the sale.
j) Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise
cash at banks and on hand and short-term deposits with
a maturity of three months or less, which are subject to an
insignificant risk of changes in value. For the purpose of
the Statement of Cash Flows, cash and cash equivalents
consist of cash and short-term deposits, as defined
above, net of outstanding bank overdrafts, if any, as they
are considered an integral part of the Company's cash
management.
k) Income Taxes
Income tax expense comprises of current and deferred tax.
Current Tax
Current income tax assets and liabilities are measured at
the amount expected to be recovered from or paid to the
tax authorities in accordance with the Indian Income-tax
Act, 1961. 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 in 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 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
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.
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.
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.
In assessing the recoverability of deferred tax assets,
the Company relies on the same forecast assumptions
used elsewhere in the financial statements and in other
management reports, which, among other things, reflect
the potential impact of climate-related development on
the business, such as increased cost of production as a
result of measures to reduce carbon emission.
Deferred income tax assets and liabilities are measured
using the tax rates and 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
income tax assets and liabilities is recognised as income
or expense in the period that includes the enactment
or substantive enactment date. The Company offsets
deferred tax assets and deferred tax liabilities 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 which intends 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.
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.
l) 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.
The Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for short-term
leases and leases of low-value assets. The Company
recognises lease liabilities to make lease payments and
right-of-use assets representing the right to use the
underlying assets.
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 are depreciated on a straight-line
basis over the shorter of the lease term and the
estimated useful lives of the assets.
If ownership of the leased asset transfers to the
Company at the end ofthe lease term or the cost reflects
the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the asset.
The useful lives are reviewed by the management at
each financial year-end and revised, if appropriate.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in note
2.2(i) Impairment of non-financial assets.
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.
iii. Short- term leases and leases of low- value assets
The Company applies the short-term lease
recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). It also applies the lease
of low-value assets recognition exemption to leases
that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the lease term.
m) Financial instrument
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.
Financial assets
(i) Initial recognition and measurement classification
Financial assets are classified, at initial recognition,
as financial assets measured at fair value through
profit or loss, fair value through other comprehensive
income (OCI) or at amortised cost.
The classification of financial assets at initial
recognition depends on the financial asset's
contractual cash flow characteristics and the
Company's business model for managing them.
With the exception of trade receivables that do not
contain a significant financing component or for which
the Company has applied the practical expedient,
the Company initially measures a financial asset at
its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
Trade receivables that do not contain a significant
financing component or for which the Company
has applied the practical expedient are measured at
the transaction price determined under Ind AS 115.
Refer to the accounting policies in section Revenue
from contracts with customers.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are 'solely
payments of principal and interest (SPPI)' on the
principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an
instrument level. Financial assets with cash flows
that are not SPPI are classified and measured at
fair value through profit or loss, irrespective of the
business model.
The Company's business model for managing
financial assets refers to how it manages its financial
assets in order to generate cash flows. The business
model determines whether cash flows will result
from collecting contractual cash flows, selling the
financial assets, or both. Financial assets classified
and measured at amortised cost are held within a
business model with the objective to hold financial
assets in order to collect contractual cash flows while
financial assets classified and measured at fair value
through OCI are held within a business model with
the objective of both holding to collect contractual
cash flows and selling.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place (regular
way trades) are recognised on the trade date, i.e.,
the date that the Group commits to purchase or sell
the asset.
(ii) Subsequent measurement
For purposes of subsequent measurement financial
assets are classified in four broad categories:
a) Financial assets at amortised cost (debt instruments)
b Financial assets at fair value through other
comprehensive income (FVTOCI) with recycling of
cumulative gains and losses (debt instruments)
c) Financial assets designated at fair value through OCI
with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
d) Financial assets at fair value through profit or loss
a) Financial assets at amortised cost (debt
instruments):
A financial asset that meets the following two
conditions is measured at amortised cost (net of any
write down for impairment), unless it is designated
at fair value through profit or loss under the fair
value option:
• Business model test: The objective of the
Company's business model is to hold the financial
asset to collect the contractual cash flows (rather
than to sell the instrument prior to its contractual
maturity to realise its fair value changes).
• Cash flow characteristics test: 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.
This category is the most relevant to the Company.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method. Amortised cost
is calculated by taking into account any discount
or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation
is included in finance income in the profit or loss.
The losses arising from impairment are recognised
in the profit or loss. The Group's financial assets at
amortised cost includes trade receivables, loans,
deposits and export incentives included under other
current and non-current financial assets.
b) Financial assets at fair value through other
comprehensive income (FVTOCI) (debt
instruments):
A financial asset that meets the following two
conditions is measured at fair value through other
comprehensive income unless the asset is designated
at fair value through profit or loss under the fair
value option:
• Business Model Test: A financial assets that is held
for collection of contractual cash flows and for
selling of the financial assets
• Cash flow characteristics test: 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.
Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. For debt instruments,
at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or
reversals are recognised in the profit or loss and
computed in the same manner as for financial assets
measured at amortised cost. The remaining fair value
changes are recognised in OCI. Upon derecognition,
the cumulative fair value changes recognised in OCI
is reclassified from the equity to profit or loss.
The Company's debt instruments at fair value through
OCI includes investments in quoted debt instruments
included under other non-current financial assets.
c) Financial assets designated at fair value through
OCI (equity instruments)
If an equity investment is not held for trading, an
irrevocable election is made at initial recognition to
measure it at fair value through other comprehensive
income with only dividend income recognised in
the statement of profit and loss when the right of
payment has been established, except when the
Company benefits from such proceeds as a recovery
of part of the cost of the financial asset, in which case,
such gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not subject
to impairment assessment.
d) Financial assets at Fair value through profit or loss:
Financial assets at fair value through profit or loss
are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of
profit and loss.
This category includes investment in mutual funds.
iii) Impairment of financial assets
In accordance with Ind AS 109 - Financial Instruments,
the Company applies expected credit loss (ECL) model for
measurement and recognition of impairment loss on the
following financial assets:
i) Trade Receivables
ii) Financial Instruments and Cash Deposits
iii) Investments
Further disclosures relating to impairment of financial
assets are also provided in the following notes:
Debt instruments at fair value - see Note 24
Trade receivables and contract assets - see Note 24
The Company recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance
with the contract and all the cash flows that the Company
expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows
will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the
contractual terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit
losses that result from default events that are possible
within the next 12-months (a 12-month ECL). For those
credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing
of the default (a lifetime ECL).
For trade receivables and contract assets, the Company
applies a simplified approach in calculating ECLs.
Therefore, the Company does not track changes in credit
risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Company has
established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
For debt instruments at fair value through OCI, the
Company applies the low credit risk simplification. At every
reporting date, the Group evaluates whether the debt
instrument is considered to have low credit risk using all
reasonable and supportable information that is available
without undue cost or effort. In making that evaluation,
the Company reassesses the internal credit rating of the
debt instrument. In addition, the Company considers that
there has been a significant increase in credit risk when
contractual payments are more than 30 days past due.
The Company's debt instruments at fair value through OCI
comprise solely of quoted bonds that are graded in the
top investment category (Very Good and Good) by the
Good Credit Rating Agency and, therefore, are low credit
risk investments. It is the Group's policy to measure ECLs
on such instruments on a 12-month basis. However, when
there has been a significant increase in credit risk since
origination, the allowance will be based on the lifetime
ECL. The Company uses the ratings from the Good Credit
Rating Agency both to determine whether the debt
instrument has significantly increased in credit risk and to
estimate ECLs.
The Company assesses on a forward-looking basis
the expected credit losses associated with its assets
carried at amortised cost and FVOCI debt instruments.
The impairment methodology applied depends on
whether there has been a significant increase in credit
risk. For trade receivables and contract assets only, the
Company applies the simplified approach permitted by
Ind AS 109
De-recognition
A financial asset (or, where applicable, a part of a financial
asset or part of a Group of similar financial assets) is
primarily derecognised (i.e. removed from the Company's
statement of financial position) when:
• The rights to receive cash flows from the asset have
expired, or
• The Company has transferred its rights to receive cash
flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to
a third party under a 'pass-through' arrangement; and
either (a) the Company has transferred substantially all
the risks and rewards of the asset, or (b) the Company
has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset
When the Group has transferred its rights to receive cash
flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has
retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the
asset, the Group continues to recognise the transferred
asset to the extent of the Group's continuing involvement.
In that case, the Group also recognises an associated
liability. The transferred asset and the associated liability
are measured on a basis that reflects the rights and
obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum
amount of consideration that the Group could be
required to repay.
Financial liabilities
Initial recognition and measurement:
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit and loss or
at amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net
of directly attributable transaction.
The Company's financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts,
and derivative financial instruments.
Subsequent measurement:
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair
value through profit or loss.
Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in the
near term. This category also includes derivative financial
instruments entered into by the Group that are not
designated as hedging instruments in hedge relationships
as defined by Ind AS 109. Separated embedded derivatives
are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised
in the profit or loss.
Financial liabilities designated upon initial recognition at
fair value through profit or loss are designated as such at
the initial date of recognition, and only if the criteria in Ind
AS 109 are satisfied. For liabilities designated as FVTPL, fair
value gains/ losses attributable to changes in own credit
risk are recognised in OCI. These gains/ losses are not
subsequently transferred to P&L. However, the Group may
transfer the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in the
statement of profit and loss. The Group has not designated
any financial liability as at fair value through profit or loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Group are those
contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor
fails to make a payment when due in accordance with the
terms of a debt instrument. Financial guarantee contracts
are recognised initially as a liability at fair value, adjusted
for transaction costs that are directly attributable to the
issuance of the guarantee. Subsequently, the liability is
measured at the higher of the amount of loss allowance
determined as per impairment requirements of Ind AS 109
and the amount recognised less, when appropriate, the
cumulative amortisation amount of income recognised in
accordance with the principles of Ind AS 115.
De recognition
A financial liability is derecognised 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.
Investment in subsidiaries
Investments in subsidiaries are carried at cost less
accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of
the investment is assessed and written down immediately
to its recoverable amount. On disposal of investments in
subsidiaries , the difference between net disposal proceeds
and the carrying amounts are 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."
Reclassification of financial assets and liabilities
The Company determines classification of financial assets
and liabilities on initial recognition. After initial recognition,
no reclassification is made for financial assets which are
equity instruments and financial liabilities. For financial
assets which are debt instruments, a reclassification is
made only if there is a change in the business model for
managing those assets. Changes to the business model
are expected to be infrequent. The Company's senior
management determines the change in the business
model as a result of external or internal changes which are
significant to the Company's operations. Such changes are
evident to the external parties. A change in the business
model occurs when the Company either begins or ceases
to perform an activity that is significant to its operations.
If the Company reclassifies financial assets, it applies the
reclassification prospectively from the reclassification
date which is the first day of the immediately next
reporting period following the change in business model.
The Company does not restate any previously recognised
gains, losses (including impairment gains or losses)
or interest.
n) Employee Benefit
(i) Short-term obligations
Liabilities for wages and salaries, including
non-monetary benefits that are expected to be
settled wholly within 12 months after the end of the
period in which the employees render the related
service are recognised in respect of employees'
services up to the end of the reporting period and
are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are
presented as current employee benefit obligations
in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not
expected to be settled wholly within 12 months after
the end of the period in which the employees render
the related service. They are therefore measured as
the present value of expected future payments to be
made in respect of services provided by employees up
to the end of the reporting period using the projected
unit credit method. The benefits are discounted
using the market yields at the end of the reporting
period that have terms approximating to the terms
of the related obligations. Remeasurements as a
result of the experience adjustments and changes in
actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities
in the balance sheet if the entity does not have an
unconditional right to defer settlement for at least
twelve months after the reporting period, regardless
of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following
post-employment schemes:
(a) Defined benefit plans such as gratuity; and
(b) Defined contribution plans such as
provident fund.
Gratuity obligations
The liability or assets recognised in the balance sheet
in respect of defined benefit pension and gratuity
plans is the present value of the defined benefit
obligations at the end of the reporting period less
the fair value of plan assets. The defined benefit
obligation is calculated annually by actuaries using
the projected unit credit method.
The present value of the defined benefit obligation
denominated in INR is determined by discounting
the estimated future cash outflows by reference to
market yields at the end of the reporting period on
government bonds that have terms approximating
to the terms of the related obligation. The benefits
which are denominated in currency other than INR,
the cash flows are discounted using market yields
determined by reference to high-quality corporate
bonds that are denominated in the current in
which the benefits will be paid, and that have terms
approximating to the terms of the related obligation.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined
benefit obligation and the fair value of plan assets.
This cost is included in employee benefit expense in
the statement of profit and loss.
Remeasurement gains and losses arising from
experience adjustments and change in actuarial
assumptions are recognised in the period in which
they occur, directly in other comprehensive income.
They are included in retained earnings in the
statement of changes in equity and in the balance
sheet. Changes in the present value of the defined
benefit obligation resulting from plan amendments
or curtailments are recognised immediately in profit
or loss as past service cost.
Defined contribution plans
The company pays provident fund contributions
to publicly administered funds as per local
regulations. The Company has no further payment
obligations once the contributions have been paid.
The contributions are accounted for as defined
contribution plans and the contributions are
recognised as employee benefit expense when they
are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction
in the future payments is available.
'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
post-employment benefit obligation.
'The mortality rate is based on publicly available
mortality tables for the specific countries.
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 rates. Further details about
gratuity obligations are given in note 14.
(iv) Bonus plans
The group recognises a liability and an expense for
bonuses. The group recognises a provision where
contractually obliged or where there is a past practice
that has created a constructive obligation.
(v) Compensated absences
The Group has a policy on compensated absences
which are both accumulating and non-accumulating
in nature. The expected cost of accumulating
compensated absences is determined by actuarial
valuation performed by an independent actuary at
each balance sheet date using the projected unit
credit method on the additional amount expected to
be paid/ availed as a result of the unused entitlement
that has accumulated at the balance sheet date.
Expense on non-accumulating compensated
absences is recognised in the period in which the
absences occur.
(vi) Share based payments
Employees of the Company receive remuneration
in the form of share-based payments, whereby
employees render services in exchange for equity
instruments of the Company.
The cost of equity-settled share-based payment
transactions is measured at the fair value of the equity
instruments at the grant date, determined using the
Black-Scholes valuation model. The fair value so
determined is recognised as an employee benefits
expense, together with a corresponding increase in
share-based payment reserve within equity, over the
vesting period during which the performance and/or
service conditions are fulfilled.
At each reporting date up to the vesting date, the
cumulative expense recognised for equity-settled
transactions reflects the extent to which the
vesting period has expired and the Company's best
estimate of the number of equity instruments that
are expected to ultimately vest. The charge or credit
recognised in the Statement of Profit and Loss for
a period represents the movement in cumulative
expense recognised between the beginning and the
end of that period and is included under employee
benefits expense.
Service conditions and non-market performance
conditions are not considered while determining
the grant date fair value of awards. However, the
likelihood of satisfying such conditions is considered
while estimating the number of equity instruments
expected to vest. Market performance conditions are
considered in determining the grant date fair value
of the awards.
o) Revenue Recognition
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, net
of returns and allowances, trade discounts and volume
rebates after taking into account contractually defined
terms of payment and excluding taxes or duties collected
on behalf of the government. The Company derives
revenues primarily from rendering of services
Service income
Service income, which primarily relates to revenue
from contract research, is recognised as and when the
underlying services are performed. There was no change
in the point of recognition of revenue upon adoption of
Ind AS 115. Upfront non-refundable payments received
under these arrangements continue to be deferred and are
recognised over the expected period that related services
are to be performed.
p) Borrowing costs
General and specific borrowing costs that are directly
attributable to the acquisition, construction or production
of a qualifying asset are capitalised during the period
of time that is required to complete and prepare the
asset for its intended use or sale. Qualifying assets
are assets that necessarily take a substantial period
of time to get ready for their intended use or sale.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted
from the borrowing cost eligible for capitalisation.
Other borrowing costs are expensed in the period in which
they are incurred.
q) Research and Development
Revenue expenditure pertaining to research is charged
to the Statement of Profit and Loss. Development costs
of products are also charged to the Statement of Profit
and Loss unless a product's technical feasibility has been
established, in which case such expenditure is capitalised.
Development expenditures on an individual project is
recognised as an intangible asset when the Company can
demonstrate :
- The technical feasibility of completing the intangible
asset so that the asset will be available for use or sale
- Its intention to complete the asset and its ability and
intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during
development.
The amount capitalised comprises expenditure that can
be directly attributed or allocated on a reasonable and
consistent basis to creating, producing and making the
asset ready for its intended use.
r) Government Grants:
Government grants are recognised at fair value as and
when there is a reasonable assurance that grant will be
received and all attached conditions will be complied
with. When the grant is related to an expense item , it is
recognised as income on systematic basis over the period
of related costs , for which it is intended to compensate
, are expensed . when the grant relates to an asset,it is
recognised as income in equal amounts over the expected
useful life of the related assets.
The benefit of Government loan at a lower market rate of
interest is treated as Government grant , measured as the
difference between proceeds received and the fair value
of loan based on prevailing market interest rates.
s) Earning per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• The profit attributable to owners of the company
• By the weighted average number of equity shares
outstanding during the financial year, adjusted
for bonus elements in equity shares issued during
the year and excluding treasury shares,if any.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used
in the determination of basic earnings per share to
take into account:
• The after income tax effect of interest and other
financing costs associated with dilutive potential
equity shares, and
• The weighted average number of additional
equity shares that would have been outstanding
assuming the conversion of all dilutive potential
equity shares.
t) Rounding of Amounts
All amounts disclosed in the financial statements and
notes have been rounded off to the nearest lakhs as per
the requirements of Schedule III, unless otherwise stated.
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