2 material accounting policies
a) Statement of compliance
These financial statements have been prepared in accordance
with the Indian Accounting Standards (hereinafter referred
to as the Ind AS) as notified by Ministry of Corporate Affairs
pursuant to Section 133 of the Companies Act, 2013 (the Act)
read with the Companies (Indian Accounting Standards) Rules,
2015 as amended and other relevant provisions of the Act and
accounting principles generally accepted in India.
B) Basis of preparation of financial statements
These financial statements have been prepared and presented
under the historical cost convention, on the accrual basis of
accounting except for certain financial assets and liabilities that
are measured at fair values at the end of each reporting period,
as stated in the accounting policies stated out below. These
financial statements have been prepared by the Company as a
going concern.
The accounting policies are applied consistently to all the periods
presented in the financial statements, except where a newly
issued Accounting Standard is initially adopted or a revision to
an existing standard requires a change in the accounting policy
hitherto in use.
The financial statements are presented in Indian Rupee which
is also the functional currency of the Company. All amounts
disclosed in the financial statements and notes have been
rounded-off to the nearest million as per the requirement of
Schedule III, unless otherwise stated. Amount less than a million
is presented as ' 0 Million.
Assets and Liabilities are classified as Current or Non-Current
as per the provisions of Schedule III to the Companies Act, 2013
and the Company normal operating cycle. Based on the nature
of business, the Company has ascertained its operating cycle as
12 months for the classification of assets and liabilities.
Figures for the previous year have been regrouped and / or
reclassified, wherever considered necessary. The impact of
such reclassification/regrouping is not material to Standalone
Financial Statements.
Previous year figures, where applicable, have been indicated in
brackets.
C) Business combinations
Business combinations have been accounted for using the
acquisition method.
The consideration transferred is measured at the fair value of
the assets transferred, equity instruments issued and liabilities
incurred or assumed at the date of acquisition, which is the
date on which control is achieved by the Company. The cost
of acquisition also includes the fair value of any contingent
consideration. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair value on the date of acquisition.
Business combinations involving entities that are controlled by
the Company are accounted for using the pooling of interests
method as follows:
I The assets and liabilities of the combining entities are
reflected at their carrying amounts.
II No adjustments are made to reflect fair values, or recognise
any new assets or liabilities. Adjustments are only made to
harmonise accounting policies.
III The balance of the retained earnings appearing in the
financial statements of the transferor is aggregated with
the corresponding balance appearing in the financial
statements of the transferee or is adjusted against general
reserve.
IV The identity of the reserves are preserved and the reserves
of the transferor become the reserves of the transferee.
V The difference, if any, between the amounts recorded as
share capital issued plus any additional consideration in
the form of cash or other assets and the amount of share
capital of the transferor is transferred to capital reserve
and is presented separately from other capital reserves.
VI The financial information in the financial statements in
respect of prior periods is restated as if the business
combination had occurred from the beginning of the
preceding period in the financial statements, irrespective
of the actual date of combination. However, where the
business combination had occured after that date, the
prior period information is restated only from that date.
Transaction costs that the Company incurs in connection with
a business combination such as finder's fees, legal fees, due
diligence fees, and other professional and consulting fees are
expensed as incurred.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net acquisition date amounts of the identifiable assets acquired
and the liabilities assumed.
In case of a bargain purchase, before recognising a gain in
respect thereof, the Company determines whether there exists
clear evidence of the underlying reasons for classifying the
business combination as a bargain purchase. Thereafter, the
Company reassesses whether it has correctly identified all of the
assets acquired and all of the liabilities assumed and recognises
any additional assets or liabilities that are identified in that
reassessment. The Company then reviews the procedures used
to measure the amounts that Ind AS requires for the purposes
of calculating the bargain purchase. If the gain remains after this
reassessment and review, the Company recognises it in other
comprehensive income and accumulates the same in equity as
capital reserve. This gain is attributed to the acquirer. If there
does not exist clear evidence of the underlying reasons for
classifying the business combination as a bargain purchase, the
Company recognises the gain, after assessing and reviewing (as
described above), directly in equity as capital reserve.
When the consideration transferred by the Company in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration arrangement is measured at its acquisition date
fair value and included as a part of the consideration transferred
in a business combination. Changes in the fair value of the
contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with the corresponding
adjustments against goodwill or capital reserve, as the case may
be. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement
period' (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition
date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent
consideration is classified. Contingent consideration that is
classified as equity is not remeasured at subsequent reporting
dates and its subsequent settlement is accounted for within
equity. Contingent consideration that is classified as an asset
or a liability is remeasured at fair value at subsequent reporting
dates with the corresponding gain or loss being recognised in
the statement of profit and loss.
When a business combination is achieved in stages, the
Company's previously held equity interest in the acquiree is
remeasured to its acquisition date fair value and the resulting
gain or loss, if any, is recognised in profit or loss. Amounts arising
from interests in the acquiree prior to the acquisition date that
have previously been recognised in other comprehensive income
are reclassified to profit or loss where such treatment would be
appropriate if that interest were disposed off.
D) Property, plant and equipment
I Property, plant and equipment are stated at cost, less
accumulated depreciation and impairment loss, if any. The
cost comprises purchase price and related expenses and
for qualifying assets, borrowing costs are capitalised based
on the Company's accounting policy. Integrated Receiver
Decoders (IRD) boxes are capitalised, when available for
deployment.
II Capital work-in-progress comprises cost of property,
plant and equipment and related expenses that are not yet
ready for their intended use at the reporting date.
III Depreciation is recognised so as to write off the cost of
assets (other than free hold land and capital work-in¬
progress) less their residual values over their useful lives,
using the straight-line method. The estimated useful lives,
residual values and depreciation method are reviewed
at each reporting period, with the effect of changes in
estimate accounted for on a prospective basis.
IV The estimate of the useful life of the assets has been
assessed based on technical advice, taking into account
the nature of the asset, the estimated usage of the asset,
the operating conditions of the asset, past history of
replacement etc. The estimated useful life of items of
property, plant and equipment is as mentioned below:
E) Investment property
I I nvestment property are properties (land or a building or
part of a building or both) held to earn rentals and / or for
capital appreciation (including property under construction
for such purposes). Investment property is measured
initially at cost including purchase price, borrowing costs.
Subsequent to initial recognition, investment property
is measured at cost less accumulated depreciation and
impairment, if any.
II Depreciation on investment property is provided as per
the useful life prescribed in Schedule II to the Companies
Act, 2013.
F) Non-current assets held for sale
The Company classifies non-current assets as held for sale
if their carrying amounts will be recovered principally through
a sale rather than through continuing use and the sale is
highly probable. Management must be committed to the sale,
which should be expected within one year from the date of
classification.
For these purposes, sale transactions include exchanges of non¬
current assets for other non-current assets when the exchange
has commercial substance. The criteria for held for sale
classification is regarded as met only when the asset is available
for immediate sale in its present condition, subject only to terms
that are usual and customary for sales of such assets, its sale is
highly probable; and it will genuinely be sold, not abandoned. The
Company treats sale of the asset to be highly probable when:
I The appropriate level of management is committed to a
plan to sell the asset,
II An active programme to locate a buyer and complete the
plan has been initiated (if applicable),
III The asset is being actively marketed for sale at a price that
is reasonable in relation to its current fair value,
IV The sale is expected to qualify for recognition as
a completed sale within one year from the date of
classification, and
V Actions required to complete the plan indicate that it is
unlikely that significant changes to the plan will be made or
that the plan will be withdrawn.
Non-current assets held for sale are measured at the lower of
their carrying amount and the fair value less costs to sell.
Property, plant and equipment and intangible assets once
classified as held for sale are not depreciated or amortised.
Gains and losses on disposals of non-current assets are
determined by comparing proceeds with carrying amounts and
are recognised in the statement of profit and loss.
A discontinued operation is a component of the entity that has
been disposed off or is classified as held for sale and
i represents a separate major line of business or geographical
area of operations and;
ii is part of a single co-ordinated plan to dispose of such a
line of business or area of operations
The result of discontinued operations are presented separately
as a single amount as profit or loss after tax from discontinued
operations in the statement of profit and loss.
An impairment loss is recognised for any initial or subsequent
write-down the asset to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less
costs to sell of an asset, but not in excess of any cumulative
impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the asset is
recognised at the date of de-recognition.
G) Goodwill
Goodwill arising on an acquisition of a business is carried at cost
as established at the date of acquisition of the business less
accumulated impairment losses, if any.
For the purpose of impairment testing, goodwill is allocated to
the respective cash generating units that is expected to benefit
from the synergies of the combination.
A cash generating unit to which goodwill has been allocated is
tested for impairment annually, or more frequently when there
is an indication that the unit may be impaired. If the recoverable
amount of the cash generating unit is less than its carrying
amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit on a pro-rata basis, based on
the carrying amount of each asset in the unit. Any impairment
loss for the goodwill is recognised directly in the statement of
profit and loss. An impairment loss recognised for goodwill is not
reversed in subsequent periods.
On the disposal of the relevant cash generating unit, the
attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
H) intangible assets
Intangible assets with finite useful lives that are acquired are
carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line
basis over the estimated useful lives.
The estimated useful life for intangible assets is 3 years. The
estimated useful and amortisation method are reviewed at each
reporting period, with the effect of any changes in the estimate
being accounted for on a prospective basis.
intangible assets under development;
Expenditure incurred on acquisition / development of intangible
assets which are not ready for their intended use at balance sheet
date are disclosed under intangible assets under development.
Research and development of internally generated
assets;
Research costs are expensed as incurred. Development
expenditures on an internally generated assets are recognised
as an intangible asset when the Company can demonstrate:
I. The technical feasibility of completing the intangible asset
so that the asset will be available for use or sale
II. Its intention to complete and its ability and intention to use
or sell the asset
IN. How the asset will generate future economic benefits
IV. The availability of resources to complete the asset
V. The ability to measure reliably the expenditure during
development.
The cost of development on internally generated intangible asset
includes the directly attributable expenditure of preparing the
asset for its intended use. Expenditure on training activities,
identified inefficiencies and initial operating losses is expensed
as it is incurred.
The cost recognised is the sum of expenditure incurred from
the date when the intangible asset first meets the recognition
criteria and prohibits reinstatement of expenditure previously
recognised as an expense.
Directly attributable costs comprise all costs necessary to
create, produce, and prepare the asset to be capable of operating
in the manner intended by management. The capitalisation cut
off is determined by when the testing stage of the software
has been completed and the software is ready to go live. Costs
incurred after the final acceptance testing and launch have been
successfully completed, is expensed.
Post the launch of the software, the cost is accounted for as
part of the development phase only where there is the software
platform development and activities to improve its functionality
which enhance the asset's economic benefits potential and
the cost meets the recognition criteria listed above for the
recognition of development costs as an asset.
Following initial recognition of the development expenditure
as an asset, the asset is carried at cost less any accumulated
amortization and accumulated impairment losses. Amortisation
of the asset begins when development is complete and the
asset is available for use. It is amortised over the period of
expected future benefit. Amortisation expense is recognised in
the statement of profit and loss unless such expenditure forms
part of carrying value of another asset. During the period of
development, the asset is tested for impairment annually.
i) impairment of property, plant and equipment / right-
of-use assets / other intangible assets / investment
property
The carrying amounts of the Company's property, plant and
equipment, right-of-use assets, other intangible assets and
investment property are reviewed at each reporting date to
determine whether there is any indication that those assets
have suffered any impairment loss. If there are indicators of
impairment, an assessment is made to determine whether the
asset's carrying value exceeds its recoverable amount. Where it is
not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the
cash generating unit to which the asset belongs.
An impairment loss is recognised in statement of profit and loss
whenever the carrying amount of an asset or a cash generating
unit exceeds its recoverable amount. The recoverable amount
is the higher of fair value less costs of disposal and value in use.
In assessing the value in use, the estimated future cash flows
are discounted to the 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 assets for which the
estimates of future cash flows have not been adjusted.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit) is increased to
the revised estimate of its recoverable amount, so that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been
recognised for the asset (or cash generating unit) in prior years.
Reversal of an impairment loss is recognised immediately in the
statement of profit and loss.
J) Derecognition of property, plant and equipment / right-
of-use assets / other intangible assets / investment
property
The carrying amount of an item of property, plant and equipment
/ right-of-use assets / other intangible assets / investment
property is derecognised on disposal or when no future
economic benefits are expected from its use or disposal. The
gain or loss arising from the derecognition of an item of property,
plant and equipment / right-of-use assets / other intangible
assets / investment property is deteremined as the difference
between the net disposal proceeds and the carrying amount of
the item and is recognised in the Statement of profit and loss.
K) Leases
The Company evaluates each contract or arrangement, whether
it qualifies as lease as defined under Ind AS 116 on 'Leases'.
i The Company as lessee;
The Company assesses whether a contract is or contains
a lease, at inception of the contract. The Company
recognises a right-of-use asset and a corresponding lease
liability with respect to all lease arrangements in which it is
the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low
value assets. For these leases, the Company recognises
the lease payments as an operating expense on a straight¬
line basis over the term of the lease.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit
in the lease. If this rate cannot be readily determined, the
Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
a Fixed lease payments (including in-substance fixed
payments), less any lease incentives receivable;
b Variable lease payments that depend on an index or
rate, initially measured using the index or rate at the
commencement date
The amount expected to be payable by the lessee
under residual value guarantees;
c The exercise price of purchase options, if the lessee
is reasonably certain to exercise the options; and
d Payments of penalties for terminating the lease, if
the lease term reflects the exercise of an option to
terminate the lease. The lease liability is presented as
a separate line item in the balance sheet.
The lease liability is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.
The Company remeasures the lease liability (and makes
a corresponding adjustment to the related rightof-use
asset) whenever:
a The lease term has changed or there is a significant
event or change in circumstances resulting in a
change in the assessment of exercise of a purchase
option, in which case the lease liability is remeasured
by discounting the revised lease payments using a
revised discount rate.
b The lease payments change due to changes in an
index or rate or a change in expected payment under
a guaranteed residual value, in which cases the lease
liability is remeasured by discounting the revised
lease payments using an unchanged discount
rate (unless the lease payments change is due to
a change in a floating interest rate, in which case a
revised discount rate is used).
c A lease contract is modified and the lease
modification is not accounted for as a separate
lease, in which case the lease liability is remeasured
based on the lease term of the modified lease by
discounting the revised lease payments using a
revised discount rate at the effective date of the
modification.
The Company did not make any such adjustments during
the periods presented.
The right-of-use assets comprise the initial measurement
of the corresponding lease liability, lease payments made
at or before the commencement day, less any lease
incentives received and any initial direct costs. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter
period of lease term and useful life of the right-of-use
asset. If a lease transfers ownership of the underlying
asset or the cost of the right-of-use asset reflects that
the Company expects to exercise a purchase option, the
related right-of-use asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the
commencement date of the lease.
The right-of-use assets is presented as a separate line
item in the balance sheet.
The Company applies Ind AS 36 to determine whether
a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the 'Property,
Plant and Equipment' policy.
II The Company as a lessor:
The Company enters into lease agreements as a lessor
with respect to some of its investment properties.
Leases for which the Company is a lessor are classified as
finance or operating leases. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease. All
other leases are classified as operating leases.
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over
the lease term.
L) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash
at banks and in hand and short-term deposits with an original
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.
M) Inventories
I Media Content :
Media content i.e. Programs, Film rights, Music rights
(completed (commissioned / acquired) and under
production) including content in digital form are stated at
lower of cost / unamortised cost or realisable value. Cost
comprises acquisition / direct production cost. Where the
realisable value of media content is less than its carrying
amount, the difference is expensed. Programs, film rights,
music rights are expensed / amortised as under:
a Programs - reality shows, chat shows, events, game
shows, etc. are fully expensed on telecast / upload.
b Programs (other than (a) above) are amortised over
three financial years starting from the year of first
telecast / upload, as per management estimate of
future revenue potential.
c Film rights are amortised on a straight-line basis
over the licensed period or sixty months from the
commencement of rights, whichever is shorter.
d Music rights are amortised over ten years starting
from the year of commencement of rights, as per
management estimate of future revenue potential.
e The cost of educational content acquired is
amortised on a straight line basis over the license
period or 60 months from the date of acquisition /
right start date, whichever is shorter.
f Films produced and / or acquired for distribution /
sale of rights:
Cost is allocated to each right based on management
estimate of revenue. Film rights are amortised as under:
i Satellite rights - Allocated cost of right is expensed
immediately on sale.
ii Theatrical rights - Amortised in the month of
theatrical release.
iii Intellectual Property Rights (IPRs) - Allocated cost of
IPRs are amortised over 5 years from release of film.
iv Music and Other Rights - Allocated cost of each right
is expensed immediately on sale.
II Raw Stock :
Tapes are valued at lower of cost or estimated net realisable
value. Cost is taken on weighted average basis.
N) Financial Instruments
Financial instruments is any contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument of
another entity.
I Initial Recognition
Financial assets (excluding trade receivables which are
initially measured at transaction price) and financial liabilities
are initially measured at transaction price. Transaction costs
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit
and loss) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair
value through profit and loss are recognised immediately in
the statement of profit and loss.
However, trade receivables that do not contain a significant
financing component are measured at transaction price
under Ind AS 115 "Revenue from Contracts with Customers".
II Financial assets
a Classification of financial assets
Financial assets are classified into the following
specified categories: amortised cost, financial assets
'at fair value through profit and loss' (FVTPL), 'Fair value
through other comprehensive income' (FVTOCI). The
classification depends on the Company's business
model for managing the financial assets and the
contractual terms of cash flows.
b Subsequent measurement
i Debt Instrument - amortised cost
A financial asset is subsequently measured at
amortised cost if it is held within a business
model whose 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. This
category generally applies to trade and other
receivables.
ii Fair value through other comprehensive
income (FVTOCI):
A 'debt instrument' is classified as at the
FVTOCI if both of the following criteria are met:
- The objective of the business model is
achieved both by collecting contractual
cash flows and selling the financial assets.
- The asset's contractual cash flows
represent solely payments of principal
and interest.
Debt instruments included within the FVTOCI
category are measured initially as well as at
each reporting date at fair value. Fair value
movements are recognised in the other
comprehensive income (OCI). However,
the Company recognises interest income,
impairment losses and reversals and foreign
exchange gain or loss in the statement of
profit and loss. On derecognition of the asset,
cumulative gain or loss previously recognised in
OCI is reclassified from the equity to statement
of profit and loss. Interest earned whilst
holding FVTOCI debt instrument is reported as
interest income using the effective interest rate
method.
In case of "equity share" the Company has
irrevocable election choice that can be
exercised on an instrument by instrument
basis to classify such instruments as FVOCI.
Accordingly the Company has classified
certain investment in equity instrument as Fair
Value through other comprehensive income.
iii Fair value through Profit and Loss (FVTPL):
FVTPL is a residual category for debt
instruments. Any debt instrument, which does
not meet the criteria for categorization as at
amortized cost or as FVTOCI, is classified as at
FVTPL. In addition, the Company may elect to
designate a debt instrument, which otherwise
meets amortized cost or FVTOCI criteria, as at
FVTPL. However, such election is considered
only if doing so reduces or eliminates a
measurement or recognition inconsistency
(referred to as 'accounting mismatch').
Debt instruments included within the FVTPL
category are measured at fair value with all
changes recognised in the statement of profit
and loss.
iv Equity investments:
The Company subsequently measures all
equity investments at fair value. Where the
Company's management has elected to
present fair value gains and losses on equity
investments in other comprehensive income,
there is no subsequent reclassification of fair
value gains and losses to statement of profit
and loss. Dividends from such investments
are recognised in statement of profit and loss
as other income when the Company's right to
receive payment is established.
v Investment in subsidiaries, joint ventures
and associates:
I nvestment in subsidiaries, joint ventures and
associates are carried at cost less impairment
loss in accordance with Ind AS 27 on 'Separate
Financial Statements'.
vi Derivative financial instruments:
Derivative financial instruments are classified
and measured at fair value through profit and
loss.
c Derecognition of financial assets
A financial asset is derecognised only when:
i The Company has transferred the rights to
receive cash flows from the asset or the rights
have expired or
ii The Company 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 in an
arrangement.
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.
d Impairment of financial assets
In accordance with Ind AS 109, the Company
applies Expected Credit Losses ("ECL") model for
measurement and recognition of impairment loss on
the following financial assets:
• Financial assets that are debt instruments, and
are measured at amortised cost, e.g. loans and
deposits;
• Financial assets that are debt instruments
and are measured at fair value through other
comprehensive income (FVTOCI)
• Trade receivables or any contractual right to
receive cash or another financial asset that result
from transactions that are within the scope of Ind
AS 115
Expected Credit Losses are measured through a loss
allowance at an amount equal to:
• The 12-months expected credit losses (expected
credit losses that result from those default events
on the financial instrument that are possible
within 12 months after the reporting date), if
the credit risk on a financial instrument has not
increased significantly; or
• Full lifetime expected credit losses (expected
credit losses that result from all possible default
events over the life of the financial instrument),
if the credit risk on a financial instrument has
increased significantly.
In accordance with Ind AS 109 - Financial Instruments,
the Company applies ECL model for measurement
and recognition of impairment loss on the trade
receivables or any contractual right to receive cash or
another financial asset that result from transactions
that are within the scope of Ind AS 115 - Revenue from
Contracts with Customers.
For this purpose, the Company follows 'simplified
approach' for recognition of impairment loss
allowance on the trade receivable balances, contract
assets and lease receivables. The application of
simplified approach requires expected lifetime
losses to be recognised from initial recognition of the
receivables based on lifetime ECLs at each reporting
date.
In case of other assets, the Company determines
if there has been a significant increase in credit
risk of the financial asset since initial recognition.
If the credit risk of such assets has not increased
significantly, an amount equal to twelve months
ECL is measured and recognised as loss allowance.
However, if credit risk has increased significantly,
an amount equal to lifetime ECL is measured and
recognised as loss allowance.
When determining whether the credit risk of a
financial asset has increased significantly since initial
recognition and when estimating expected credit
losses, the Company considers reasonable and
supportable information that is relevant and available
without undue cost or effort. This includes both
quantitative and qualitative information and analysis,
based on the Company's historical experience and
informed credit assessment and including forward
looking information.
The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no realistic prospect of recovery. This
is generally the case when the Company determines
that the debtor does not have assets or sources of
income that could generate sufficient cash flows to
repay the amounts subject to the write off. However,
financial assets that are written off could still be
subject to enforcement activities in order to comply
with the Company's procedures for recovery of
amounts due.
The presumption under IND AS 109 with reference
to significant increases in credit risk since initial
recognition (when financial assets are more than
180 days past due) has been rebutted and is not
applicable to the Company, as the Company is able
to collect significant portion of its receivables that
exceed the due date
III Financial liabilities and equity instruments
a Classification of debt or equity:
Debt or equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial
liability and an equity instrument.
b Subsequent measurement:
i Financial liabilities measured at amortised
cost:
Financial liabilities are subsequently measured
at amortized cost using the effective interest
rate (EIR) method. Gains and losses are
recognised in statement of profit and loss
when the liabilities are derecognised as well
as through the EIR amortisation process.
Amortized cost is calculated by taking
into account any discount or premium on
acquisition and fee or costs that are an integral
part of the EIR. The EIR amortisation is included
in finance costs 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 the fair value
due to the short maturity of these instruments.
ii Financial liabilities measured at fair value
through profit and loss (FVTPL):
Financial liabilities at FVTPL include financial
liabilities held for trading and financial liabilities
designated upon initial recognition as FVTPL.
Financial liabilities are classified as held for
trading if they are incurred for the purpose
of repurchasing in the near term. Derivatives,
including separated embedded derivatives are
classified as held for trading unless they are
designated as effective hedging instruments.
Financial liabilities at fair value through profit
and loss are carried in the financial statements
at fair value with changes in fair value
recognised in other income or finance costs in
the statement of profit and loss.
Lease liability associated with assets taken
on lease (except short-term and low value
assets) is measured at the present value of
lease payments to be made. Lease payments
are discounted using the incremental rate of
borrowing as the case may be. Lease payments
comprise fixed payments in relation to the lease
(less lease incentives receivable), variable lease
payments, if any and other amounts (residual
value guarantees, penalties, etc.) to be payable
in future in relation to the lease arrangement.
c Derecognition of financial liabilities
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 derecognition 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.
IV Foreign Currency Convertible bonds (FCCB)
The Company has classified foreign currency convertible
bond denominated in USD that can be converted to
ordinary shares at the option of the bondholder at a
conversion price fixed in Company's functional currency
(?) as a compound financial instrument comprising of a
liability component and an equity component.
Initial measurement
The liability component of a compound financial instrument
is initially recognised at the fair value of a similar liability
that does not have an equity conversion option. The equity
component is initially recognised at the difference between
the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the
liability and equity components in proportion to their initial
carrying amounts.
Subsequent measurement
Subsequent to initial recognition, the liability component
of a compound financial instrument is measured at
amortised cost using the effective interest method. The
equity component of a compound financial instrument is
not re-measured. Interest related to the financial liability
is recognised in profit or loss under finance cost. On
conversion at maturity, the financial liability is reclassified
to equity and no gain or loss is recognised.
V Fair value measurement
The Company measures financial instruments such as
debts and certain investments, 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:
a In the principal market for the asset or liability or
b 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.
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:
a Level 1 — Quoted (unadjusted) market prices in active
markets for identical assets or liabilities.
b Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
c 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 balance
sheet 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.
VI Offsetting financial instruments
Financial assets and liabilities are offset and the net
amount is reported in the balance sheet where there is a
legally enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis or realise
the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events
and must be enforceable in the normal course of business
and in the event of default, insolvency or bankruptcy of the
Company or the counterparty.
O) Borrowings and borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use of sale. All other borrowing costs are recognised in
profit or loss in the period in which they are incurred.
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