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Saatvik Green Energy Ltd. కంపెనీ అకౌంటింగ్ విధానాలు
3. Summary of material accounting policies(a) Current and non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification.
An asset is current when it is:
¦ Expected to be realised or intended to be sold
or consumed in normal operating cycle.
¦ Held primarily for the purpose of trading.
¦ Expected to be realised within twelve months
after the reporting period; or
¦ Cash or cash equivalent unless restricted
from being exchanged or used to settle a
liability for at least twelve months after the
reporting period.
All other assets are classified as non-current.
A liability is current when:
¦ It is expected to be settled in normal operating
cycle.
¦ It is held primarily for the purpose of trading.
¦ It is due to be settled within twelve months
after the reporting period; or
¦ There is no unconditional right to defer
settlement of the liability for at least twelve
months after the reporting period.
The Company classifies all other liabilities as non¬
current.
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 its operating cycle as 12
months.
Deferred tax assets/liabilities are classified as non¬
current assets and liabilities.
(b) Property, plant and equipment
Property, plant and equipment, are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the
cost of replacing part of the plant and equipment
and borrowing costs for long-term construction
projects if the recognition criteria are met. When
significant parts of 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 repair and maintenance costs
are recognised in profit or loss as incurred.
Depreciation is provided on a pro rata basis on the
straight-line method over the useful lives of assets,
which is as stated in Schedule II of the Companies
Act 2013 or based on technical evaluation made
by the Company. The Managementâs estimates of
the useful lives and useful life as per Schedule II
of Companies Act 2013 for various categories of
items of Property, Plant and Equipment are given
below:
An item of property, plant and equipment and any
significant part initially recognised, is derecognised
upon disposal or when no future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the
net disposal proceeds and the carrying amount of
the asset) is included in the statement of profit and
loss when the asset is derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial period end and adjusted
prospectively, if appropriate.
The useful lives of the assets specified under the
Schedule II are based on their single shift working.
However, where the Company estimated the
useful life of an assets on single shift basis at the
beginning of the period but uses the assets on
double or triple shift during the period, then the
depreciation expense is increased by 50 or 100 per
cent as the case may be for that period.
The Company reviews the residual value, useful
lives and depreciation method annually and, if
expectations differ from previous estimates, the
change is accounted for as a change in accounting
estimate on a prospective basis.
Cost of material, erection charges and other
expenses incurred for assets in the course of
construction are capitalised in the assets under
Capital work in progress net of accumulated
impairment loss, if any. At the point when an asset is
operating at managementâs intended use, the cost
of construction is transferred to the appropriate
category of property, plant and equipment and
depreciation commences.
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 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.
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 incentive 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.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies
in note (e) 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.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. The lease
payments include fixed payments. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease payments
made.
In addition, the carrying amount of lease
liabilities is remeasured if there is a
modification, a change in the lease term, a
change in the lease payments (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of
an option to purchase the underlying asset.
(iii) Short-term leases
The Company applies the short-term lease
recognition exemption to its short-term
leases of machinery and equipment (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).
Lease payments on short-term leases are
recognised as expense on a straight-line basis
over the lease term.
(e) Impairment of non-financial assets
The Company assesses at each reporting date,
whether there is an 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 assetâs recoverable
amount. An assetâs recoverable amount is the
higher of an assetâs or cash-generating unitâs (CGU)
fair value less costs of disposal and its value in
use. The 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.
Impairment losses are recognised in the statement
of profit and loss.
(f) Investment in subsidiaries
Investment in subsidiaries are shown at cost in
accordance with the option available in Ind AS
27, âSeparate Financial Statementsâ. Where the
carrying amount of an investment in greater than its
estimated recoverable amount, it is written down
immediately to its recoverable amount and the
difference is transferred to the Statement of profit
and loss.
On disposal of investment, the difference between
the net disposal proceeds and the carrying amount
is charged or credited to the Statement of Profit and
Loss.
Inventories are valued at the lower of cost and net
realisable value.
(i) Raw materials: Cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on Moving
Weighted Average basis.
(ii) Stores & spares: Cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on Moving
Weighted Average basis.
(iii) Finished goods and work in progress: Cost
includes cost of direct materials and labour
and a proportion of manufacturing overheads
based on the normal operating capacity
excluding borrowing costs. Cost is determined
on Moving Weighted Average basis.
(iv) Traded goods: Cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on Moving
Weighted Average basis.
Net realisable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and the estimated costs
necessary to make the sale.
(h) Revenue from contract with customers
The Company earns revenue primarily from the
following major sources:
¦ Sale of products (comprise of manufacture
and sale of solar photovoltaic modules, sale
of solar pumps and solar inverter); and
¦ Income from rendering Engineering,
Procurement and Construction services
Revenue from contract with customers is
recognised when control of a product or service
is transferred to a customer at an amount which
reflects the consideration to which the Company
expects to be entitled in exchange for those
products and services, and excludes amounts
collected on behalf of third parties. The Company
has generally concluded that it is principal in its
revenue arrangements because it typically controls
the goods or services before transferring them to
the customer.
The disclosures of Critical Estimates and
Judgements relating to revenue from contracts with
customers are provided in Note 2.3.
(i) Sale of products
Revenue from sale of products is recognised
at a point in time when control of the product
is transferred to the customer, generally at on
delivery of the goods to the customer or the
carrier at the factory gate, as agreed in the
contract.
Revenue is adjusted for variable consideration
such as discounts, rebates, refunds or other
similar items in a contract when they are
highly probable to be provided. The amount
of revenue excludes any amount collected on
behalf of third parties.
The Company recognises revenue generally
at the point in time when the products are
delivered to customer or when it is delivered
to a carrier for export sale, which is when
the control over product is transferred to
the customer. In contracts where freight is
arranged by the Company and recovered
from the customers, the same is treated as a
separate performance obligation and revenue
is recognised when such freight services are
rendered.
In revenue arrangements with multiple
performance obligations, the Company
accounts for individual products and services
separately if they are distinct - i.e. if a product
or service is separately identifiable from other
items in the arrangement and if a customer
can benefit from it. The consideration is
allocated between separate products and
services in the arrangement based on their
stand-alone selling prices.
There is no significant financing component
in revenue recognition. In case of any such
financing component is there in revenue
arrangements, the Company adjusts the
transaction price for financing component,
if any and the adjustment is accounted in
finance cost.
The Company renders Engineering,
Procurement and Construction (âEPCâ) and
Design, construction, procurement and
commissioning of Solar Photovoltaic Water
Pumping System (SPWPS) services to its
customers.
Revenue from contracts is recognised as
the performance obligation is satisfied
progressively over the contract period, using
percentage of completion method. The
Companyâs progress towards completion is
measured based on the proportion that the
contract expenses incurred to date bear to the
estimated total contract expenses. Payment
is due as per the achievement of contractual
milestones.
The estimates of contract cost and the
revenue thereon are reviewed periodically by
management and the cumulative effect of
any changes in estimates is recognised in the
period in which such changes are determined.
Where it is probable that the contract
expenses will exceed total revenues from
a contract, the expected loss is recognised
immediately as an expense in the statement
of profit and loss.
Where the profit from a contract cannot be
estimated reliably, revenue is only recognised
equalling the expenses incurred to the extent
that it is probable that the expenses will be
recovered.
If the consideration in a contract includes a
variable amount, the Company estimates the
amount of consideration to which it will be
entitled in exchange for transferring the goods
to the customer. The variable consideration
is estimated at contract inception and
constrained until it is highly probable that a
significant revenue reversal in the amount
of cumulative revenue recognised will not
occur when the associated uncertainty with
the variable consideration is subsequently
resolved.
The Company typically provides warranties
for general repairs of defects that existed at
the time of sale, as required by law. These
assurance-type warranties are accounted
for under Ind AS 37 Provisions, Contingent
Liabilities and Contingent Assets. Refer to the
accounting policy on warranty provisions in
Note (m).
(v) Contract balancesa. Contract assets
A contract asset is initially recognised
for revenue earned from EPC services
because the receipt of consideration
is conditional on acceptance from the
customer. Upon acceptance by the
customer, the amount recognised as
contract assets is reclassified to trade
receivables.
Contract assets are subject to
impairment assessment. Refer to
accounting policies on impairment of
financial assets in section (l) Financial
instruments - initial recognition and
subsequent measurement.
A receivable is recognised if an amount
of consideration that is unconditional
(i.e., only the passage of time is required
before payment of the consideration
is due). Refer to accounting policies of
financial assets in section (l) Financial
instruments - initial recognition and
subsequent measurement.
A contract liability is recognised if a
payment is received or a payment is due
(whichever is earlier) from a customer
before the Company transfers the related
goods or services. Contract liabilities
are recognised as revenue when the
Company performs under the contract
(i.e., transfers control of the related
goods or services to the customer).
A refund liability is recognised for the
obligation to refund some or all of the
consideration received (or receivable)
from the customer. The Companyâs
refund liabilities arise from customersâ
right of return and volume rebates.
The Company updates its estimates
of refund liabilities at the end of each
reporting period.
(i) Employee benefit expenses(i) Short term employee benefits
A liability is recognised for benefits accruing to
employees in respect of wages, salaries and
annual leaves in the period the related service
is rendered at the undiscounted amount of
the benefits expected to be paid in exchange
for that service. Liabilities recognised in
respect of short-term employee benefits are
measured at the undiscounted amount of the
benefits expected to be paid in exchange for
the related service.
(ii) Other long-term employee benefits
The Company treats accumulated leave
expected to be carried forward beyond twelve
months, as long-term employee benefit for
measurement purposes. Such long-term
compensated absences are provided for
based on the actuarial valuation using the
projected unit credit method at the reporting
date. Actuarial gains/losses are immediately
taken to the statement of profit and loss and
are not deferred.
The obligations are presented as current
liabilities in the balance sheet as the entity
does not have an unconditional right to defer
the settlement for at least twelve months after
the reporting date.
(iii) Retirement benefits plana. Defined contribution plan
Retirement benefit in the form of
provident fund is a defined contribution
scheme. The Company has no obligation,
other than the contribution payable
to the provident fund. The Company
recognises contribution payable to the
provident fund scheme as an expense,
when an employee renders the related
service. If the contribution payable to
the scheme for service received before
the balance sheet date exceeds the
contribution already paid, the deficit
payable to the scheme is recognised as a
liability after deducting the contribution
already paid.
The cost of providing benefits under the
defined benefit plan is determined using
the projected unit credit method.
Remeasurements, comprising of
actuarial gains and losses, the effect
of the asset ceiling, excluding amounts
included in net interest on the net
defined benefit liability and the return
on plan assets (excluding amounts
included in net interest on the net
defined benefit liability), are recognised
immediately in the balance sheet with a
corresponding debit or credit to retained
earnings through OCI in the period in
which they occur. Remeasurements
are not reclassified to profit or loss in
subsequent periods.
Past service costs are recognised in
profit or loss on the earlier of:
¦ The date of the plan amendment or
curtailment, and
¦ The date that the Company
recognises related restructuring
costs.
Net interest is calculated by applying
the discount rate to the net defined
benefit liability or asset. The Company
recognises the following changes in
the net defined benefit obligation as an
expense in the Standalone statement of
profit and loss:
¦ Service costs comprising current
service costs, past-service costs,
gains and losses on curtailments
and non-routine settlements; and
¦ Net interest expense or income.
A liability for a termination benefit is recognised
at the earlier of when the entity can no longer
withdraw the offer of the termination benefit
and when the entity recognises any related
restructuring costs.
Share based payments to employees are
measured at the fair value of the equity
instruments at the grant date. Details
regarding the determination of the fair value
of equity-settled share-based transactions
are set out in note 39.
The fair value determined at the grant
date of the equity-settled share-based
payments is expensed on a straight-line
basis over the vesting period, based on the
Companyâs estimate of equity instruments
that will eventually vest, with a corresponding
increase in equity. At the end of each reporting
year, the Company revises its estimate of the
number of equity instruments expected to
vest. The impact of the revision of the original
estimates, if any, is recognised in Statement
of profit and loss such that the cumulative
expense reflects the revised estimate, with a
corresponding adjustment to the share based
payment reserve.
Service and non-market performance
conditions are not taken into account when
determining the grant date fair value of options,
but the likelihood of the conditions being met
is assessed as part of the Companyâs best
estimate of the number of equity instruments
that will ultimately vest. Market performance
conditions are reflected within the grant date
fair value. Any other conditions attached to
an options, but without an associated service
requirement, are considered to be non¬
vesting conditions. Non-vesting conditions
are reflected in the fair value of an option
and lead to an immediate expensing of an
option unless there are also service and/or
performance conditions.
No expense is recognised for options that
do not ultimately vest because non-market
performance and/or service conditions have
not been met. Where options include a market
or non-vesting condition, the transactions are
treated as vested irrespective of whether the
market or non-vesting condition is satisfied,
provided that all other performance and/or
service conditions are satisfied.
When the terms of an equity-settled options
are modified, the minimum expense
recognised is the grant date fair value of the
unmodified option, provided the original
vesting terms of the option are met. An
additional expense, measured as at the
date of modification, is recognised for any
modification that increases the total fair value
of the share-based payment transaction,
or is otherwise beneficial to the employee.
Where an option is cancelled by the entity or
by the counterparty, any remaining element
of the fair value of the option is expensed
immediately through profit or loss.
The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.
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.
I. Financial assets
a) Initial recognition and measurement
Financial assets are classified, at initial
recognition, as subsequently measured
at amortised cost and fair value through
profit or loss.
The classification of financial assets
at initial recognition depends on the
financial assetâs contractual cash flow
characteristics and the Companyâs
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.
The Companyâs 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.
Purchases or sales of financial assets
that require delivery of assets within a
time frame established by regulation or
convention in the marketplace (regular
way trades) are recognised on the trade
d ate, i.e., the date that the Company
commits to purchase or sell the asset.
For purposes of subsequent
measurement, financial assets are
classified in two categories:
¦ Financial asset at amortised cost
¦ Equity instruments at fair value
through profit or loss (FVTPL)
c) Financial assets at amortised cost
A financial asset is measured at
amortised cost if both the following
conditions are met:
¦ the asset is held within a business
model whose objective is to
hold assets in order to collect
contractual cash flows; and
¦ the contractual terms of the
instrument give rise on specified
dates to cash flows that are
solely payments of principal and
interest on the principal amount
outstanding.
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
Companyâs financial assets at amortised
cost includes trade receivables, and loan
to related parties and security deposits.
d) Fair value through other
comprehensive income (FVTOCI)
On initial recognition of an equity
investment that is not held for trading,
the Company may irrevocably elect
to present subsequent changes
in the investmentâs fair value in
OCI. This election is made on an
investment-by-investment basis.
If the Company decides to classify an
equity instrument as at FVTOCI, then all
fair value changes on the instrument,
excluding dividends, are recognised
in the OCI. There is no recycling of the
amounts from OCI to Statement of Profit
and Loss, even on sale of investment.
However, the Company may transfer the
cumulative gain or loss within equity.
e) Financial assets at fair value through
profit or loss (FVTPL)
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 derivative
instruments and investment in quoted
mutual funds.
f) Derecognition
A financial asset (or, where applicable,
a part of a financial asset or part of a
Company of similar financial assets) is
primarily derecognised (i.e., removed
from the Companyâs Standalone balance
sheet) 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 âpass¬
throughâ 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.
g) Impairment of financial assets
Further disclosures relating to
impairment of financial assets are
also provided in the Note (h) - Trade
receivables and contract assets.
The Company recognises an allowance
for expected credit losses (ECLs) for
trade receivables and contract assets.
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 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.
The Company considers a financial asset
in default when contractual payments
are 45 days past due. However, in certain
cases, the Company may also consider
a financial asset to be in default when
internal or external information indicates
that the Company is unlikely to receive
the outstanding contractual amounts in
full before taking into account any credit
enhancements held by the Company. A
financial asset is written off when there is
no reasonable expectation of recovering
the contractual cash flows.
h) Reclassification of financial assets
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.
II. Financial liabilitiesa) Initial recognition and measurement
Financial liabilities are classified, at
initial recognition, as financial liabilities
at fair value through profit or loss, loans
and borrowings and payables.
All financial liabilities are recognised
initially at fair value and, in the case of
loans and borrowings and payables,
net of directly attributable transaction
costs.
The Companyâs financial liabilities
include trade and other payables, loans
and borrowings including bank overdrafts
and derivative financial instruments.
b) Subsequent measurement
For purposes of subsequent
measurement, financial liabilities are
classified in two categories:
¦ Financial liabilities at fair value
through profit or loss
¦ Financial liabilities at amortised
cost (loans and borrowings)
c) Financial liabilities at fair value
through profit and 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 Company that are not
designated as hedging instruments in
hedge relationships as defined by Ind AS
109.
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.
d) Financial liabilities at amortised cost
(Loans and borrowings)
This is the category most relevant to
the Company. After initial recognition,
interest-bearing loans and borrowings
are subsequently measured at amortised
cost using the EIR method. Gains and
losses are recognised in profit or loss
when the liabilities are derecognised
as well as through the EIR amortisation
process.
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 as finance costs
in the statement of profit and loss. This
category generally applies to borrowings.
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.
III. Derivative financial instrumentsInitial recognition and subsequent
measurement
The Company uses derivative financial
instruments, such as currency swaps,
to hedge its foreign currency risks. Such
derivative financial instruments are initially
recognised at fair value on the date on which
a derivative contract is entered into and are
subsequently re-measured at fair value.
Derivatives are carried as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
The purchase contracts that meet the
definition of a derivative under Ind AS 109 are
recognised in the statement of profit and loss.
Any gains or losses arising from changes in
the fair value of derivatives are taken directly
to profit or loss.
IV. Classification as debt or equity
Debt and 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.
An equity instrument is any contract that
evidences a residual interest in the assets
of the Company after deducting all of its
liabilities. Equity instruments issued by the
Company are recognised at the proceeds
received, net of direct issue costs.
VI. Offsetting of financial instruments
Financial assets and financial liabilities are
offset and the net amount is reported in
the Standalone balance sheet if there is a
currently enforceable legal right to offset the
recognised amounts and there is an intention
to settle on a net basis, to realise the assets
and settle the liabilities simultaneously.
k) Foreign currencies
(i) Functional and presentation currency
The Companyâs Standalone financial
statements are presented in INR, which is
also the Companyâs functional currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company at functional
currency spot rates at the date the transaction
first qualifies for recognition. However, for
practical reasons, the Company uses average
rate if the average approximates the actual
rate at the date of the transaction.
Monetary assets and liabilities denominated
in foreign currencies are translated at the
functional currency spot rates of exchange at
the reporting date.
Exchange differences arising on settlement or
translation of monetary items are recognised
in the Statement of profit or loss.
Non-monetary items that are measured in
terms of historical cost in a foreign currency
are translated using the exchange rates at the
dates of the initial transactions.
In determining the spot exchange rate to use
on initial recognition of the related asset,
expense, or income (or part of it) on the
derecognition of a non-monetary asset or
non-monetary liability relating to advance
consideration, the date of the transaction
is the date on which the Company initially
recognises the non-monetary asset or non¬
monetary liability arising from the advance
consideration.
If there are multiple payments or receipts
in advance, the Company determines the
transaction date for each payment or receipt
of advance consideration.
Tax expense for the period comprises current tax
and deferred tax.
a) Current tax (including tax for earlier years)
Current income tax assets and liabilities
are measured at the amount expected to
be recovered from or paid to the taxation
authorities. The tax rates and tax laws used
to compute the amount are those that are
enacted or substantively enacted, at the
reporting date in the countries where the
Company operates and generates taxable
income.
Current income tax relating to items
recognised outside profit or loss is recognised
outside profit or loss (in other comprehensive
income). Current tax items are recognised
in correlation to the underlying transaction
in OCI. 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 is provided using the Balance
sheet approach 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,
except:
(a) When the deferred tax liability
arises from the initial recognition of
goodwill or an asset or liability in a
transaction that is not a business
combination and, at the time of
the transaction, affects neither
the accounting profit nor taxable
profit or loss and does not give rise
to equal taxable and deductible
temporary differences;
(b) In respect of taxable temporary
differences associated with
investments in subsidiaries, when
the timing of the reversal of the
temporary differences can be
controlled and it is probable that
the temporary differences will not
reverse in the foreseeable future.
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,
except:
(a) When the deferred tax asset relating
to the deductible temporary
difference arises from the initial
recognition of an asset or liability in
a transaction that is not a business
combination and, at the time of
the transaction, affects neither
the accounting profit nor taxable
profit or loss and does not give rise
to equal taxable and deductible
temporary differences;
(b) In respect of deductible temporary
differences associated with
investments in subsidiaries,
deferred tax assets are recognised
only to the extent that it is probable
that the temporary differences will
reverse in the foreseeable future
and taxable profit will be available
against which the temporary
differences 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 tax assets and liabilities are
measured at the tax rates that are
expected to apply in the year when
the asset is realised, or the liability is
settled, based on tax rates (and tax laws)
that have been enacted or substantively
enacted at the reporting date.
Deferred tax relating to items recognised
outside profit or loss is recognised
outside profit or loss (in other
comprehensive income). Deferred tax
items are recognised in correlation to the
underlying transaction in OCI.
(iii) Offsetting of Deferred tax assets and
liabilities
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.
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