Tenneco Clean Air India Ltd. కంపెనీ అకౌంటింగ్ విధానాలు

2 Material accounting policies

2.1 These standalone financial statements (‘financial
statements'') of the Company have been prepared
in accordance with the Indian Accounting Standards
(hereinafter referred to as the ‘Ind AS'') as notified by
Ministry of Corporate Affairs (‘MCA'') under section 133
of the Companies Act 2013 read with the Companies
(Indian Accounting Standards) Rules 2015, as amended
and other relevant provisions of the Act.

2.2 Summary of Material Accounting Policies

a) The standalone financial statements have been
prepared using the material accounting policies
and measurement bases summarised below. These
were used throughout all periods presented in the
financial statements.

Basis of preparation

The standalone financial statements have been
prepared on going concern basis in accordance
with accounting principles generally accepted in
India. Further, the financial statements have been
prepared on historical cost basis except for certain
financial assets and financial liabilities which are
measured at fair values as explained in relevant
accounting policies.

b) Current and non-current classification

All assets and liabilities have been classified as current
or non-current as per the Company''s normal operating
cycle and other criteria set out in the Act. Deferred
tax assets and liabilities are classified as non-current
assets and non-current liabilities, as the case may be.

c) Use of estimates

The preparation of standalone financial statements
in conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and
the results of operations during the year. Although
these estimates are based upon management''s
best knowledge of current events and actions,
actual results could differ from these estimates.
Any revision to accounting estimates is recognised
in the current and future periods.

d) Property, plant and equipment
Recognition and initial measurement

Property plant and equipment are stated at their cost
of acquisition. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and
directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade
discount and rebates are deducted in arriving at
the purchase price. Subsequent costs are included
in the asset''s carrying amount or recognised as
a separate asset, as appropriate, only when it is
probable that future economic benefits associated
with the item will flow to the Company. All other
repair and maintenance costs are recognised in
Statement of Profit and Loss as incurred.

Subsequent measurement (depreciation and
useful lives)

Property, plant and equipment are subsequently
measured at cost less accumulated depreciation and
impairment losses. Depreciation on property, plant
and equipment is provided on a straight-line basis,
computed on the basis of useful lives (as set out below)
prescribed in Schedule II to the Companies Act, 2013:

The residual values, useful lives and method of
depreciation are reviewed at each financial year
end and adjusted prospectively, if appropriate.

De-recognition

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 de-recognition of the asset
(calculated as the difference between the net
disposal proceeds and the carrying amount of the
asset) is included in the income statement when
the asset is derecognised.

e) Intangible assets

Recognition and initial measurement

Intangible assets (Computer softwares) are stated
at their cost of acquisition. The cost comprises
purchase price, borrowing cost if capitalisation
criteria are met and directly attributable cost of
bringing the asset to its working condition for
the intended use.

Subsequent measurement (amortisation)

The cost of capitalised software is amortised over a
period of 5 years from the date of its acquisition.

f) Impairment of non-financial assets

At the end of each reporting period, the Company
reviews the carrying amounts of its tangible
and intangible assets to determine whether
there is any indication that those assets have
suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is
estimated in order to determine the extent of the
impairment loss (if any).

Recoverable amount is the higher of fair value less
costs of disposal and value in use. 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 for which the estimates of
future cash flows have not been adjusted.

After impairment, depreciation is provided on
the revised carrying amount of the asset over its
remaining useful life.

g) Impairment of financial assets

The Company assesses at each date of balance
sheet whether a financial asset or a group of
financial assets is impaired.

Ind AS 109 requires expected credit losses to be
measured through a loss allowance. Company
performs credit assessment for customers on an
annual basis. Company recognizes credit risk, on
the basis of lifetime expected losses and where
receivables are due for more than twelve months.

For all other financial assets, expected credit losses
are measured at an amount equal to the 12 month
expected credit losses or at an amount equal to the
life time expected credit losses if the credit risk on
the financial asset has increased significantly since
initial recognition.

When an impairment loss subsequently reverses,
the carrying amount of the asset (or a cash¬
generating unit) is increased to the revised estimate
of its recoverable amount, but 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. A reversal of
an impairment loss is recognised immediately in
profit or loss.

h) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are
recognised when the Company becomes a party
to the contractual provisions of the financial
instrument and are measured initially at fair value
adjusted for transaction costs, except for those
carried at fair value through profit or loss which are
measured initially at fair value. Trade receivable
that do not contain significant financing component
are initially recognised at transaction price.
Subsequent measurement of financial assets and
financial liabilities is described below.

Non-derivative financial assets

Subsequent measurement

i. Financial assets carried at amortised cost - a
financial asset is measured at the amortised
cost if both the following conditions are met:

• The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and

• Contractual terms of the asset give
rise on specified dates to cash flows
that are solely payments of principal
and interest (SPPI) on the principal
amount outstanding.

After initial measurement, such financial assets
are subsequently measured at amortised cost
using the effective interest rate (EIR) method.

ii. Financial assets carried at fair value through
other comprehensive income (FVOCI)

A financial asset is subsequently measured
at fair value through other comprehensive
income if it is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets and the contractual terms of
the financial asset give rise on specified dates
to cash flows that are solely payments of
principal and interest on the principal amount
outstanding and selling financial assets.

iii. Financial assets carried at fair value through
profit or loss (FVTPL)

Financial assets are measured at fair value
through profit or loss unless they are measured
at amortised cost or at fair value through other
comprehensive income on initial recognition.
The transaction costs directly attributable
to the acquisition of financial assets and
liabilities at fair value through profit or loss
are immediately recognised in Statement of
Profit and Loss.

iv. Equity instruments designated as at FVTOCI

On initial recognition, the Group may make
an irrevocable election (on an instrument-by¬
instrument basis) to designate investments in
equity instruments as at FVTOCI. Designation
at FVTOCI is not permitted if the equity
investment is held for trading or if it is
contingent consideration recognised by an
acquirer in a business combination.

Investments in equity instruments at FVTOCI
are initially measured at fair value plus
transaction costs.

Subsequently, they are measured at fair
value with gains and losses arising from
changes in fair value recognized in other
comprehensive income and accumulated in a
separate component of equity. The cumulative
gain or loss is not reclassified to profit or
loss on disposal of the equity investments,
instead, it is transferred to retained earnings.
Dividends on these investments in equity
instruments are recognised in profit or loss in
accordance with IndAS 109, unlessthe dividends
clearly represent a recovery of part of the cost

of the investment. Dividends are included in
the ‘Other income'' line item in profit or loss.
The Group designated all investments in
equity instruments that are not held for trading
as at FVTOCI on initial recognition (see note 5).

A financial asset is held for trading if:

- it has been acquired principally for the
purpose of selling it in the near term; or

- on initial recognition it is part of a portfolio
of identified financial instruments that
the Group manages together and has
evidence of a recent actual pattern of
short-term profit-taking; or

- it is a derivative (except for a derivative
that is a financial guarantee contract
or a designated and effective
hedging instrument).

v. Derecognition of financial assets

The Company derecognizes a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the financial asset and the transfer qualifies
for derecognition under Ind AS 109.

Non-derivative financial liabilities

Subsequent measurement

Subsequent to initial recognition, all non¬
derivative financial liabilities are measured
at amortised cost using the effective
interest method.

De-recognition of financial liabilities

A financial liability is de-recognised 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.

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.

i) Leases

The Company as a lessee

The Company''s leased asset classes primarily
consist of leases for land, building and vehicles. The
Company assesses whether a contract contains a
lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right
to control the use of an identified asset for a period
of time in exchange for consideration. To assess
whether a contract conveys the right to control the
use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an
identified asset (ii) the Company has substantially
all of the economic benefits from use of the asset
through the period of the lease and (iii) the Company
has the right to direct the use of the asset.

At the date of commencement of the lease, the
Company recognises a right-of-use asset (“ROU”)
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for
leases with a term of twelve months or less (short¬
term leases) and low value leases. For these short¬
term and low value leases, the Company recognises
the lease payments as an operating expense on a
straight-line basis over the term of the lease.

Certain lease arrangements include options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities include
these options when it is reasonably certain that
they will be exercised.

The right-of-use assets are initially recognised at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs less any lease incentives.
They are subsequently measured at cost less
accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset.

The lease liability is initially measured at amortised
cost at the present value of the future lease
payments. The lease payments are discounted
using the interest rate implicit in the lease or, if
not readily determinable, using the incremental
borrowing rates in the country of domicile of

price is allocated to each distinct performance
obligation and recognised as revenue, as or when,
the performance obligation is satisfied. Revenue
towards satisfaction of a performance obligation
is measured at the amount of transaction price
(net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts and
schemes offered by the Company as part of the
Contract. The Company recognises revenue from
the following major sources:

(i) Sale of products:

Revenue from sale of products is measured
based on the consideration specified in
a contract with a customer and excludes
amounts collected on behalf of third parties.
It is measured at consideration received or
receivable, net of returns and allowances,
trade discounts and volume rebates. The
Company recognises revenue when it transfers
control over a product to a customer i.e. when
goods are delivered at the delivery point, as
per terms of the agreement, which could be
either customer premises or carrier premises
who will deliver goods to the customer. When
payments received from customers exceed
revenue recognised to date on a particular
contract, any excess is reported in the Balance
Sheet under other current liabilities.

Satisfaction of performance obligations

The Company''s revenue is derived from the
single performance obligation to transfer
primarily products under arrangements in
which the transfer of control ofthe products and
the fulfilment of the Company''s performance
obligation occur at the same time. Revenue
from the sale of goods is recognised when the
Company has transferred control of the goods
to the buyer and the buyer obtains the benefits
from the goods, the potential cash flows and
the amount of revenue (the transaction price)
can be measured reliably, and it is probable that
the Company will collect the consideration to
which it is entitled to in exchange for the goods.
Whether the customer has obtained control
over the asset depends on when the goods
are made available to the carrier or the buyer
takes possession of the goods, depending on
the delivery terms. For the Company, generally
the criteria to recognise revenue has been
met when its products are delivered to its
customers or to a carrier who will transport

the goods to its customers, this is the point
in time when the Company has completed
its performance obligations. Revenue is
measured at the transaction price of the
consideration received or receivable, the
amount the Company expects to be entitled to.

Payment terms

The sale of goods is typically made under
credit payment terms differing from customer
to customer and ranges between 30-90 days.

Variable considerations associated with such
sales

Periodically, the Company launches various
volume or other rebate programs where once
a certain volume or other conditions are met,
it gives the customer as volume discount
some portion of the amounts previously
billed or paid. For such arrangements, the
Company only recognises revenue for the
amounts it ultimately expects to realise from
the customer. The Company estimates the
variable consideration for these programs
using the most likely amount method or the
expected value method, whichever approach
best predicts the amount of the consideration
based on the terms of the contract and
available information and updates its
estimates each reporting period.

(ii) Revenue from services

Revenue from sale of services is recognised
upon rendering the services based on
agreements/ arrangements with the
concerned parties For fixed price contracts,
revenue is recognised based on the actual
service provided to the end of the reporting
period as a proportion of the total services to
be provided overtime since the Company''s
performance does not create an asset with
an alternative use to the Company and the
Company has an enforceable right to payment
for performance completed to date.

The Company provide designing services
for customised tools to its customers and
recognises its revenue over time using an
input method to measure progress towards
complete satisfaction of tool designing.

The Company recognises revenue from
designing of tools over time if it can reasonably
measure its progress towards complete
satisfaction of the performance obligation.

Where the Company cannot reasonably measure
the outcome of a performance obligation, but the
Company expects to recover the costs incurred
in satisfying the performance obligation, in
those circumstances, the Company recognises
revenue only to the extent of the costs incurred
until such time that it can reasonably measure
the outcome of the performance obligation.

(iii) Revenue from development of customer paid
tools:

The Company incurs pre-production tooling
costs related to the products developed for
its customers under supply arrangements.
Tooling income (net) represents amounts
recovered from customers, which are in excess
of development costs incurred by the Company
to manufacture such tools, similarly tooling cost
(net) represents costs incurred by the Company
in excess of amounts recovered from customers.
The Company recognizes such tooling income
(net)/ tooling cost (net) when the control of the
goods have passed on to the customer. The
Company expenses all pre-production tooling
costs related to customer owned tools for which
reimbursement is not contractually guaranteed
by the customer or for which the customer has
not provided a non-cancellable right to use the
tooling, at the time of their estimation. When it
is probable that total development costs will
exceed the tooling revenue, the expected loss
is recognized as an expense in the Statement
of Profit and Loss in the period in which such
probability occurs. The tooling income (net) is
recognized at the time of receipt of Production
Part Approval Process from customer.

(iv) Contract assets

A contract asset is the Company''s right to
consideration in exchange for goods or
services that the Company has transferred
to the customer. A contract asset becomes
a receivable when the Company''s right to
consideration is unconditional, which is the
case when only the passage of time is required
before payment of the consideration is due.
The impairment of contract assets is measured,
presented and disclosed on the same basis as
trade receivables. The Contract asset in case
of company comprises of deferred income
which relates to expenses incurred but not
billed yet as per the terms of contract.

The Company''s contract assets are disclosed
in Note 5(b), Note 5(c) and Note 34.

(v) Contract liabilities

A contract liability is the obligation to transfer
goods or services to a customer for which
the Company has received consideration (or
an amount of consideration is due) from the
customer. If a customer pays consideration
before the Company transfers goods or
services to the customer, a contract liability is
recognised when the payment is made or the
payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when
the Company performs under the contract.
The Contract liability comprises of unearned
income which relates to excess of invoicing
over cost incurred for a particular project.

The Company''s contract liabilities are
disclosed in Note 13 and Note 34.

(vi) Interest:

Interest income is recorded on accrual basis.

(vii) Export Benefits/Incentives:

Export entitlements under the Duty Entitlement
Pass Book (DEPB) Scheme/ Duty Drawback
scheme are recognised in the Statement of
Profit and Loss when the same is received
by the Company.

l) Statement of Cash flows

Cash flows are reported using the indirect method,
whereby profit for the period is adjusted for the
effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating
cash receipts or payments and item of income or
expenses associated with investing or financing cash
flows. The cash flows from operating, investing and
financing activities of the Company are segregated.

m) Foreign Currency Transactions
Functional and presentation currency

The standalone financial statements are presented
in Indian Rupee (‘INR or H'') which is also the functional
and presentation currency of the Company.

Transactions and balances

Foreign currency transactions are recorded in the
functional currency, by applying to the exchange
rate between the functional currency and the
foreign currency at the date of the transaction.

Foreign currency monetary items outstanding at
the balance sheet date are converted to functional
currency using the closing rate. Non-monetary
items denominated in a foreign currency which
are carried at historical cost are reported using the
exchange rate at the date of the transactions.

Exchange differences arising on such conversion
and settlement at rates different from those at
which they were initially recorded, are recognised
in the Statement of Profit and Loss in the year in
which they arise.

n) Retirement and other employee benefits

(i) Defined Contribution plan

These are plans in which the Company pays
pre-defined amounts to funds administered by
government authority/ Company and does not
have any legal or constructive obligation to pay
additional sums. These comprise contributions
in respect of Employees'' Provident Fund and
Employees'' State Insurance. The Company''s
payments to the defined contribution plans
are recognised as employee benefit expenses
when they are due.

(ii) Defined benefit plan

Gratuity liability under the Payment of Gratuity
Act is accrued on the basis of an actuarial
valuation made at the end of each financial
year. The actuarial valuation is done as per
projected unit credit method.

Actuarial gains and losses arising from
past experience and changes in actuarial
assumptions are credited or charged to other
comprehensive income in the year in which
such gains or losses are determined.

(iii) Short term compensated absences are
provided for based on estimates. Long term
compensation liability for leave encashment
is determined in accordance with company
policy and is measured on the basis of
valuation by an independent actuary at
the end of the financial year. The actuarial
valuation is done as per projected unit credit
method.

Actuarial gains and losses arising from
past experience and changes in actuarial
assumptions are charged to Statement of
Profit and Loss in the year in which such gains
or losses are determined.

(iv) Bonus plans

The Company recognises a liability and
an expense for bonuses. The Company
recognises a provision where contractually

obliged or where there is a past practice that
has created a constructive obligation.

o) Income Taxes

Tax expense comprises of current and deferred
tax. Current income tax is measured at the
amount expected to be paid to the tax authorities
in accordance with the Income Tax Act, 1961
enacted in India.

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).

Deferred tax is recognised in respect of temporary
differences between carrying amount of assets
and liabilities for financial reporting purposes and
corresponding amount used for taxation purposes.
Deferred tax assets on unrealised tax loss are
recognised to the extent that it is probable that
the underlying tax loss will be utilised against
future taxable income. This is assessed based
on the Company''s forecast of future operating
results, adjusted for significant non-taxable income
and expenses and specific limits on the use of
any unused tax loss. 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.

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 statement of profit and loss is recognised
outside Statement of Profit and Loss (either in other
comprehensive income or in equity).

p) Earnings per Share

Basic earnings per share are calculated by dividing
the net profit or loss for the year attributable to equity
shareholders by the weighted average number of
equity shares outstanding during the year.

For the purpose of calculating diluted earnings per
share, the net profit or loss for the year attributable
to equity shareholders and the weighted
average number of shares outstanding during
the year are adjusted for the effects of all dilutive
potential equity shares.