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Polycab India

BSE: 542652|NSE: POLYCAB|ISIN: INE455K01017|SECTOR: Cables - Power & Others
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Accounting Policy Year : Mar '19

1 Significant Accounting Policies

1.1 Basis of preparation

The Company prepared its Financial statements to comply with the accounting standards specified under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015, as amended. These Financial statements includes Standalone balance Sheet as at 31March 2019, the Standalone statement of Profit and Loss including Other Comprehensive Income and Standalone cash flows and Standalone statement of changes in equity for the year ended 31 March 2019, and a summary of significant accounting policies and other Explanatory information (together hereinafter referred to as “ Standalone Financial Statements” or “Financial statements”).

The Standalone Financial Information for the year ended 31 March 2019 and year ended 31 March 2018 has been prepared on an accrual basis and a historical cost convention, except for the following Financial assets and liabilities which have been measured at fair value:

- Derivative Financial instruments,

- Certain Financial assets and liabilities measured at fair value (refer accounting policy regarding Financial instruments)

The annual Financial statements for the year ended 31 March 2018 were prepared in ‘ in crores, however these Financial statements have been prepared in Rs. in Millions herein.

Accounting policies and methods of computation followed in the Standalone Financial Statements are same as compared with the annual Financial statements for the year ended 31 March 2018, except for adoption of new standard or any pronouncements effective from 1 April 2018.

The Consolidated Financial statements are presented in Indian Rupees (“Rs.”) And all values are rounded to the nearest million upto two decimal places, except otherwise indicated.

Ind AS 115 Revenue from Contracts with Customers, became mandatory for reporting periods beginning on or after 01 April 2018 replaces the existing revenue recognition standards. The Company has applied the modified retrospective approach and accordingly has included the impact of Ind AS 115 applicable to the interim period resented in these Standalone Financial Statements. The Company has adopted following accounting policy for revenue recognition.

1.2 Summary of significant accounting policies

A Investment in subsidiaries and joint ventures

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries.

The Company’s investments in its subsidiaries and joint venture is initially recognized at cost.The Company determines

Whether it is necessary to recognise an impairment Loss on its investment in its subsidiary or joint venture. At each reporting date, the Company determines whether there is objective evidence that the investment in the subsidiary or joint venture is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the subsidiary or joint venture and its carrying value and recognises the impairment Loss in the statement of Standalone Statement of Profit & Loss.

B Joint operation

The Company recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the separate Ind AS Financial statements under the appropriate headings.

The Company being a joint operator has recognised its share of assets, liabilities, income and expenses of these joint operations incurred jointly with other partner, along with its share of income from the sale of the output and any assets, liabilities and expenses that it has incurred in relation to joint operation.

C Current versus non-current classification

The Company presents assets and liabilities in the Standalone balance sheet based on current / non-current Classification.

An asset is treated as current when it is:

- Expected to be realised or intended to be sold or consumed in normal operating cycle;

- held primarily for the purpose of trading;

- Expected to be realised within twelve months after the reporting period; or

- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at Least twelve months after the reporting period.

ALL other assets are classified as non-current.

A liability is treated as current when:

- It is expected to be settled in normal operating cycle;

- It is held primarily for the purpose of trading;

- It is due to be settled within twelve months after the reporting period; or

- There is no unconditional right to defer the settlement of the liability for at Least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

D Fair value measurement

The Company measures Financial instruments, such as, derivatives, mutual funds etc. At fair value at each Standalone balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

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 Standalone Financial Statements are categorised within the fair value hierarchy, described as follows, based on the Lowest level input that is significant to the fair value measurement as a whole:

- level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

- level 2 - valuation techniques for which the Lowest level input that is significant to the fair value measurement is directly or indirectly observable

- level 3 - valuation techniques for which the Lowest level input that is significant to the fair value measurement is unobservable

For the purpose of fair value Disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risk of the assets or liability and the level of fair value hierarchy as explained above.

E Property, plant and equipment and capital work-in-progress

Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment Losses, if any. The cost comprises purchase price, borrowing costs if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. ALL other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Standalone Statement of Profit & Loss for the period in which such expenses are incurred.

Capital work-in-progress comprises of property, plant and equipment that are not ready for their intended use at the end of reporting period and are carried at cost comprising direct costs, related incidental expenses, other directly attributable costs and borrowing costs.

Gains or Losses arising from derecognition of property, plant and equipments are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Standalone Statement of Profit & Loss when the asset is derecognized.

Depreciation on Property, plant and equipment’s is calculated on pro rata basis on straight-Line method using the management assessed useful Lives of the assets which is in Line with the manner prescribed in Schedule II of the Companies Act, 2013.The useful Life is as follows:

Property, plant and equipment

Assets useful Life (In Years)

Buildings 30-60

Plant &equipments 3-15

Electrical installations 10 Furniture & fixtures 10

Office equipments 3-6

Windmill 22

Vehicles 8-10

The residual values, useful Lives and methods of depreciation of property, plant and equipment are reviewed at each Financial year end and adjusted prospectively.

Leasehold Lands are amortized over the period of Lease.

Lease hold Improvements are depreciated on straight Line basis over their initial agreement period.

F Intangible assets

Intangible assets are stated at cost, net of accumulated amortisation and impairment Losses, if any. The cost comprises purchase price, borrowing costs if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use.

Gains or Losses arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Standalone Statement of Profit & Loss when the asset is derecognized.

Amortisation on intangible assets is calculated on pro rata basis on straight-Line method using the useful Lives of the assets and in the manner prescribed in Schedule II of the Companies Act, 2013. The useful Life is as follows:

Assets useful Life (In Years)

Computer software 3

The residual. Values, useful. Lives and methods of depreciation of intangible assets are reviewed at each Financial year end and adjusted prospectively.

G Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the Lease. The arrangement is, or contains, a Lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

A Lease is classified at the inception date as a finance Lease or an operating Lease. A Lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance Lease. Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases.

Company as a Lessee

Operating Lease payments are recognised as an expense in the statement of Standalone Statement of Profit & Loss as per the contractual terms over the lease period.

Finance lease are capitalised at the commencement of the lease and depreciated over the period of lease.

H Borrowing costs

Borrowing cost includes interest, exchange differences arising from the foreign currency borrowings and amortization of ancillary costs incurred in connection with the arrangement of borrowings.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.

I Impairment of non-Financial assets

The carrying amounts of assets are reviewed at each Standalone Balance sheet date, if there is any indication of impairment based on internal / external factors. Impairment Loss is provided to the extent the carrying amount of assets exceeds their recoverable amount. Recoverable amount is the higher of an asset’s net selling price and its value in use.value in use is the presentvalue of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful Life. Net selling price is the amount obtainable from the sale of an asset in an arm’s Length transaction between knowledgeable, willing parties, Less the costs of disposal.

Impairment Losses are recognised in the statement of Standalone Statement of Profit & Loss.

J 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. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. The Company is committed to the sale expected within one year from the date of classification.

Non-current assets held for sale are measured at the Lower of their carrying amount and the fair value Less costs to sell. Assets and Liabilities classified as held for sale are presented separately in the Standalone balance sheet. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

K Inventories

Raw materials, traded goods, work in progress, finished goods, packing materials, project material for Long term contracts, scrap materials and stores and spares are valued at Lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, packing materials, and stores and spares is determined on a First In-First Out (FIFO) basis and includes all applicable costs incurred in bringing goods to their present location and condition.

Work-in-progress and finished goods are valued at Lower of cost and net realizable value. Cost includes direct materials as aforesaid, direct labour cost and a proportion of manufacturing overheads based on total manufacturing overheads to raw materials consumed.

Traded goods are valued at Lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories at their Location and condition. Cost is determined on a weighted average basis.

The stocks of scrap materials have been taken at net realisable value.

Net realizable value is the estimated selling price in the ordinary course of business, Less estimated costs of completion and estimated costs necessary to make the sale.

The Company enters into purchase of contract of copper and aluminium, in which the amount payable is not fixed on the date of purchase and the same is affected by changes in LME prices in future. Such transactions are entered into to protect the Company against the risk of price movement in the purchased copper and aluminium with respect to realisation of the price of product. Fair value hedges are mainly used to hedge the exposure to change in fair value of commodity price risks. The fair value adjustment remains part of the carrying value of inventory and taken to Standalone Statement of Profit & Loss when the inventory is sold.

L Revenue recognition

Revenue from contracts with customers for sale of goods, construction contracts and its related provision of services. The Company satisfies a performance obligation and recognizes revenue over time, if one of the following criteria is met:

A) The Company’s performance does not create an asset with an alternate use to the Company and the Company has as an enforceable right to payment for performance completed to date.

B) The Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.

C) The customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs.

For performance Obligations where one of the above conditions are not met, revenue is recognized at the point in time at which the performance obligation is satisfied.

When the Company satisfies a performance obligation by delivering the promised goods or services it creates a contract based asset on the amount of consideration earned by the performance. Where the amount of consideration received from a customer exceeds the amount of revenue recognized this gives rise to a contract liability. In case of multiple performance obligation revenue for each performance obligation is recognized when it is satisfied. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes and duty.

The Company assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. Taxes collected on behalf of the government are excluded from revenue.

Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably

Variable consideration includes volume discounts, price concessions, Liquidity damages, incentives, etc. The Company estimates the variable consideration with respect to above based on an analysis of accumulated historical experience. The Company adjust estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed.

Sale of goods

Performance obligation in case of Revenue from sale of goods is satisfied at a point in time and is recognized when the performance obligation is satisfied and control as per Ind AS 115 is transferred to the customer. The Company collects GST on behalf of the Government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Revenue is disclosed net of discounts, incentives and returns, as applicable.

Revenue from Construction contracts

Performance obligation in case of revenue from Long - term contracts is satisfied over the period of time. Since the company creates an asset that the customer controls as the asset is created and the company has an enforceable right to payment for performance completed to date if it meets the agreed specifications. Revenue from Long term contracts, where the outcome can be estimated reliably and 10% of the projectcost is incurred, is recognized under the percentage of completion method by reference to the stage of completion of the contract activity. The stage of completion is measured by input method i.e. The proportion that costs incurred to date bear to the estimated total Costs of a contract. The total costs of contracts are estimated based on technical and other estimates. In the event that a Loss is anticipated on a particular contract, provision is made for the estimated Loss. Contract revenue earned in excess of billing is reflected under as “contract asset” and billing in excess of contract revenue is reflected under “contract liabilities”.Retention money receivable from project customers does not contain any significant financing element, these are retained for satisfactory performance of contract.

Warranty

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. In certain contracts, the Company provides warranty for an extended period of time and includes rectification of defects that existed at the time of sale and are normally bundled together with the main contract. Such bundled contracts include two performance Obligations because the promises to transfer the goods and services and the provision of service-type warranty are capable of being distinct. Using the relative stand-alone selling price method, a portion of the transaction price is allocated to the service-type warranty and recognised as a liability. Revenue is recognised over the period in which the service-type warranty is provided on a basis appropriate to the nature of the contract and services to be rendered.

Right to return

When a contract provides a customer with a right to return the goods within a specified period, the Company estimates the expected returns using a probability-weighted average amount approach similar to the expected value method under Ind AS 115.

Under Ind AS 115, the consideration received from the customer is variable because the contract allows the customer to return the products. The Company used the expected value method to estimate the goods that will not be returned. For goods expected to be returned, the Company presented a refund liability and an asset for the right to recover products from a customer separately in the balance sheet.

Export incentives

Export incentives under various schemes notified bythe Government have been recognised on the basis of applicable Regulations, and when reasonable assurance to receive such revenue is established.

Interest

For all Financial asset measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR).

Dividends

Dividend income is recognized when the Company’s right to receive dividend is established by the reporting date,

M Foreign currency translation

The Company’s Standalone Financial Statements are presented in Indian rupee (INR) which is also the Company’s functional currency.

Foreign currency transaction are recorded on initial recognition in the functional currency, using the exchange rate prevailing at the date of transaction.

Measurement of foreign currency item at the Standalone Balance sheet date

Foreign currency monetary assets and liabilities denominated in foreign currency are translated at the exchange rates prevailing on the reporting date.

Exchange differences

Exchange differences arising on settlement or translation of monetary items are recognised as income or expense in the statement of Standalone Statement of Profit & 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.

N Employee benefits

I employee benefits

ALL short-term employee benefits such as salaries, incentives, Special awards, medical benefits which are

Expected to be settled wholly within 12 months after the end of the period in which the employee renders the related services which entitles him to avail such benefits are charged to the Standalone Statement of Profit & Loss account.

The Company has revised its leave policy applicable to all employees except for certain categories of employees in Daman factory Location effective 1 April 2019. The Company estimates and provides the liability for such short-term and Long term benefits based on the terms of the policy. 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 advances are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Remeasurement gains/Losses on defined benefit plans are immediately taken to the Statement of Standalone Statement of Profit & Loss and are not deferred.

II Defined contribution plans

Retirement benefit in the form of provident fund and ‘employer-employee Scheme’ are defined contribution schemes.The Company recognises contribution payable to the provident fund and ‘employer employee’scheme as an expenditure, when an employee renders the related service. The Company has no obligation, other than the contribution payable to the funds. The Company’s contributions to defined contribution plans are charged to the statement of Standalone Statement of Profit & Loss as incurred.

III Defined benefit plan

The Company operates a defined benefit gratuity plan for its employees. The costs of providing benefits under this plan is determined on the basis of actuarial valuation at each year-end using the projected unit credit method. Re-measurements, 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 Standalone Balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Standalone Statement of Profit & Loss in subsequent periods.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.

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 iv. Share based payment

Equity settled share based payments to employees and other providing similar services are measured at fair value of the equity instruments at grant date.

The fair value determined at the grant date of the equity-settled share based payment is expensed on a straight Line basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimates of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any is, recongised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the shared option outstanding account.

No expense is recognised for options that do not ultimately vest because non market performance and/ or service conditions have not been met.

The dilutive effect, if any of outstanding options is reflected as Additional share dilution in the computation of diluted earnings per share.

O Income taxes

Tax expenses comprise 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

Current income tax relating to items recognised outside Standalone Statement of Profit & Loss is recognised outside Standalone Statement of Profit & Loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax relating to items recognised outside Standalone Statement of Profit & Loss is recognised outside Standalone Statement of Profit & Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to

The underlying transaction either in OCI or directly in equity.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for Financial reporting purposes at the reporting date. Deferred income tax is measured using the tax rates and the tax Laws enacted or substantially enacted at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for deductible temporary differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

At each reporting date, the Company re-assesses unrecognised deferred tax assets. It recognises unrecognized deferred tax asset to the extent that it has become reasonably certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no Longer reasonably certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

Current tax assets and current tax liabilities are offset when there is a Legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.

Deferred tax assets and deferred tax liabilities are offset when there is a Legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income Levied by the same governing taxation Laws.

P Segment reporting

Identification of segments

The Company’s operating businesses are organized and managed separately according to the nature of products and services with each segment representing a strategic business unit that offers different products & serves different markets.

Inter-segment transfers

The Company Generally accounts for intersegment sales and transfers at cost plus appropriate margins.

Allocation of common costs/ Assets & liabilities

Common allocable costs/ assets & liabilities are allocated to each segment are consistently allocated amongst the segments on appropriate basis.

Unallocated items

Unallocated items include General corporate income & expense items which are not allocated to any business segment.

Segment accounting policies

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the Standalone Financial Statements of the Company as a whole.

Q Earnings per share

Basic earnings per share are calculated by dividing the net profit or Loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or Loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all potentially dilutive equity shares.

R Provisions, Contingent liabilities and capital commitments

A provision is recognised when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of Standalone Statement of Profit & Loss. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the Standalone Financial Statements.

Capital Commitments includes the amount of purchase orders (net of advances) issued to parties for completion of assets.

Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.

S Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand, cheques 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 purposes of cash flow statement consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company’s cash management.

T Financial instruments

A Financial instrument is any contract that gives rise to a Financial asset of one entity and a Financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

ALL Financial assets are recognised initially at fair value plus, in the case of Financial assets not recorded at fair value through Standalone Statement of Profit & Loss, transaction costs that are attributable to the acquisition of the Financial asset.

Financial assets are classified at the initial recognition as Financial assets measured at fair value or as Financials assets measured at amortised cost.

Subsequent measurement

For purposes of subsequent measurement, Financial assets are classified in two broad categories:

- Financials assets at amortised cost

- Financials assets at fair value

Where assets are measured at fair value, gains and Losses are either recognised entirely in the statement of Standalone Statement of Profit & Loss (i.e., fair value through Standalone Statement of Profit & Loss), or recognised in other comprehensive income (i.e., fair value through other comprehensive income).

A Financials assets carried at amortised cost

A Financials assets that meets the following two conditions is measured at amortised cost (net of Impairment) unless the asset is designated at fair value through Standalone Statement of Profit & Loss under the fair value option.

- Business model test: The objective of the Company’s business model is to hold the Financial assets to collect the contractual cash flow (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).

- Cash flow characteristics test: The contractual terms of the Financial assets give rise on specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding.

B Financials assets at fair value through other comprehensive income

Financials assets is subsequently measured at fair value through other comprehensive income if it is held with in a business model whose objective is achieved by both collections contractual cash flows and selling

Financial assets and the contractual terms of the Financial assets give rise on specified dated to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.

If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or Loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of Standalone Statement of Profit & Loss

C Financials assets at fair value through profit or loss

A Financial asset which is not classified in any of the above categories is subsequently fair valued through Standalone Statement of Profit & Loss.

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 when:

A) The rights to receive cash flows from the asset have expired, or

B) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and Obligations that the Company has retained.

Impairment of Financial assets

The Company assesses impairment based on expected credit Losses (ECL) modelforthe following:

A) 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 18.

B) Other Financial assets such as deposits, advances etc.

The Company follows ‘simplified approach’ for recognition of impairment Loss allowance on trade receivables or contract revenue receivables.

The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ecls at each reporting date, right from its initial recognition.

For recognition of impairment Loss on other Financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment Loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment Loss allowance based on 12-month ECL.

As a practical expedient, the Company uses the provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historical observed default rates over the expected life of the trade receivables and its adjusted forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

ECL impairment Loss allowance (or reversal) during the period is recognized as other expense in the statement of Standalone Statement of Profit & Loss.

Financial liabilities

Initial recognition and measurement

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 Company’s Financial liabilities include trade and other payables, Loans and borrowings including bank overdrafts and derivative Financial instruments.

Subsequent measurement

The measurement offinancial liabilities depends on their classification,as described below:

A Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or Loss include Financial liabilities held for trading and Financial liabilities designated upon initial recognition as at fair value through profit or Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative Financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.

B Gains or losses on liabilities held for trading are recognised in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or Loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ Losses attributable to changes in own credit risk are recognized in OCI. These gains/ Loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or Loss within equity. ALL other changes in fair value of such liability are recognised in the statement of profit or Loss.

C Loans and borrowings

After initial recognition, interest-bearing Loans and borrowings are subsequently measured at amortised cost using the EIR method.

Derecognition

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 or Loss.

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a Loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of Loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised Less cumulative amortisation.

U Derivative Financial instruments

The Company enters into derivative contracts with an intention to hedge its foreign exchange price risk and interest risk. Derivative contracts which are Linked to the underlying transactions are recognised in accordance with the contract terms. 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.

Any gains or Losses arising from changes in the fair value of derivatives are taken directly to Standalone Statement of Profit & Loss.

V Acceptances

The Company enters into arrangements for purchase under usance Letter of credit issued by banks under non-fund based working capital Limits of the Company. Considering these arrangements are majorly for raw materials with a maturity of up to twelve months, the economic substance of the transaction is determined to be operating in nature and these are recognised as Acceptances under Trade and other payables.

W Embedded derivatives

An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary in a way similar to an unconsolidated derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified variable.The Company enters into purchase contract of copper and aluminum, in which the amount payable is not fixed on the date of purchase, but instead is affected by changes in LME prices in future. Such transactions are entered into to protect against the risk of price movement in the purchased copper and aluminum. Accordingly, such unfixed payables are considered to have an embedded derivative.

Hedge Accounting: Fair Value Hedges

The Company designates the copper and aluminum price risk in such instruments as hedging instruments, with copper and aluminum inventory considered to be the hedged item. The hedged risk is copper and aluminum spot prices. At the inception of a hedge relationship, with effect from 1 April 2016, The Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company’s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the Financial reporting periods for which they were designated.

X Business combination under common control

Common control business combination includes transactions such as transfer of subsidiaries or business between entities within a group.

Business combinations involving entities or business under common control are accounted for using the pooling interest method. Under pooling interest method, the assets and liabilities of combining entities are reflected at their carrying amount, the only adjustments that are made are to harmonise accounting policies.

The Financials information in the Standalone Financial Statements in respect of prior period are restated as if the business combination had occurred from the beginning of the preceding period in the Standalone Financial Statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information is restated from that date.

The difference, if any, between the amount 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 presented separately from other capital reserves with Disclosures of its nature and purposes in the notes.

Y Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.

When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

When the grant relates to an asset, it’s recognition as income in the statement of Standalone Statement of Profit & Loss is Linked to fulfilment of associated export Obligations.

The Company has chosen to present grants received to income as other income in the statement of Standalone Statement of Profit & Loss.

Source : Dion Global Solutions Limited
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