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Vodafone Idea Limited

BSE: 532822|NSE: IDEA|ISIN: INE669E01016|SECTOR: Telecommunications - Service
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Accounting Policy Year : Mar '19

1. CORPORATE INFORMATION

Vodafone Idea Limited (formerly Idea Cellular Limited) (''the Company''), a public limited company, was incorporated under the provisions of the Companies Act applicable in India on March 14, 1995. Its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India (Scrip Code; NSE: IDEA, BSE: 532822). The registered office of the Company is situated at Suman Tower, Plot No. 18, Sector-11, Gandhinagar - 38201 1, Gujarat.

Vodafone India Limited (VlnL) along with its subsidiary Vodafone Mobile Services Limited (VMSL) (hereinafter collectively called as erstwhile Vodafone) merged into Idea Cellular Limited (ICL) on August 31, 2018 (Effective Date). This has resulted in the formation of a Joint Venture between the promoter Groups i.e Aditya Birla Group and Vodafone Group and change of name from ICL to Vodafone Idea Limited (VIL). Accordingly, financial statements for the year ended March 31, 2019 includes financial results of the operation of VInL and VMSL for the period from August 31, 2018 to March 31, 2019. The Company is leading telecom service provider in India. The Company is engaged in the business of Mobility and Long Distance services.

These financial statements for the year ended March 31, 2019 were approved by the Board of Directors and authorized for issue on May 13, 2019.

2. (a) STATEMENT OF COMPLIANCE

These financial statements of the Company comprising of Balance Sheet, Statement of Profit and Loss, Statement of Changes in Equity and Statement of Cash Flows together with the notes have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.

(b) BASIS OF PREPARATION

These financial statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services on the transaction date.

All financial information presented in INR has been rounded off to million unless otherwise stated.

The financial statements are based on the classification provisions contained in Ind AS 1, ''Presentation of Financial Statements'' and division II of schedule III of the Companies Act, 2013.

New and amended standards adopted by the Company

Ind AS-115, Revenue from Contracts with Customers Effective April 1, 2018, the Company has adopted Ind AS 115 Revenue from Contracts with Customers basis the modified retrospective method applied retrospectively to the contracts that are not completed as of April 1, 2018 (being date of initial application). Accordingly, the comparative information has not been restated. The effect on adoption of the said standard was insignificant on these financial statements.

The new revenue recognition standard Ind AS 115 defines a new five-step model to recognize revenue from customer contracts. Revenue is recognized when a customer obtains control of the goods or receives services and thus has the ability to direct the use and obtain the benefits from the goods or services. The standard supersedes Ind AS 18 ''Revenue'' and Ind AS 11 ''Construction contracts'' and related interpretations.

Other standards such as Ind AS 12 - Income tax and Ind AS 21 - Foreign currency transactions and advance consideration, do not have any impact on the Company.

3. AMALGAMATION OF VODAFONE MOBILE SERVICES LIMITED (''VMSL'') AND VODAFONE INDIA LIMITED (''VINL'') WITH THE COMPANY

Vodafone Mobile Services Limited (VMSL), Transferor Company 1 and Vodafone India Limited (VInL), Transferor Company 2 (collectively the T transferor Companies) who were in the business of providing telecommunication services under the respective licenses issued to them by the Department of Telecom (DoT), merged in to Idea Cellular Limited (ICL), the Transferee Company. These companies filed a scheme of amalgamation which was approved by their respective shareholders, creditors, Securities and Exchange Board of India (SEBI), Stock Exchanges, Competition Commission of India, Department of Telecommunications (DoT), Foreign Investment Promotion Board, Reserve Bank of India (RBI) and other required authorities / third parties. The scheme as approved by various regulatory authorities was sanctioned for the transferee company by Ahmadabad bench of National Company Law Tribunal (NCLT) on January 11, 2018 and for the transferor companies by the Mumbai bench of NCLT on January 19, 2018 subject to approval by DoT. The approval from DoT was received on July 26, 2018 after the Transferee Company deposited Rs,39,263 Mn and provided a Bank Guarantee (BG) of Rs,33,224 Mn under protest. The scheme became effective on August 31, 2018, the date on which the scheme along with all approvals, (including final NCLT approval) were filed with the Registrar of Companies (RoC) at Ahmadabad. Upon the scheme becoming effective the Transferor Companies stood dissolved without being wound-up.

This resulted in formation of a joint venture between the promotor groups i.e. Vodafone Group and Aditya Birla Group and change of name from ICL to Vodafone Idea Limited (VIL). The Vodafone Group and Aditya Birla Group owns 45.1% and 26.0% in the combined Company respectively and the balance 28.9% is owned by other shareholders as on August 31, 2018.

In compliance with the scheme, on merger of VMSL i.e. Transferor Company 1 with the Transferee Company, 3,893,927,522 equity shares of VIL were issued to VInL i.e. Transferor Company 2 being the shareholder of Transferor Company 1. Immediately thereafter, on merger of VInL i.e. Transferor Company 2 with the Transferee Company, these shares were cancelled and 4,375,199,464 equity shares were issued afresh to shareholders of VInL. The stamp duty paid on such issue amounting to Rs,83 Mn has been debited to Securities Premium Account.

As per Indian Accounting Standards as prescribed under section 133 of the Companies Act, 2013, no specific accounting guidance is given in case of formation of a joint venture, hence, the Company had an option to either recognise contribution of business from the joint ventures using ''Pooling of interest'' method or adopt the ''fair value'' method. The Company has adopted ''Pooling of interest'' method. Accordingly, all the assets, liabilities and reserves of Transferor companies have been recorded at their carrying amounts and in the form in which they appeared in the financial statements as at the date of merger of the respective Transferor Companies. The financial information in the financial statement in respect of prior periods are not restated as the business combination was not involving entities under common control.

(1) Represents elimination between Transferor Company 1 and Transferor Company 2.

(2) Effects of alignment of accounting policies and practices, transaction between Transferor Companies and the Company.

On the scheme becoming effective, the Company has consolidated line by line the assets, liabilities and components of Other Equity of each of the Transferor Companies after eliminating the inter-company transactions between these entities and adjustments with respect to alignment of accounting policies and practices through retained earnings.

C) Further, the Implementation Agreement entered between the parties defines a settlement mechanism between the Company and VInL shareholders for any cash inflow/outflow that could possibly arise from the settlement of certain outstanding disputes pertaining to period until May 31, 2018. Accordingly, VIL has recorded net indemnity liability of Rs,83,923 Mn, of which Rs,85,015 Mn is recorded through capital reserve, on merger. The liability has been disclosed as other non-current financial liability. The settlement of this indemnity liability would happen periodically as defined in the Agreement starting from June 2020 and will not extend beyond June 2025. In the event such disputed matters do not finally result in cash inflows/outflows within the indemnity period, there would be no settlement to/from the erstwhile VInL shareholders by/to the Company. The settlement between the Company and VInL shareholders for any cash inflow/outflow that could possibly arise shall be subject to RBI approval, if any, which would be evaluated/obtained at the time of actual settlement with VInL shareholders.

With the amalgamation of the transferor companies as mentioned above, carrying values of assets, liabilities and equity of transferor companies become form part of the financial statements of the Company.

B) Details of other equity on amalgamation of Transferor Company 1 and Transferor Company 2

(1) On amalgamation, the effect of cancellation of investment of Transferor Company 2 into Transferor Company 1 of Rs,477,723 Mn, and difference between share capital of Transferor Companies of Rs,33,067 Mn and shares issued by the Company of Rs,43,752 Mn to the shareholders of the Transferor Companies have resulted into creation of the amalgamation adjustment deficit account being debit balance in accordance with the guidance given under education material on Ind-AS 103 issued by The Institute of Chartered Accountants of India.

4. The Company has incurred a net loss for the year ended March 31, 2019 of Rs,140,560 Mn (year ended March 31, 2018 Rs,44,583 Mn) and has a negative working capital as at March 31, 2019 of Rs,344,920 Mn (March 31, 2018 Rs,14,739 Mn). The borrowings including interest thereon repayable during next twelve months period ending March 31, 2020 is Rs,333,079 Mn. This includes borrowings of Rs,102,802 Mn reclassified from long term to short term as the Company was not able to meet certain financial ratios, which the company is confident will not result in any accelerated payment (refer note 24(b)). In addition, the Company expects to incur capital expenditure to achieve its planned business growth as per its approved business plan. Subsequent to the year end, the Company has raised an amount aggregating Rs,249,998 Mn by way of a rights issue from existing eligible equity shareholders, including promoter contribution of Rs,179,207 Mn. On this basis, the Company believes that the capital infusion as mentioned above, existing cash and cash equivalents (including current investments) of Rs,73,649 Mn as at March 31, 2019, expected cash flow from sale of certain non-current investments and cash from operations over the next 12 months is sufficient for scheduled debt repayments, including interest, capital expenditure payouts and other working capital requirements of the Company for the next twelve months. These financial statements have therefore been prepared on a going concern basis.

5. SIGNIFICANT ACCOUNTING POLICIES

a) Revenue from contracts with customers

Revenue is recognized when a customer receives services and thus has the ability to direct the use and obtain the benefits from those services. Revenue is measured at the Transaction price i.e. an amount that reflects the consideration, to which an entity expects to be entitled in exchange for transferring goods or services to customers, excluding amounts collected on behalf of third parties. Taxes and duties collected by the seller / service provider are to be deposited with the government and not received by the Company on their own account. Accordingly, it is excluded from revenue. The Company evaluates its exposure to significant risks and reward associated with the revenue arrangements in order to determine its position of a principal or an agent in this regard. Consideration payable to a customer includes cash or credit or other items expected to be payable to the customer (or to other parties that purchase the entity''s services from the customer). The Company accounts

for consideration payable to a customer as a reduction from the transaction price unless the payment to the customer is in exchange for a distinct service that the customer transfers to the entity.

i) Revenue from supply of services

Revenue on account of telephony services (post-paid and prepaid categories, roaming, interconnect and long distance services) is recognized on rendering of services. Fixed Revenues in the post-paid category are recognized over the period of rendering of services. Processing fees on recharge vouchers in case of prepaid category is recognized over the validity of such vouchers.

Revenue from other services (internet services, mobile advertisement, revenue from toll free services, etc.) is recognized on rendering of services. Revenue from passive infrastructure is recognized on rendering of services.

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 recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

Multiple element contracts:

Bundle packages that include multiple elements, at the inception of the arrangement, the Company determines whether it is necessary to separate the separately identifiable elements and apply the corresponding revenue recognition policy to each element. Total package revenue is allocated among the identified elements based on their relative standalone price.

ii) Unbilled income

Unbilled Income is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs its obligation by transferring goods or services to a customer before the same is invoiced to the customer, unbilled income is recognized for the earned consideration that is conditional on satisfaction of performance obligation.

iii) Trade receivables

A receivable represents the Company''s right to 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 5- r) Financial instruments -initial recognition and subsequent measurement.

iv) Advance from customer and deferred revenue Advance from customer and deferred revenue is the obligation to transfer services to a customer for which the Company has received consideration from the customer. If a customer pays consideration before the Company transfers services to the customer, a contract liability is recognized when the payment is made. Advance from customer and deferred revenue are recognized as revenue when the Company fulfills its performance obligations under the contract.

v) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is recorded using the applicable Effective Interest Rate (EIR), which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset''s net carrying amount on initial recognition.

vi) Dividends

Dividend Income is recognized when the Company''s right to receive the payment is established.

vii) Cost to obtain a contract

The Company pays sales commission to its channel partners for each contract that they obtain. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions because the amortization period of the asset that the Company otherwise would have used is one year or less.

b) Leases

The Company evaluates whether an arrangement is (or contains) a lease based on the substance of the arrangement at the inception of the lease. An arrangement which is dependent on the use of a specific asset or assets and conveys a right to use the asset or assets, even if it is not explicitly specified in an arrangement is (or contains) a lease.

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

i. Company as a lessee

Finance lease:

Assets held under finance leases are initially recognized as assets at the commencement of the lease at their fair value or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance costs and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are recognized in the Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company''s general policy on borrowing costs. Such assets are depreciated / amortized over the period of lease or estimated useful life of the assets whichever is less. Contingent rentals are recognized as expenses in the periods in which they are incurred.

Operating lease:

Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis unless payments to the less or are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increase; such increases are recognized in the year in which such benefits accrue. Contingent rentals arising, if any, under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

ii. Company as a lesser

Finance lease:

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company''s net investment in the leases. Finance lease income is allocated to accounting period so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.

Operating lease:

Rental income from operating lease is recognized on a straight line basis over the lease term unless payments to the Company are structured to increase in line with expected general inflation to compensate for the Company''s expected inflationary cost increase; such increases are recognized in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight line basis over the lease term. Contingent rents are recognized as income in the period in which they are earned.

The Company enters into agreements which entitle its customers the right to use of specified capacity of dark fibre / bandwidth capacity for a specific period of time. Under such arrangements, the rights to use the specified assets are given for a substantial part of the estimated useful life of such assets. The contracted price received upfront in advance is treated as deferred revenue and is recognized on a straight line basis over the agreement period.

c) Employee benefits

i. Defined Contribution Plan

Contributions to Provident and other funds are funded with the appropriate authorities and charged to the Statement of Profit and Loss when the employees have rendered service entitling them to the contributions. Contributions to Superannuation are funded with the Life Insurance Corporation of India and charged to the Statement of Profit and Loss when the employees have rendered service entitling them to the contributions.

The Company has no obligation other than contribution payable to these funds.

ii. Defined Benefit Plan

The Company has a defined benefit gratuity plan which is a combination of funded plan and unfunded plan. In case of funded plan, the Company makes contribution to a separately administered fund with the Life Insurance Corporation of India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimation of the payments. Any deficit in plan assets managed by LIC as compared to the liability based on an independent actuarial valuation is recognized as a liability. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method, with actuarial valuations being carried out at periodic intervals. Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding charge or credit to Other Comprehensive Income (OCI) in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:

- Service costs; and

- Net interest expense or income

iii. Short-term and other long-term employee benefits A liability is recognized for benefits accruing to employees in respect of salaries, wages and other short term employee benefits in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

Provision for leave benefits to employees is based on actuarial valuation done by projected accrued benefit method at the reporting date. The related remeasurements are recognized in the Statement of Profit and Loss in the period in which they arise.

iv. Share- based payments

Equity-settled share-based payments to employees for options granted by the Company to its employees are measured at the fair value of the equity instruments at the grant date.

Stock option of Vodafone Group Plc (VGPLc) granted to the employees of the Company are accounted as cash-settled share based payments by the Company.

The fair value determined at the grant date of the equity settled share-based payments is expensed over the period in which the performance or service conditions are fulfilled, based on the Company''s estimate of stock options that will eventually vest, with a corresponding increase in equity. The fair value of the cash settled share-based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of stock option that will eventually vest, with a corresponding increase in liability. At the end of each reporting period, 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 recognized in the Statement of Profit and Loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve or liability as applicable.

In respect of cancellation of unvested stock options, the amount already charged as share based payment expense is reversed under the same head in the Statement of Profit and Loss.

In respect of modification such as re-pricing of existing stock option, the difference in fair value of the option on the date of re-pricing is accounted for as share based payment expense over the remaining vesting period.

d) Annual Revenue Share License Fees - and Spectrum Usage Charges

The variable license fees and annual spectrum usage charges, computed basis of adjusted gross revenue, are charged to the Statement of Profit and Loss in the period in which the related revenue arises as per the license agreement of the licensed service area at prescribed rate.

e) Foreign currency transactions

The Company''s financial statements are presented in Indian Rupees (INR) which is also the Company''s functional currency. Transactions in foreign currencies are initially recorded at the INR spot rate on the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange on the reporting date.

Exchange differences arising on settlement or translation of monetary items are recognized on net basis within finance cost in the Statement of Profit and Loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are recognized using the exchange rates at the dates of the initial transactions.

f) Exceptional items

Items of income or expense which are non-recurring or outside of the ordinary course of business and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company are disclosed as Exceptional items in the Statement of Profit and Loss.

g) Taxes

Income tax expense represents the sum of current tax and deferred tax.

i. Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current tax is based on the taxable income and calculated using the applicable tax rates and tax laws. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

Current tax relating to items recognized outside profit or loss is recognized outside profit or loss in correlation to the underlying transaction either in OCI or directly in equity.

ii. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or that entire deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at the end of each reporting date and are recognized to the extent 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 realized 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 recognized outside profit or loss is recognized outside profit or loss in correlation to the underlying transaction either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation statute.

h) Current / Non - Current Classification

An asset is classified as current when

a) It is expected to be realized or consumed in the respective company''s normal operating cycle;

b) It is held primarily for the purpose of trading;

c) It is expected to be realized within twelve months after the reporting period; or

d) If it is cash or cash equivalent, unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Any asset not conforming to the above is classified as noncurrent.

A liability is classified as current when

a) It is expected to be settled in the normal operating cycle of the respective companies;

b) It is held primarily for the purposes of trading;

c) It is expected to be settled within twelve months after the reporting period; or

d) The respective companies have no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

Any liability not conforming to the above is classified as noncurrent.

i) Property, Plant and Equipment

Property, Plant and Equipment (PPE) and Capital work in progress (CWIP) held for use in the rendering of services and supply of goods, or for administrative purposes, are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes all direct costs relating to acquisition and installation of Property, Plant and Equipment, non-refundable duties and borrowing cost relating to qualifying assets. In line with the transitional provisions, exchange differences on long term foreign currency borrowings taken on or before March 31, 2016 are continued to be capitalized under PPE. CWIP represents cost of property, plant and equipment not ready for intended use as on the reporting date. 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. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Freehold Land is not depreciated. Depreciation on all other assets under PPE commences once such assets are available for use in the intended condition and location. Depreciation is provided using straight-line method on pro rata basis over their estimated useful economic lives as given below. The useful life is taken as prescribed in Schedule II to the Companies Act, 2013 except where the estimated useful economic life has been assessed to be lower.

Asset Retirement Obligation (ARO) is capitalized when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. ARO is measured based on present value of expected cost to settle the obligation.

An item of property, plant and equipment and any significant part which meets the criteria for asset held for sale will be reclassified from property, plant and equipment to asset held for sale. When any significant part of property, plant and equipment is discarded or replaced, the carrying value of discarded / replaced part is derecognized. Any gains or losses arising from retirement or disposal of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss on the date of retirement or disposal.

j) Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Cost includes all direct costs relating to acquisition of Intangible assets and borrowing cost relating to qualifying assets. Subsequently, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangibles are not capitalized and the related expenditure is reflected in the Statement of Profit and Loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. There are no intangible assets assessed with indefinite useful life.

Intangible assets with finite lives are amortized over the useful economic life. The amortization period, residual value and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset. Intangible assets are amortized on straight line method as under:

- Cost of spectrum is amortized on straight line method from the date when the related network is ready for intended use over the unexpired period of the spectrum.

- Cost of licenses is amortized on straight line method from the date of launch of circle/renewal of license over the unexpired period of the license.

- Software, which is not an integral part of hardware, is treated as an intangible asset and is amortized over its useful economic life as estimated by the management between 3 to 5 years.

- Bandwidth capacities acquired under Indefeasible Right to Use (IRU) basis is accounted for as intangible assets and amortized over the period of the agreement.

- Brand - Separately acquired brand is shown at historical cost. Subsequently brand is carried at cost less accumulated amortization and impairment loss, if any. The Company amortizes brand using the straight line method over the estimated useful life of 15 years.

Cost of Intangible assets under development represents cost of intangible assets not ready for intended use as on the reporting date. It includes the amount of spectrum allotted to the Company and related borrowing costs (that are directly attributable to the acquisition or construction of qualifying assets) if any, for which network is not yet ready.

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

k) Non - Current Assets Held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and its sale is highly probable. The sale is considered highly probable only when the asset or disposal groups is available for immediate sale in its present condition, it is unlikely that the sale will be withdrawn and the sale is expected to be completed within one year from the date of classification. Noncurrent assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. These are not depreciated or amortized once classified as held for sale. Assets and liabilities classified as held for sale are presented separately in the Balance Sheet. Non-current assets that ceases to be classified as held for sale are measured at lower of (i) its carrying amount before the asset was classified as held for sale, adjusted for depreciation that would have been recognized had that asset not been classified as held for sale, and (ii) its recoverable amount at the date when the disposal group ceases to be classified as held for sale.

l) Impairment of Non - Financial Assets

Tangible and Intangible assets are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. 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). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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. In determining fair value less cost of disposal, an appropriate valuation model is used. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, an impairment loss is recognized in Statement of Profit and Loss by reducing the carrying amount of the asset (or cash-generating unit) to its recoverable amount. For assets excluding goodwill, impairment losses recognized in the earlier periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. If such indication exists, the Company estimates the asset''s (or cash generating unit''s) recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in estimates used to determine the assets'' recoverable amount since the last impairment loss was recognized. 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 such impairment loss not been recognized for the asset (or cash-generating unit) in prior years. Any reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.

m) Investment in Subsidiaries, Associate and Joint Arrangements

The Company recognizes its investment in subsidiaries, joint ventures and associate at cost less any impairment losses, if any except investment in Indus which have accounted for at Fair value though other comprehensive income.

n) Borrowing Costs

Borrowing Costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the finance costs.

o) Inventories

Inventories are valued at cost or net realizable value, whichever is lower. Cost is determined on weighted average basis and includes cost of purchase and other costs incurred in bringing inventories to their present location and condition. Net realizable 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.

p) Cash and cash equivalents

Cash and cash equivalents in the Balance Sheet comprise of cash at bank and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the Statement of Cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.

q) Financial Instruments

Initial recognition and measurement

Financial Instruments (assets and liabilities) are recognized when the Company becomes a party to a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, other than those designated as fair value through profit or loss (FVTPL), are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in the Statement of Profit and Loss.

i. Financial assets

All regular way purchase or sale of financial assets are recognized and derecognized on a trade date basis. Regular way purchase or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Subsequent measurement

All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets:

a) Financial assets measured at amortized cost

b) Financial assets measured at fair value through profit or loss (FVTPL)

c) Financial assets measured at fair value through other comprehensive income (FVTOCI)

I. Financial assets measured at amortized cost

A financial asset is measured at amortized 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 instruments 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 amortized cost using the Effective Interest Rate (EIR) method. EIR is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the EIR, transaction costs and other premiums or discounts) through the expected life of the debt instrument or where appropriate, a shorter period, to the net carrying amount on initial recognition.

The EIR amortization is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to trade and other receivables, loans, etc.

II. Financial assets measured at FVTPL

FVTPL is a residual category for financial assets in the nature of debt instruments. Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. 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. Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized when:

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

- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either

- the Company has transferred substantially all the risks and rewards of the asset, or

- the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:

- Debt instruments measured at amortized cost e.g., loans and bank deposits

- Trade receivables

- Other Financial assets not designated as FVTPL

For recognition of impairment loss on other financial assets and risk exposure, the Company determines 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.

ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.

The Company follows ''simplified approach'' for recognition of impairment loss allowance on Trade receivables (including lease receivables). The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECL at each reporting date, right from its initial recognition.

For the purpose of measuring the expected credit loss for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. Further, a large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively depending on their significance. Individual trade receivables are written off when management deems them not to be collectible on assessment of facts and circumstances. Refer note15.

III. Financial assets measured at FVOCI

Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in statement of profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to statement of profit and loss and recognized in other (gains)/losses (net). Interest income from these financial assets is included in other income using the effective interest rate method.

ii. Financial liabilities

Subsequent measurement

All financial liabilities are subsequently measured at amortized cost using the EIR method or at FVTPL.

a) Financial liabilities at amortized cost

After initial recognition, interest-bearing borrowings and other payables are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized 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 amortization is included as finance costs in the Statement of Profit and Loss.

b) Financial liabilities at FVTPL

Financial liabilities are classified as FVTPL when the financial liabilities are held for trading or are designated as FVTPL on initial recognition. 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. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the profit or loss.

De-recognition

A financial liability is de-recognized when the obligation under the liability is discharged or cancelled or expires. In case, 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 recognized in Statement of Profit and Loss.

iii. Derivative financial instruments

The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to manage its foreign currency risks and interest rate risks, respectively. These derivative instruments are not designated as cash flow, fair value or net investment hedges and are entered into for period consistent with currency and interest exposures. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. 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 the Statement of Profit and Loss.

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 a stand-alone derivative instrument. 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 interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

If the hybrid contract contains a host that is a financial asset within the scope of Ind AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss, unless designated as effective hedging instruments.

iv. Offsetting 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 recognized amounts and there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

r) Fair value measurement

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 is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

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

- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) (a) on the date of the event or change in circumstances that caused the transfer or (b) at the end of each reporting period or (c) at the beginning of each reporting period.

s) Dividend distribution to equity holders

Dividends paid / payable along with applicable taxes are recognized when it is approved by the shareholders. In case of interim dividend, it is recognized when it is approved by the Board of Directors and distribution is no longer at the discretion of the Company. A corresponding amount is accordingly recognized directly in equity.

t) Earnings per share

The earnings considered in ascertaining the Company''s Earnings per share (EPS) is the net profit after tax.

EPS is disclosed on basic and diluted basis. Basic EPS is computed by dividing the profit / loss for the period attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period. The diluted

EPS is calculated on the same basis as basic EPS, after adjusting for the effects of potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

u) Onerous Contract

An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.

If the Company has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before a separate provision for an onerous contract is established, the Company recognizes any impairment loss that has occurred on assets dedicated to that contract.

v) Provisions and Contingent Liabilities

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a 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 Profit and 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 recognized as a finance cost.

i. Asset Retirement Obligation (ARO)

ARO is provided for those lease arrangements where the Company has a binding obligation to restore the said location / premises at the end of the period in a condition similar to inception of the arrangement. The restoration and decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of the particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the Statement of Profit and Loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.

ii. Contingent Liabilities

A Contingent Liability is disclosed where there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Contingent Assets are not recognized.

w) Business Combinations

Business Combinations are accounted for using Ind AS 103 ''Business Combination''. Acquisitions of businesses are accounted for using the acquisition method unless the transaction is between entities under common control.

Business Combinations arising from transfer of interests in entities that are under common control, are accounted using pooling of interest method wherein, assets and liabilities of the combining entities are reflected at their carrying value. No adjustment is made to reflect fair values, or recognize any new assets or liabilities other than those required to harmonies accounting policies. The identity of the reserves is preserved and appears in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor.

6. USE OF ESTIMATES, ASSUMPTIONS AND JUDGMENTS

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require an adjustment to the carrying amount of assets or liabilities in future periods. Difference between actual results and estimates are recognized in the periods in which the results are known / materialise.

The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Estimates and Assumptions

i. Share-based payments

The Company initially measures the cost of equity-settled transactions with employees using Black & Scholes model to determine the fair value of the liability incurred. Share issued by Vodafone Group Pic., is measured by deducting the present value of expected dividend cash flows over the life of the awards from the share price as at the grant date. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. Vesting conditions, other than market conditions i.e. performance based condition are not taken into account when estimating the fair value. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 53.

ii. Taxes

The respective companies provide for tax considering the applicable tax regulations and based on reasonable estimates.

Management periodically evaluates positions taken in the tax returns giving due considerations to tax laws and establishes provisions in the event if required as a result of differing interpretation or due to retrospective amendments, if any.

Deferred tax asset (DTA) is recognized only when and to the extent there is convincing evidence that the respective companies will have sufficient taxable profits in future against which such assets can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies, recent business performance and developments.

Minimum alternative tax (MAT) is recognized as an asset only when and to the extent there is convincing evidence that the respective companies will pay normal income tax and will be able to utilize such credit during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the Statement of Profit and loss and is included in Deferred Tax Assets. The respective companies review the same at each Balance Sheet date and if required, writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that respective companies will be able to absorb such credit during the specified period.

To ensure that there is convincing evidence that the respective companies will have sufficient taxable profits, the Company has used 10 years projections. A terminal growth rate consistent with the long-term average growth rate of the industry and internal / external sources of information has been used for extrapolating cash flows beyond the planning period of 5 years. Further details about taxes refer note 57 and 58.

iii. Defined benefit plans (gratuity and compensated absences benefits)

The Company''s obligation on account of gratuity and compensated absences is determined based on actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature, these liabilities are highly sensitive to changes in these assumptions.

All assumptions are reviewed at each reporting date. The parameter subject to frequent changes is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables in India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Further details about gratuity obligations are given in note 54(A).

iv. Allowance for Trade receivable

For the purpose of measuring the expected credit loss for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. Further, a large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively depending on their significance. Individual trade receivables are written off when management deems them not to be collectible on assessment of facts and circumstances. Refer note 15.

v. Useful life of Property, Plant and Equipment

The useful life to depreciate property, plant and equipment is based on technical obsolescence, nature of assets, estimated usage of the assets, operating conditions of the asset, and manufacturers'' warranties, maintenance and support period, etc. The charge for the depreciation is derived after considering the expected residual value at end of the useful life.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed by the management at each financial year end and adjusted prospectively, if appropriate. Further details about property, plant and equipment are given in note 8.

vi. Impairment of Non-financial assets

Non-financial assets i.e. Property, Plant and Equipment (including CWIP) and Intangible assets (including Intangible assets under development) are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. 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). The recoverable amount is the fair value less costs of disposal calculated based on available information and sensitive to the discount rate, valuation techniques, expected future cash inflows and the growth rate. Refer note 65.

vii. Operating lease commitments - Company as lessee

The Company has entered into lease agreements for properties and cell sites. The classification of the leasing arrangement as a finance lease or operating lease is based on the evaluation of several factors including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee''s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the assets'' economic life, proportion of present value of minimum lease payment to fair value of lease asset and extent of specialized nature of the leased asset. Lease arrangements where the significant risks and rewards related to properties and cell sites are retained with the lessors, are accounted for as operating leases. Refer note 46(a) for further details about operating lease.

viii. Provisions and Contingent Liabilities

Provisions and contingent liabilities are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Evaluations of uncertain provisions and contingent liabilities and assets requires judgment and assumptions regarding the probability of realization and the timing and amount, or range of amounts, that may ultimately be incurred. Such estimates may vary from the ultimate outcome as a result of differing interpretations of laws and facts. Refer Note 45 for further details about Contingent liabilities.

7. NEW ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED ON OR AFTER APRIL 1, 2019.

a. Ind AS 116- Leases

Ind AS 116 on Leases has been notified by the Ministry of Corporate Affairs on March 30, 2019 and is applicable from April 1, 2019. Ind AS 116 will replace Ind AS 17, the existing lease standard. The revised standard sets out the principles for recognition, measurement, presentation and disclosure of leases. It requires the lessee to recognize assets and liabilities for all leases with a few exemptions / exceptions. However, there is no major change in accounting by the less or. The rights and obligations related to operating leases will now have to be recognized as assets (right-of-use asset) and liabilities (lease liability) in the Balance sheet of lessee vis-a-vis a disclosure requirement of future minimum lease payments as per the current standard. This may result in a significant increase in the Company''s Total Assets and Lease Liability. Currently, the lease rentals for Operating Leases are charged to Statement of Profit & Loss as operating expenses. Going forward, the Right of Use Asset will be amortized over the lease period.

The Company is currently in the process of evaluating the effects of this standard on the financial statements.

b. Amendment to Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments

The amendment provides clarification on the uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit / (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The standard permits two possible methods of transition -

i) Full retrospective approach - Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8

- Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and

ii) Retrospectively with cumulative effect of initial application of Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.

The amendment is applicable from April 1, 2019. The Company is in process of evaluating the effects of this amendment on the financial statements.

c. Amendment to Ind AS 12 ''Income Tax''

The amendment clarifies that the income tax consequences of dividends including payments on financial instruments classified as equity, are linked more directly to past transactions or events that generated distributable profits rather than to distribution of such amounts to owners. Therefore, an entity shall recognize the income tax consequences of dividends in the Statement of Profit and Loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

The amendment is applicable from April 1, 2019 and has no impact on the financial statements.

d. Amendment to Ind AS 23 ''Borrowing Costs''

The amendment clarifies that for computing general rate of borrowed funds, an entity should exclude specific borrowing for obtaining a qualifying asset, only until the asset is ready for its intended use or sale. Borrowing costs (related to specific borrowings) that remains outstanding after the related qualifying asset is ready for use or sale should subsequently be considered as part of general borrowing costs of the entity. The amendment is applicable from April 1, 2019 and has no impact on the financial statements.

e. Amendment to Ind AS 19 ''Employee Benefits''

The amendment clarifies that when a defined benefit plan is amended, curtailed or settled during a reporting period, the entity would be required to use updated actuarial assumptions to determine its current service cost and net interest for the remainder of the period after the plan amendment, curtailment or settlement.

The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or loss.

An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in other comprehensive income.

The amendment is applicable from April 1, 2019 and has no significant impact on the Company''s financial statements.

f. Amendment to Ind AS 109 ''Financial Instruments''

The amendment clarifies that an exception has been prescribed to the classification and measurement requirements with respect to the SPPI criterion i.e. the contractual cash flows are ''solely payments of principal and interest on the principal amount outstanding'' for financial asset or a debt instrument which:

i. have a prepayment feature that results in negative compensation

ii. apart from the prepayment feature other features of financial assets would have contractual cash flows which would meet the SPPI criteria and

iii. The fair value of the prepayment feature is insignificant when the entity initially recognizes the financial asset. (If it Is impracticable to assess based on facts and circumstances that existed on initial recognition, then exception would not be available)

Such financial assets or debt instrument could be measured at amortized cost or at FVOCI based on business model within which they are held.

The amendment is applicable from April 1, 2019 and has no significant impact on the Company''s financial statements.

g. Amendment to Ind AS 103 Business Combination

The amendment clarifies that, when a party to a joint arrangement obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including re-measuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer re-measures its entire previously held interest in the joint operation.

These amendments will apply to business combinations for which acquisition date is on or after April 1, 2019. Currently the same are not applicable to the Company, but may apply to future transactions.

Footnotes:

1. Plant and machinery includes gross block of assets capitalized under finance lease Rs,19,115 Mn (March 31, 2018: Rs,11,859 Mn) and corresponding accumulated depreciation being Rs,14,540 Mn (March 31, 2018: Rs,8,431 Mn). Additions in plant and machinery during the year includes gross block of assets capitalized under finance lease Rs,2,119 Mn (March 31, 2018: Rs,2,061 Mn) and corresponding accumulated depreciation being Rs,204 Mn (March 31, 2018: Rs,228 Mn).

2. Refer note 24(a) for assets pledged as securities towards funded and non-funded facilities.

3. Net foreign exchange loss/ (gain) amounting to Rs,397 Mn capitalized during the year (March 31, 2018: '' (192) Mn recapitalized).

4. Disposal/ adjustment include accelerated depreciation charge of Rs,5,589 Mn (March 31, 2018: '' Nil) on account of network re-alignment and integration cost and disclosed under exceptional items.

Footnotes:

1. Computer - software includes gross block of assets capitalized under finance lease Rs,5,507 Mn (March 31, 2018: Rs,3,795 Mn) and corresponding accumulated amortization being Rs,4,394 Mn (March 31, 2018: Rs,2,363 Mn). Additions in computer -software includes gross block of assets capitalized under finance lease Rs,677 Mn (March 31, 2018: Rs,863 Mn) and corresponding accumulated amortization being Rs,181 Mn (March 31, 2018: Rs,167 Mn).

2. Interest amounting to Rs,2,548 Mn (March 31, 2018: Rs,3,244 Mn) has been capitalized during the year.

3. Entry/ license fee and spectrum gross block ''46,283 Mn and Net block Rs,38,261 Mn range from 2.5 year to 8.4 year and Entry/ license fee and spectrum gross block Rs,1,416,010 Mn and Net block Rs,1,186,877 Mn range from 11 year to 18.5 year (March 31, 2018 : gross block Rs,2,236 Mn and Net block Rs,1,489 Mn range from 3.5 year to 9.5 year and Entry/ license fee and spectrum gross block Rs,605,757 Mn and Net block Rs,536,888 Mn range from 12 year to 18.5 year).

4. Refer note 24(a) for computer software pledged as securities towards funded and non-funded facilities.

5. Brand Includes Rs,25,945 Mn paid by VMSL and VInL on July 20, 2018 for using Vodafone brand in accordance of the terms of agreement for the period of 15 years.

6. Intangible Assets under development as at March 31, 2019 is Rs,27,443 Mn (March 31, 2018: Rs,29,340 Mn). Addition pursuant to amalgamation of VMSL and VInL with the Company (refer note 3) of Rs,100,939 Mn (including interest of Rs,8,321 Mn), amount added during the year Rs,5,334 Mn (including interest of Rs,2,548 Mn), and amount capitalized during the year of Rs,108,170 Mn (including interest of Rs,10,249 Mn). As of March 31, 2019 intangible assets under development include interest amounting to Rs,3,695 Mn (March 31, 2018: Rs,3,075 Mn).

* Numbers are below one million under the rounding off convention adopted by the Company and accordingly not reported.

(1) As at March 31, 2019, the Company has pledged 43,376 equity shares of Indus held by the Company as security against the short term loan of Rs,30,318 Mn. Such pledge is executed by the Company as first ranking exclusive charge in favour of Security trustee for the benefit of the lender and its successor. Subsequent to the balance sheet date, such pledge has been released following the repayment of the short term loan on May 08, 2019.

(2) Pursuant to amalgamation of VMSL and VInL with the Company (refer note 3).

(3) The Company assessed the expected cash flows and future plans of all its subsidiary Companies upon merger of VMSL and VinL with the Company and accordingly, recorded a provision for impairment of Rs,4,300 Mn and Rs,2,143 Mn for investment in Mobile Commence Solution Limited and in You Broadband India Limited respectively.

(1) Pursuant to amalgamation of VMSL and VInL with the Company, authorized share capital Rs,170,180 Mn of Transferor Company 1 (Vodafone Mobile Services Limited) and Rs,50,000 Mn of Transferor Company 2 (Vodafone India Limited) stand transferred as authorized share capital of the Company (refer note 3).

(1) These shares are allotted as fully paid up pursuant to amalgamation of VMSL and VInL with the Company without payment being received in cash.

(b) Terms/ rights attached to issued, subscribed and paid up equity shares

The Company has only one class of equity shares having par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(1) The percentage of shareholding as at March 31, 2019 is less than 5% and hence not included above.

(d) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option scheme. (refer note 53)

(1) Capital reserve comprises of capital receipt, received as compensation from an erstwhile Joint Venture partner for failure to subscribe in the equity shares of VInL in earlier years and indemnity liability (refer note 3(C)) and pursuant of merger of ABTL with the Company.

(2) Capital reduction reserve was created by VInL on distribution of share of VInL in Indus to share holders of VInL in accordance with capital reduction scheme. This reserve is not available for distribution as dividend.

(3) The Company was creating Debenture Redemption Reserve (DRR) till March 31, 2018 in accordance with the Companies Act, 2013. However, the reserve available for payment of dividend has turned to a negative value pursuant to amalgamation of VMSL and VInL into the Company. The Company has incurred losses during the current year. Accordingly, the Company is not required to create any further DRR as per the Act and hence no DRR has been created during the year ended March 31, 2019.

(4) The Company has accounted for the merger of VInL and VMSL with the Company under ''pooling of interest'' method. Consequently, investment of VInL in VMSL, share capital of VInL and VMSL has been cancelled. The difference between the face value of shares issued by the Company and the value of shares and investment so cancelled has been recognized in Amalgamation Adjustment Deficit Account. From utilization perspective, this is an unrestricted reserve.

(5) Not available for distribution as dividend.

(ii) The Company has also provided charge against certain assets of the Company for availing non-fund based facility towards bank guarantees/ letter of credit including guarantee to DoT with respect to deferred payment liabilities towards spectrum, one time spectrum charges and various performance/ roll out obligations. The details of the same are as below:

- First Pari Passu charge on present and future moveable and current assets of the Company amounting to Rs,20,000 Mn (March 31, 2018: Nil) and outstanding facility against such security is Rs,20,000 Mn (March 31, 2018: Nil)(1).

- Second pari passu charge on present and future moveable and current assets of the Company amounting to Rs,1 1 1,750 Mn (March 31, 2018: Rs,32,500 Mn) and outstanding facility against such security is Rs,94,095 Mn (March 31, 2018: Rs,32,500

Mn)(1).

- Second pari passu charge on present and future moveable assets of the Company amounting to Rs,402 Mn (March 31, 2018: Rs,19,750 Mn) and outstanding facility against such security is Rs,402 Mn (March 31, 2018: Rs,19,750 Mn)(1).

(1) Security offered does not cover properties/ assets acquired pursuant to amalgamation of VMSL and VInL with the Company.

(1) Some of the Company''s loans are subjected to covenant clauses, whereby the Company is required to meet certain specified financial ratios. The Company has not met certain financial ratios for some of these arrangements, the gross outstanding amount for which as at March 31, 2019 was Rs,158,443 Mn. Waivers for loans of Rs,55,596 Mn has been received as of reporting date and the balance Rs,102,802 Mn has been re-classified from non-current borrowings to current maturities of long term debt. The unamortized arrangement fees on such borrowings of ''743 Mn has been charged in statement of profit and loss. As on the reporting date, none of the banks have approached for early repayment and the Company is confident that this will not result in any acceleration of repayment.

Source : Dion Global Solutions Limited
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