Atul Ltd Annual Report 2016-17

Atul Ltd | Annual Report 2016-17

Note 1 Significant Accounting Policies

(continued)

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases

of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred tax liabilities

are not recognised if they arise from the initial recognition of Goodwill. Deferred income tax is also not accounted for if it

arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of

the transaction affects neither accounting profit nor taxable profit | (tax loss). Deferred income tax is determined using tax

rates (and laws) that have been enacted or substantially enacted by the Balance Sheet date and are expected to apply when

the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that

future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of

investments in subsidiary companies, branches and associate company and interest in joint arrangements where the Group

is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not

reverse in the foreseeable future.

Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments

in subsidiary companies, branches and associate company and interest in joint arrangements where it is not probable that

the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary

difference can be utilised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities

and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset

where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset

and settle the liability simultaneously.

Current and deferred tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items

recognised in Other Comprehensive Income or directly in equity. In this case, the tax is also recognised in Other Comprehensive

Income or directly in equity, respectively.

f) Government grants:

Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant

will be received and the Group will comply with all attached conditions.

ii) Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as

deferred income and are credited to the Statement of Profit and Loss in proportion to depreciation over the expected

lives of the related assets and presented within other income.

iii) Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period

necessary to match them with the costs that they are intended to compensate and presented within other income.

g) Leases:

As a lessee:

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership

are classified as finance leases. Finance leases are capitalised at the inception of the lease at the fair value of the leased

property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance

charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the

liability and finance cost. The finance cost is charged to the Statement of Profit and Loss over the lease period so as to produce

a constant periodic rate of interest on the remaining balance of the liability for each period.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee

are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor)

are charged to Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments

are structured to increase in line with expected general inflation to compensate expected inflationary cost increases for

the lessor.

As a lessor:

Lease income from operating leases where the Group is a lessor is recognised as income on a straight-line basis over the

lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the

expected inflationary cost increases. The respective leased assets are included in the Balance Sheet based on their nature.

Under combined lease agreements, land and building are assessed individually. Lease rental attributable to the operating

lease are charged to the Statement of Profit and Loss as lease income whereas lease income attributable to finance lease is

recognised as finance lease receivable and recognised on the basis of effective interest rate.

Notes

to the Consolidated Financial Statements