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i) Contingent liabilities
Amal Ltd has contingent liabilities for pending lawsuits pertaining to sales tax where it is a defendant (
`
0.56 cr) and
unsecured creditors whose 70% of the outstanding principal amounts were not paid earlier under the revival scheme
(
`
0.42 cr).
The sales tax claim is on account of a tax position that is challenged by the assessing authorities. It is not possible to
estimate by when the courts will reach a decision on this case and neither the amount can be reliably measured. The
potential undiscounted amount of all future payments that the Group may be required to make if there was an adverse
decision related to the lawsuit (which is estimated to be
`
0.56 cr) continues to be disclosed as a contingent liability. As
at March 31, 2017, there has been no change in the amount of contingent liability as compared to the acquisition date
that is December 01, 2016.
In case of unsecured creditors, certain suppliers and contractors had declined to accept a 70% reduction in their
outstanding receivable balance offered in the debt rehabilitation scheme of Amal Ltd. The company is required to pay
these unpaid outstanding amounts only on its revival in line with the package of the scheme. Since the Group considers
the revival of the company not yet probable, it considers these outstanding amounts as not probable obligation at
present. These amounts being reliably measurable are recognised as part of assumed liabilities at their undiscounted
unpaid amount that approximates its fair value.
ii) Acquired receivables
The gross contractual amounts of acquired receivables pertain to:
a) Trade receivables of
`
1.33 cr
b) Other financial assets comprising security deposits, interest accrued on time deposits and others assets of
`
0.39 cr
c) Non-current assets comprising receivables from the Government, income tax receivable and capital advances of
`
0.13 cr
d) Other current assets comprising amounts receivables from Government, prepaid expenses and advances to suppliers
of
`
0.32 cr
The fair value of these assets approximates their fair value.
iii) Accounting policy choice for non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the proportionate share
of non-controlling interests in net identifiable assets of the acquired entity. The Group has elected to recognise the
non-controlling interests at its fair value on the acquisition date using a quoted price (unadjusted) in an active market
accessible at the acquisition date.
iv) Revenue and profit contribution
The acquired business contributed revenues and profits to the Group for the period of December 01, 2016 to March 31,
2017 as follows:
Revenue:
`
8.09 cr
Profit:
`
0.39 cr
If the business combination had occurred on April 01, 2016, the consolidated pro-forma revenue and profit of the Group
for the year ended March 31, 2017 may have been:
Revenue:
`
28.67 cr
Profit:
`
8.89 cr
These amounts have been calculated using the subsidiary company results and adjusting them for:
1) differences in the Accounting Policies between the Group and the subsidiary company,
2) the additional depreciation and amortisation that will be charged assuming the fair value adjustments to property,
plant and equipment and intangible assets had applied from April 01, 2016, together with the consequential tax
effects and
3) elimination of intercompany transactions.
v) Deferred tax impact on business combination
Refer Note 29.5(g) for deferred tax impact on business combination.
vi) Transactions that are recognised separately from the acquisition of assets and liabilities
The Group has identified certain pre-existing balances namely trade receivables of Amal Ltd and trade payables of Atul
Ltd, 0% Redeemable Preference Shares held by Atul Ltd in Amal Ltd, interest free loan given by Atul Ltd to Amal Ltd
pursuant to BIFR order etc. These balances are now inter-company and hence eliminated on acquisition as they are
from Group perspective
'
settled'. There is no settlement gain | (loss) identified on this elimination. Atul Ltd and Amal
Ltd have transactions with each other which are accounted for as per the Accounting Standards applicable to those
transactions. Refer Note 29.4 for the description of those transactions, amounts recognised for such transactions and
their classification in the Consolidated Financial Statements.
Notes
to the Consolidated Financial Statements