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105
Notes
to the Financial Statements
Note 1 Significant Accounting Policies
(continued)
Minimum Alternate Tax (‘MAT’) under the provisions of the Income Tax Act, 1961 is recognised as current tax in the
Statement of Profit and Loss. The credit available under the Act in respect of MAT paid will be recognised as deferred tax
asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the
period for which the MAT credit can be carried forward for set off against the normal tax liability. Such an asset is reviewed
at each Balance Sheet date.
Deferred income tax is provided in full, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts. 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
substantively 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 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 Company 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 profit or 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.
e) Government grants:
i)
Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be
received and the Company 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 profit or 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.
f) Leases:
As a lessee:
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee
are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or 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:
Income from operating leases where the Company 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. Leases of
property, plant and equipment where the Company as a lessor has substantially transferred all the risks and rewards are
classified as finance lease. 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 rent receivables, net of interest income,
are included in other financial assets. Each lease receipt is allocated between the asset and interest income. The interest
income is recognised in 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 asset for each period.
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.
g) Property, plant and equipment:
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at acquisition cost net
of accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly