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Atul Ltd | Annual Report 2017-18
Note 1 Significant Accounting Policies
(continued)
For investments in debt instruments, this will depend on the business model in which the investment is held. For investments
in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through Other Comprehensive Income.
Initial recognition and measurement:
Financial asset is recognised when the Company becomes a party to the contractual provisions of the instrument. Financial
asset is recognised initially at fair value plus, in the case of financial asset not recorded at fair value through profit or loss,
transaction costs that are attributable to the acquisition of the financial asset. Transaction costs of financial asset carried at
fair value through profit or loss are expensed in the Statement of Profit and Loss.
Subsequent measurement:
After initial recognition, financial asset is measured at:
i)
fair value {either through Other Comprehensive Income (FVOCI) or through profit or loss (FVPL)} or,
ii) amortised cost
Debt instruments:
Subsequent measurement of debt instruments depends on the business model of the Company for managing the asset
and the cash flow characteristics of the asset. There are 3 measurement categories into which the Company classifies its
debt instruments:
Measured at amortised cost:
Financial assets that are held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows that are solely payments of principal and interest, are subsequently measured at amortised cost
using the EIR method less impairment, if any, the amortisation of EIR and loss arising from impairment, if any is recognised
in the Statement of Profit and Loss.
Measured at fair value through Other Comprehensive Income (OCI):
Financial assets that are held within a business model whose objective is achieved by both, selling financial assets and
collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured at fair
value through OCI. Fair value movements are recognised in the OCI. Interest income measured using the EIR method and
impairment losses, if any are recognised in the Statement of Profit and Loss. On derecognition, cumulative gain | (loss)
previously recognised in OCI is reclassified from the equity to other income in the Statement of Profit and Loss.
Measured at fair value through profit or loss:
A financial asset not classified as either amortised cost or FVOCI, is classified as FVPL. Such financial assets are measured at
fair value with all changes in fair value, including interest income and dividend income if any, recognised as other income
in the Statement of Profit and Loss.
Equity instruments:
The Company subsequently measures all investments in equity instruments other than subsidiary companies, associate
company and joint venture company at fair value. The Management of the Company has elected to present fair value gains
and losses on such equity investments in Other Comprehensive Income, and there is no subsequent reclassification of these
fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments continue to be recognised
in profit or loss as other income when the right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in the Statement of Profit
and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported
separately from other changes in fair value.
Investments in subsidiary companies, associate company and joint venture company:
Investments in subsidiary companies, associate company and joint venture company are carried at cost less accumulated
impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed
and written down immediately to its recoverable amount. On disposal of investments in subsidiary companies, associate
company and joint venture company, the difference between net disposal proceeds and the carrying amounts are recognised
in the Statement of Profit and Loss.
Notes
to the Financial Statements