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109
Note 1 Significant Accounting Policies
(continued)
Impairment of financial assets:
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been
a significant increase in credit risk. Note 27.8 details how the Company determines whether there has been a significant
increase in credit risk.
For trade and lease receivable only, the Company applies the simplified approach permitted by Ind AS 109 Financial
Instruments, which requires expected lifetime losses to be recognised from initial recognition of such receivables.
Derecognition:
A financial asset is derecognised only when the Company has transferred the rights to receive cash flows from the financial
asset, the asset expire or retains the contractual rights to receive the cash flows of the financial asset, but assumes a
contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and
rewards of ownership of the financial asset. In such cases, the financial asset is derecognised through Statement of Profit
and Loss or Other Comprehensive Income as applicable. Where the Company has not transferred substantially all risks and
rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of
the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where
the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing
involvement in the financial asset.
Financial liabilities:
i)
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
ii) Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at the fair value.
iii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Financial
liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised
in the Statement of Profit and Loss.
iv) Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
p) Offsetting financial instruments:
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the assets
and settle the liabilities simultaneously.
q) Derivatives and hedging activities:
The Company holds derivative financial instruments such as foreign exchange forward, interest rate swaps, currency swaps
and currency options to mitigate the risk of changes in exchange rates or interest rate. The counterparty for these contracts
is generally a bank.
i)
Financial assets or financial liabilities, at fair value through profit or loss
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not
qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a
hedge, or is so designated, but is ineffective as per Ind AS 109, is categorised as a financial asset or financial liability,
at fair value through profit or loss.
Derivatives not designated as hedges are recognised initially at fair value and attributable transaction costs are
recognised in net profit in the Statement of Profit and Loss, when incurred. Subsequent to initial recognition, these
derivatives are measured at fair value through profit or loss and the resulting gains or losses are included in other
Notes
to the Financial Statements