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Atul Ltd | Annual Report 2017-18
Note 1 Significant Accounting Policies
(continued)
Deferred income tax is provided in full, 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 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 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 foreseable 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 Consolidated 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:
a) 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.
b) 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 Consolidated Statement of Profit and Loss in proportion to depreciation over
the expected lives of the related assets and presented within other income.
c) Government grants relating to income are deferred and recognised in the Consolidated 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 lease’s inception 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 Consolidated 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 the Consolidated 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 for the lessor’s expected
inflationary cost increases.
As a lessor:
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 Consolidated Balance Sheet based on their
nature.
Notes
to the Consolidated Financial Statements