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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 Consolidated Statement of Profit and Loss.
iv) Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
s) 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.
t) Derivatives and hedging activities:
The Group 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 on foreign currency exposures 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 Group 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 exchange gains or losses are included
in other income. Assets| liabilities in this category are presented as current assets | current liabilities if they are either
held for trading or are expected to be realised within 12 months after the Balance Sheet date.
ii) Cash flow hedge
The Group designates certain foreign exchange forward and options contracts as cash flows hedges to mitigate the
risk of foreign exchange exposure on firm commitment and highly probable forecast transactions. It designates certain
Interest Rate Swap as cash flows hedge to mitigate the risk of foreign exchange exposure on variable interest loans.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair
value of the derivative is recognised in Other Comprehensive Income and accumulated in the cash flows hedging
reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the net
profit in the Consolidated Statement of Profit and Loss. If the hedging instrument no longer meets the criteria for
hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold,
terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flows hedging
reserve till the period the hedge was effective remains in cash flows hedging reserve until the forecasted transaction
occurs. The cumulative gain or loss previously recognised in the cash flows hedging reserve is transferred to the
Consolidated Statement of Profit and Loss upon the occurrence of the related forecasted transaction.
If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flows hedging
reserve is reclassified to net profit in the Consolidated Statement of Profit and Loss.
u) Borrowings:
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised
in the Statement of Profit and Loss over the period of the borrowings using the effective interest method. Fees paid on the
establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
the Statement of Profit and Loss as other income | (expense).
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
Note 1 Significant Accounting Policies
(continued)
Notes
to the Consolidated Financial Statements