Annual Report 2016-17

Notes forming part of onancial statements (Contd.)

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Forward exchange contracts not intended for trading or speculation purposes, classioed as

derivative onancial instruments

As per the accounting principles laid down in Ind AS 109 – “Financial Instruments” relating to cash pow

hedges, derivative onancial instruments which qualify for cash pow hedge accounting are fair valued

at balance sheet date and the effective portion of the resultant loss / (gain) is debited / (credited) to

the hedge reserve under other comprehensive income and the ineffective portion is recognized to the

statement of proot and loss. Derivative onancial instruments are carried as forward contract receivable

when the fair value is positive and as forward contract payable when the fair value is negative.

Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognized

in the statement of proot and loss as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, or terminated, or

exercised, or no longer qualioes for hedge accounting. Any cumulative gain or loss on the hedging

instrument recognized under other comprehensive income under other comprehensive income is

transferred to the statement of proot and loss when the forecasted transaction occurs or affects proot or

loss or when a hedged transaction is no longer expected to occur.

Derecognition

The Company derecognises a onancial asset when the contractual rights to the cash pows from the asset

expire, or when it transfers the onancial asset and substantially all the risks and rewards of ownership of the

asset to another party.

On derecognition of a onancial asset in its entirety, the difference between the asset’s carrying amount and

the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised

in other comprehensive income and accumulated in equity, if any, is recognised in proot or loss.

ii) Financial liabilities

Initial recognition and measurement

Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to issue

of onancial liabilities (other than onancial assets and onancial liabilities at fair value through proot or loss)

are deducted from the fair value of the onancial liabilities on initial recognition. Transaction costs directly

attributable to the issue of onancial liabilities at fair value through proot or loss are recognised immediately

in proot or loss.

Subsequent measurement

For the purpose of subsequent measurement, onancial liabilities are classioed as:

- Financial liabilities at amortized cost

Financial liabilities such as loans and borrowings are subsequently measured at amortized cost using

the effective interest rate method. The change in measurements are recognized as onance costs in the

statement of proot and loss.

- Financial liabilities at fair value through proot or loss (FVTPL)

Financial liabilities include onancial liabilities held for trading and onancial liabilities designated upon

initial recognition as at fair value through proot or loss if the recognition criteria as per Ind AS 109

– “Financial Instruments” are satisoed. Gains or losses on liabilities held for trading are recognized in

statement of proot and loss. Fair value gains or losses on liabilities designated as FVTP/ attributable to

changes in own credit risk are recognized in other comprehensive income. All other changes in fair value

of liabilities designated as FVTP/ are recognized in the statement of proot and loss. The Company has not

designated any onancial liability as at FVTP/.