Annual Report 2016-17

Notes forming part of onancial statements (Contd.)

246

•

Derecognition

The Company derecognises onancial liabilities when the Company’s obligations are discharged, cancelled or

have expired. The difference between the carrying amount of the onancial liability derecognised and the

consideration paid and payable is recognised in proot or loss.

iii) Impairment

i) Financial assets

The Company applies Expected Credit /oss (EC/) model for measurement and recognition of impairment

loss on onancial assets measured at amortized cost and onancial assets that are debts instruments and

are measured at fair value through other comprehensive income (FVTOCI). EC/ is the difference between

contractual cash pows that are due and the cash pows that the Company expects to receive, discounted

at the original effective interest rate.

For trade receivables, the Company recognizes impairment loss allowance based on lifetime EC/ at each

reporting date, right from its initial recognition. For other onancial assets, the Company determines

whether there has been a signiocant increase in the credit risk since initial recognition. If credit risk has

not increased signiocantly, 12 month EC/ is used to provide for impairment loss. However, if credit risk has

increased signiocantly, lifetime EC/ is used.

ii) Non-onancial assets

The carrying amounts of Property, Plant and Equipment and Goodwill are reviewed at each balance

sheet date or whenever there is any indication of impairment based on internal/external factors. If any

indications exist, the Company estimates the asset’s recoverable amount.

Recoverable amount of intangible under development that is not yet available for use is estimated at

least at each onancial year end even if there is no indication that the asset is impaired.

An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable

amount. The recoverable amount is the greater of the asset’s fair value and its value in use. In assessing

value in use, the estimated future cash pows are discounted to their present value using a pre-tax discount

rate that repects current market assessments of the time value of money and risks specioc to the asset.

(f) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of

borrowings.

Borrowing costs directly attributable to the acquisition, construction or development of an asset that necessarily

takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the

respective asset. All other borrowing costs are expensed in the year they occur.

(g) Leases

Where the Company is a lessee

/eases, where the lessor effectively retains substantially all the risks and beneots of ownership of the leased item,

are classioed as operating leases.

Operating lease payments are recognized as an expense in the statement of proot and loss as per the terms of the

lease agreements.

(h) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable taking into account the amount of

any trade discounts and volume rebates allowed by the Company. Revenue is recognized to the extent it is probable

that the economic beneots will pow to the Company and the revenue can be reliably measured. The following

specioc recognition criteria must also be met before revenue is recognized: