A provision is recognized when the Company has a present obligation as a result of past events and it isprobable that an outflow of resources will be required to settle the obligation in respect of which areliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to theirpresent value and are determined based on the best estimate required to settle the obligation at theBalance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the currentbest estimates.
Financial assets and financial liabilities are recognised when the Company becomes a party to thecontractual provisions of the instruments. Financial assets and financial liabilities are initially measuredat fair value. Transaction costs that are directly attributable to the acquisition or issue of financialassets and financial liabilities (other than financial assets and financial liabilities at fair value throughprofit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities,as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition offinancial assets or financial liabilities at fair value through profit or loss are recognised immediately inprofit or loss. Financial assets: All regular way purchases or sales of financial assets are recognised andderecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financialassets that require delivery of assets within the time frame established by regulation or convention inthe marketplace.
The financial assets are initially measured at fair value. Transaction costs that are directly attributableto the acquisition of financial assets are added to the fair value of the financial assets on initialrecognition.
(i) Financial assets (other than investments) are subsequently measured at amortised cost using theeffective interest method. Effective interest method is a method of calculating the amortised cost of adebt instrument and of allocating interest income over the relevant period. The effective interest rateis the rate that exactly discounts estimated future cash receipts (including all fees and points paid orreceived that form an integral part of the effective interest rate, transaction costs and other premiumsor discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period,to the net carrying amount on initial recognition. Investments in debt instruments that meet thefollowing conditions are subsequently measured at amortised cost
• the asset is held within a business model whose objective is to hold assets in order to collectcontractual cash flows; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solelypayments on principal and interest on the principal amount outstanding.
A financial asset is regarded as credit impaired when one or more events that may have a detrimentaleffect on estimated future cash flows of the asset have occurred. The Company applies the expectedcredit loss model for recognising impairment loss on financial assets (i.e. the shortfall between thecontractual cash flows that are due and all the cash flows (discounted) that the Company expects toreceive).
The Company derecognises a financial asset when the contractual rights to the cash flows from theasset expire, or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party. If the Company neither transfers nor retains substantially allthe risks and rewards of ownership and continues to control the transferred asset, the Companyrecognises its retained interest in the asset and an associated liability for amounts it may have to pay.On de-recognition of a financial asset in its entirety, the difference between the asset's carryingamount and the sum of the consideration received and receivable is recognised in the Statement ofprofit and loss.
The Company has applied the de-recognition requirements of financial assets prospectively fortransactions occurring on or after April 1, 2016 (the transition date).
Classification as debt or equity Debt and equity instruments issued by the Company are classified aseither financial liabilities or as equity in accordance with the substance of the contractualarrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity afterdeducting all of its liabilities. Equity instruments issued by a group entity are recognised at theproceeds received, net of direct issue costs.
All financial liabilities are subsequently measured at amortised cost using the effective interestmethod. The carrying amounts of financial liabilities that are subsequently measured at amortised costare determined based on the effective interest method. Interest expense that is not capitalised as partof costs of an asset is included in the "Finance Costs".
The effective interest method is a method of calculating the amortised cost of a financial liability and ofallocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments (including all fees and points paid or received that form anintegral part of the effective interest rate, transaction costs and other premiums or discounts) throughthe expected life of the financial liability, or (where appropriate) a shorter period, to the net carryingamount on initial recognition.
The Company derecognises financial liabilities when, and only when, the Company's obligations aredischarged, cancelled or have expired. An exchange between with a lender of debt instruments withsubstantially different terms is accounted for as an extinguishment of the original financial liability andthe recognition of a new financial liability. Similarly, a substantial modification of the terms of anexisting financial liability (whether or not attributable to the financial difficulty of the debtor) isaccounted for as an extinguishment of the original financial liability and the recognition of a newfinancial liability. The difference between the carrying amount of the financial liability derecognisedand the consideration paid and payable is recognised in profit or loss.
The Company has applied the de-recognition requirements of financial liabilities prospectively fortransactions occurring on or after April 1, 2016 (the transition date).
The preparation of financial statements in conformity with Ind AS requires the Company'sManagement to make judgments, estimates and assumptions about the carrying amounts of assetsand liabilities recognised in the financial statements that are not readily apparent from other sources.The judgements, estimates and associated assumptions are based on historical experience and otherfactors including estimation of effects of uncertain future events that are considered to be relevant.Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates (accounted on a prospective basis) and recognised in the period in which the estimate isrevised if the revision affects only that period, or in the period of the revision and future periods of therevision affects both current and future periods.
The following are the critical judgements and estimations that have been made by the Management inthe process of applying the Company's accounting policies and that have the most significant effect onthe amounts recognised in the financial statements and/or key sources of estimation uncertainty at theend of the reporting period that may have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year.
An inventory provision is recognised for cases where the realisable value is estimated to be lower thanthe inventory carrying value. The inventory provision is estimated taking into account various factors,including prevailing sales prices of inventory item, losses associated with obsolete / slow-moving /redundant inventory items. The Company has, based on these assessments, made adequate provisionin the books.