222 / 370
Statutory Reports
Corporate Overview
Financial Statements
F-18
(Standalone)
72nd Annual Report 2016-17
Financial liabilities at fair value through profit or loss:
Derivatives, including embedded derivatives separated from the host contract, unless they are
designated as hedging instruments, for which hedge accounting is applied, are classified into this category. These are measured at fair value with changes
in fair value recognized in the Statement of Profit and Loss.
Financial guarantee contracts:
These are initially measured at their fair values and, are subsequently measured at the higher of the amount of loss
allowance determined or the amount initially recognized less, the cumulative amount of income recognized.
Other financial liabilities:
These are measured at amortized cost using the effective interest method.
ii)
Determination of fair value:
The fair value of a financial instrument on initial recognition is normally the transaction price (fair value of the consideration given or received). Subsequent
to initial recognition, the Company determines the fair value of financial instruments that are quoted in active markets using the quoted bid prices
(financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for other instruments. Valuation techniques include
discounted cash flow method and other valuation models.
iii)
Derecognition of financial assets and financial liabilities:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability
for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company
continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
Financial liabilities are derecognised when these are extingushed, that is when the obligation is discharged, cancelled or has expired.
iv)
Impairment of financial assets:
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at amortized cost. Loss allowance in respect of financial
assets is measured at an amount equal to life time expected credit losses and is calculated as the difference between their carrying amount and the
present value of the expected future cash flows discounted at the original effective interest rate.
(u)
Hedge accounting
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable
forecast transactions. The Company designates these forward contracts in a cash flow hedging relationship by applying the hedge accounting
principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective
as hedges of future cash flows are recognized in other comprehensive income and the ineffective portion is recognized immediately in the Statement
of Profit and Loss. Amounts accumulated in equity are reclassified to the Statement of Profit and Loss in the periods in which the forecasted transactions
occurs.
Forward premium in forward contract are not considered part of the hedge. These are treated as cost of hedge and the changes in fair value attributable to
forward premium is recognized in the other comprehensive income along with the changes in fair value determined to be effective portion of the hedge.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
For forecast transactions, any cumulative gain or loss on the hedging instrument recognized in equity is retained there until the forecast transaction occurs.
If the forecast transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is immediately transferred to the Statement
of Pofit and Loss for the year.
(v)
Recent accounting pronouncements
New Accounting pronouncements affecting amounts reported and /or disclosures in the financial statements.
The Company has not applied the following revisions to Ind ASs that have been issued but are not yet effective. The Company is evaluating the impact of
these pronouncements on the financial statements:
i) Amendments to Ind AS 107 – Statements of Cash Flows
In March 2017, the Ministry of Corporate Affairs (MCA) issued amendments to Ind AS 107 - Statement of Cash Flows introducing additional disclosures that
will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is effective from April 1, 2017.
ii) Amendments to Ind AS 102 – Share-based Payments
In March 2017, the MCA issued amendments to Ind AS 102 – Share-based Payments that clarify how to account certain share-based payment transactions.
The amendments for:
Accounting requirements with respect to the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based
payments;
Accounting requirements with respect to share-based payment transactions with a net settlement feature for withholding tax obligations; and
Modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to
equity-settled.
The amendment is effective from April 1, 2017.
NOTES FORMING PART OF FINANCIAL STATEMENTS