FUTURE INDO COUNT Accounting Policy

1. CORPORATE INFORMATION


Indo Count Industries Limited (the ''''Company'''') is a limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at Office No.1, Plot No.266, Village Alte, Kumbhoj Road, Taluka Hatkanagale, Dist. Kolhapur-416109, Maharashtra, India.


The Company is a one of the India''''s Home Textiles manufacturer. The Company has focused in some of the world''''s finest fashion, institutional and utility bedding and has built significant presence across the globe. It exports to more than 54 countries.


The Financial statements of the Company for the year ended 31st March 2017 were authorized for issue in accordance with a resolution of the Board of Directors on 15th May 2017.


2. BASIS OF PREPARATION


Ministry of Corporate Affairs notified roadmap to implement Indian Accounting Standards (''''Ind AS'''') notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016. As per the said roadmap, the company is required to apply Ind AS starting from financial year beginning on or after 1st April,


2016. Accordingly, the financial statements of the Company have been prepared in accordance with the Ind AS.


For all periods up to and including the year ended 31st March, 2016, the Company prepared its financial statements in accordance with the Accounting Standards notified under the section 133 of the companies Act 2013, read together with Companies (Accounts) Rules 2014 (Indian GAAP). These financial statements for the year ended 31st March, 2017 are the first the company has prepared in accordance with Ind AS (Refer Note 49 for information on how the Company has adopted Ind AS).


The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:


- Derivative financial instruments,


- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)


The financial statement are presented in Indian Rupees (''''INR'''') and all values are rounded to the nearest lakhs, except otherwise indicated.


3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Property, plant and equipment:


As on 1st April, 2015 “transition date”, the company opted to continue with the carrying value for all of its Property, plant and equipment as recognized in its previous GAAP financials as deemed cost. Accordingly, revaluation reserve standing in books as on transition date transferred to retained earnings. Gross block, accumulated depreciation and WDV amounts of revalued assets are added to cost of respective class of assets. After transition to IND-AS, company opted to follow cost model.


Property, plant and equipment are stated at original cost inclusive of incidental expenses related to acquisition net of tax / duty credit availed, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.


Capital work-in-progress includes cost of property, plant and equipment under installation / under development as at the balance sheet date.


Depreciation on the property, plant and equipment


derecognition.


3.3 Intangible Assets


Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.


The useful lives of intangible assets are assessed as either finite or indefinite.


Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss.


Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.


Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.


Research and Development Cost:


Research costs are expensed as incurred.


Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:


- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale


- Its intention to complete and its ability and intention to use or sell the asset


- How the asset will generate future economic benefits


- The availability of resources to complete the asset


- The ability to measure reliably the expenditure during development


Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is mortised over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss.


During the period of development, the asset is tested for impairment annually.


Patents and Trade Marks:


The Company made upfront payments to purchase patents and trade-marks. The patents have been granted for a period of 20 years by the relevant agency with the option of renewal at the end of this period. Trade-marks for the use of intellectual property are granted for a period of 10 years with the option of renewal at the end of this period.


A summary trade-marks of the policies applied to the Company''''s intangible assets is, as follows:


3.4 Borrowing costs


Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.


Borrowing costs directly attributable to the acquisition, construction or production 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 asset. All other borrowing costs are expensed in the period in which they occur.


3.5 Impairment of non-financial assets:


As at each balance sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized in the previous periods. If any indication exits or when annual impairment testing for an asset is required, if any, the Company determines the recoverable amount and impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.


Recoverable amount is determined:


- In the case of an individual asset, at the higher of the fair value less cost to sell and the value in use; and


- In the case of cash generating unit (a group of assets that generates identified, independent cash flows) at the higher of the cash generating unit''''s fair value less cost to sell and the value in use.


In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. In determining fair value less cost of disposal, recent market transaction are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculation are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.


The company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.


Impairment losses of continuing operations, including impairment on inventories, are recognized in profit and loss section of the statement of profit and loss, except for properties previously revalued with the revaluation taken to other Comprehensive Income (the OCI) For Such properties, the impairment is recognized in OCI up to the amount of any previous revaluation.


3.6 Inventories


Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition is accounted for as follows:


a) Raw material, packing material, construction material, stores & spares:


Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.


b) Finished goods and work in progress:


Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.


c) Traded goods:


Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.


d) Wastage and rejections are valued at estimated realizable value.


Slow and non-moving material, obsolesces, defective inventories are duly provided for and valued at net realizable value. Goods and materials in transit are valued at actual cost incurred up to the date of balance sheet. Materials and supplies held for use in the production of inventories are not written down if the finished products in which they will be used are expected to be sold at or above cost.


Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.


3.7 Cash and cash equivalents


Cash and cash equivalents comprise cash on hand and demand deposits with banks which are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.


3.8 Foreign currency transactions


The Company''''s financial statements are presented in INR, which is also the Company''''s functional currency.


Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate at the date of the transaction. At each balance sheet date, foreign currency monetary items are reported using the closing exchange rate. Exchange differences that arise on settlement of monetary items or on reporting at each balance sheet date of the Company''''s monetary items at the closing rate are recognized as income or expenses in the period in which they are arise. Non-monetary items which are carried at historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on transaction of non-monetary items is recognized in line with the gain or losses of the item that gave arise to the translation difference (i.e. translation differences on items whose gain or loss is recognized in other comprehensive income or the statement of profit and loss is also recognized in other comprehensive income or the statement of profit and loss respectively).


3.9 Current versus non-current classification


The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset as current when it is:


- Expected to be realized or intended to sold or consumed in normal operating cycle


- Held primarily for the purpose of trading


- Expected to be realized within twelve months after the reporting period, or


- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period


All other assets are classified as non-current.


A liability is current when:


- It is expected to be settled in normal operating cycle


- It is held primarily for the purpose of trading


- It is due to be settled within twelve months after the reporting period, or


- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period


The Company classifies all other liabilities as noncurrent. Deferred tax assets and liabilities are classified as non-current assets and liabilities.


3.10 Fair value measurement


The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:


- In the principal market for the asset or liability, or


- In the absence of a principal market, in the most advantageous market for the asset or liability


The principal or the most advantageous market must be accessible by the Company.


The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.


A fair value measurement of a non-financial asset takes into account a market participant''''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.


The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.


All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:


- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities


- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable


- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable


For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.


For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.


3.11 Revenue Recognition


Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.


The specific recognition criteria described below must also be met before revenue is recognized.


Sale of goods:


Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.


Rendering of Services:


Revenue from sale of service is recognized as per terms of the contract with customers when the outcome of the transactions involving rendering of services can be estimated reliably.


Interest Income:


For all financial instruments measured at mortised cost, interest income is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in other income in the statement of profit and loss.


Dividends:


Revenue is recognized when the Company''''s right to receive the payment is established, which is generally when shareholders approve the dividend.


Lease Income:


Lease agreements where the risks and rewards incident to the ownership of an asset substantially vest with the less or are recognized as operating leases. Lease rentals are recognized on straight-line basis as per the terms of the agreements in the statement of profit and loss.


3.12 Government Grants


Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.


When the Company receives grants of nonmonetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset by equal annual installments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as a government grant. The loan or assistance is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.


3.13 Earnings per share


Basic earnings per share is calculated by dividing the profit from continuing operations and total profit, both attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period.


3.14 Taxes


Current Income Tax:


- Tax on income for the current period is determined on the basis on estimated taxable income and tax credits computed in accordance with the provisions of the relevant tax laws and based on the expected outcome of assessments / appeals.


- Current income tax relating to items recognized directly in equity and not in the statement of profit and loss. Management periodically evaluates position taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.


Deferred Tax:


Deferred Tax is provided using the balance sheet approach on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.


The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.


Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.


Deferred tax relating to items recognized outside the statement of profit and loss is recognized outside the statement of profit and loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.


Deferred Tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.


The break-up of the major components of the deferred tax assets and liabilities as at balance sheet date has been arrived at after setting off deferred tax assets and liabilities where the Company have a legally enforceable right to set off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws.


3.15 Segment accounting


The Chief Operational Decision Maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.


The operating segments have been identified on the basis of the nature of products / services.


a) Segment revenue includes sales and other income directly identifiable with / allocable to the segment including inter-segment revenue.


b) Expenses that are directly identifiable with / allocable to segments are considered for determining the segment result. Expenses which relate to the Company as a whole and not allocable to segments are included under unallowable expenditure.


c) Income which relates to the Company as a whole and allocable to segments is included in unallowable income.


d) Segment result includes margins on intersegment and sales which are reduced in arriving at the profit before tax to the Company.


e) Segment assets and liabilities include those directly identifiable with respective segments. Unallowable assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.


Inter-Segment transfer pricing


Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreed between the segments. Such transfer prices are either determined to yield a desired margin or agreed on a negotiated basis.


3.16 Leases


The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.


Finance leases that transfer substantially all of the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit and loss.


A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainly that the Company will obtain ownership by the end of the lease term, the asset is depreciated over shorter of the estimated useful life of the asset and the lease term.


Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by less or are classified as operating leases. Lease rentals are charges to the statement of profit and loss on straight line basis.


3.17 Employee benefits


i) Short-term employee benefits


All employee benefits payable only within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, etc. and the excepted cost of bonus, ex-gratia, and incentives are recognized in the period during which the employee renders the related service.


ii) Post-employment benefits


a) Defined contribution plans


State Government Provident Scheme is a defined contribution plan. The contribution paid / payable under the scheme is recognized in the statement of profit and loss during the period in which the employee renders the related services.


b) Defined Benefit Plans


The employee Gratuity Fund scheme and Leave Encashment scheme managed by different trusts are defined benefit plans.


The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each balance sheet date, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation.


Remeasurements, comprising of actuarial gain and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods. Past service cost is recognized in the statement of profit and loss in the period of plan amendment.


Net Interest is calculated by applying the discount rate to the net defined benefit liability or asset.


The Company recognizes the following changes in the net defined benefit obligation under employee benefit expenses in the statement of profit and loss.


- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements.


- Net interest expense or income.


Long-term employee benefit


Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the balance sheet date.


Termination benefits


Termination benefits are recognized as an expenses in the period in which they are incurred.


3.18 Provision, Contingent liabilities, Contingent assets and Commitments General


Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.


If the effect of the time value of money is material, provisions are discounted using a current pre- tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.


Contingent liability is disclosed in the case of:


- a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation;


- a present obligation arising from past events, when no reliable estimate is possible;


- a possible obligation arising from past events, unless the probability of outflow of resources is remote.


Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.


Provision, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.


Warranty Provisions


Provision for warranty-related costs are recognized when the product is sold or service provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.


Liquidated damages


Provision for liquidated damages are recognized on contracts for which delivery dates are exceeded and computed in reasonable manner.


Other Litigation claims


Provision for litigation related obligation represents liabilities that are expected to materialize in respect of matters in appeal.


Onerous contracts


A provision for onerous contracts is measured at the present value of the lower expected costs of terminating the contract and the expected cost of continuing with the contract. Before a provision is established, the Company recognizes impairment on the assets with the contract.


Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activates of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.


3.20Non-current assets held for sale and discontinued operations


Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.


Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit and loss.


Assets and liabilities classified as held for distribution are presented separately from other assets and liabilities in the balance sheet.


A disposal group qualifies as discontinued operation if it is a component of the Company that either has been disposed of, or is classified as held for sale and:


- represents a separate major line of business or geographical area of operations,


- is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations,


Or


- is a subsidiary acquired exclusively with a view to resale.


An entity shall not depreciate (or amortize) a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale.


3.21 Financial Instruments


i) Financial assets


Initial recognition and measurement All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.


Financial assets are classified, at initial recognition, as financial assets measured at fair value or as financial assets measured at mortised cost.


Subsequent measurement


For purposes of subsequent measurement, financial assets are classified in two broad categories:


- Financial asset at fair value


- Financial assets at mortised cost


Where assets are measured at fair value, gains and losses are either recognized entirely in the statement of profit and loss (i.e. fair value through profit or loss), or recognized in other comprehensive income (i.e fair value through other comprehensive income).


A financial asset that meets the following two conditions is measured at mortised cost (net of any write down for impairment) unless the asset is designated at fair value through profit or loss under the fair value option.


- Business model test: The objective of the Company''''s business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realize its fair value changes).


- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.


A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option.


- Business model test: The Financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.


- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.


Even if an instrument meets the two requirements to be measured at mortised cost or fair value through other comprehensive income, a financial asset is measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ''''accounting mismatch'''') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different basis.


All other financial asset is measured at fair value through profit or loss.


All Equity investments are measured at fair value in the balance sheet, with value changes recognized in the statement of profit and loss, except for those equity investments for which the entity has elected to present value changes in ''''other comprehensive income''''.


If an equity investment is not held for trading, an irrevocable election is made at initial recognition to measure it at fair value through other comprehensive income with only dividend income recognized in the statement of profit and loss.


Derecognition


A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognized (i.e. removed from the Company''''s statement of financial position) when:


- The rights to receive cash flows from the asset have expired, or


- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement and either;


a) The Company has transferred substantially all the risks and rewards of the asset, or


b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.


When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.


Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.


Investment in associates, joint venture and subsidiaries


The Company has accounted for its investment in associates, joint venture, and subsidiaries at cost.


Impairment of financial assets


The Company assesses impairment based on expected credit losses (ECL) model to the following:


- Financial assets measured at mortised cost;


- Financial assets measured at fair value through other comprehensive income (FVTOCI);


Expected credit losses are measured through a loss allowance at an amount equal to:


- The 12- months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or


- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).


The Company follows ''''simplified approach'''' for recognition of impairment loss allowance on:


- Trade receivables or contract revenue receivables; and


- All lease receivables


Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.


The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.


For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-months ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognize impairment loss allowance based on 12-months ECL.


For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increase in credit risk to be identified on a timely basis.


ii) Financial liabilities:


Initial recognition and measurement


All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.


The Company''''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.


Subsequent measurement


The measurement of financial liabilities depends on their classification, as described below:


Financial liabilities at fair value through profit or loss


Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.


Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.


Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.


Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied.


Loans and borrowings


After initial recognition, interest-bearing loans and borrowing are subsequently measured at mortised cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.


Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.


Financial guarantee contracts


Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.


Derecognition


A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms of an existing liability are substantially modified, such as exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability .The difference in the respective carrying amounts is recognized in the statement of profit and loss.


iii) Offsetting of financial instruments


Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.


iv) Derivative financial instruments and hedge accounting


The company enters into derivative contracts to hedge foreign currency / price risk on unexecuted firm commitments and highly probable forecast transactions. Such derivative financial instruments are initially recognized at fair value on the date on which a derivate contract is entered into and are subsequently premeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.


Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit and loss, expect for the effective portion of cash flow hedges, which is recognized in other comprehensive income and presented as a separate component of equity which is later reclassified to statement of profit and loss when the hedge item affects profit or loss.


3.22 Business combination under common control


Common control business combinations include transactions, such as transfer of subsidiaries or businesses, between entities within a group.


Business combinations involving entities or businesses under common control are accounted for using the pooling of interest method. Under pooling of interest, the assets and liabilities of the combining entities are reflected at their carrying amounts, the only adjustments that are made are to harmonies accounting policies.


The financial information in the financial statements in respects of prior periods are restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information is restated only from that date.


The difference, if any, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose in the notes.


3.23 Preference Shares


i) Non-convertible Preference Shares


On issuance of non-convertible preference shares, the fair value is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at mortised cost (net of transaction costs) until it is extinguished on conversion or redemption.


ii) Convertible Preference Shares


Convertible preference shares are separated into liability and equity components based on the terms of the contract.


On issuance of the convertible preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at mortised cost (net of transaction costs) until it is extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognized and included in equity. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not premeasured in subsequent years.


Transaction costs are apportioned between the liability and equity components of the convertible preference shares based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
“2019 © COPYRIGHT DYNAMIC EQUITIES PVT. LTD.”

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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