Apollo Micro Systems Ltd. நிறுவனத்தின் கணக்கியல் கொள்கைகள்

Mar 31, 2023

Significant accounting policies

3.1 Revenue recognition

Revenue from goods and services is recognized, when
the Company satisfies a performance obligation by
transferring a promised good or service to its customers.
The Company considers the terms of the contract and
its customary business practices to determine the
transaction price. Performance obligations are satisfied
at the point of time when the customer obtains controls
of the asset.

Revenue is measured based on transaction price, which is
the fair value of the consideration received or receivable,
stated net of discounts, returns and Goods & services
Tax. Transaction price is recognised based on the price
specified in the contract, net of the estimated sales
incentives/ discounts. Past trends are used to estimate
and provide for the discounts/right of return, using the
expected value method.

3.2 Leases

As a lessee, the Company mainly has lease arrangement
for buildings. The Company assesses whether a contract
is or contains a lease at inception of the contract. The
assessment involves the exercise of judgement about
whether there is an identified asset, whether the
Company has the right to direct the use of the asset
and whether the Company obtains substantially all the
economic benefits from use of that asset.

The Company recognise a right-of- use asset (ROU) and a
corresponding lease liability at the lease commencement
date. The lease liability is measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate can not be
readily determined, the Company uses the incremental
borrowing rate.

The ROU assets are initially recognised at cost, which
comprises the initial amount of the lease liability

adjusted for any lease payments made at or prior to
the commencement date of the lease plus any initial
direct costs less any lease initiatives. ROU assets are
amortised from the commencement date on a straight¬
line basis over the shorter of the lease term and useful
life of the underlying assets. ROU assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may
not be recoverable.

The lease liability is initially measured at amortised
cost at the present value of future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or if nor readily determinable,
using the incremental borrowing rate. Lease liabilities
are remeasured with a corresponding adjustments
to the related ROU asset if the Company changes its
assessment of whether it will exercise an extension or a
termination option.

3.3 Foreign currency transactions

Transaction in foreign currency are translated in functional
currency using the exchange rates prevailing at the
dates of the respective transactions. Foreign currency
monetary items, outstanding at the balance sheet date
are restated at year end rates. Non-monetary items are
measured in terms of historical cost in foreign currency
are not translated again. The exchange differences on
monetary items arising, if any are recognised in the
statement of Profit and loss in the period in which they
arise.

3.4 Taxation

Income tax expense consists of current and deferred tax.
Income tax expense is recognized in the statement of
Profit and loss except to the extent that it relates to items
recognized in the other comprehensive income or directly
in the equity, in which case the current and deferred
taxes are also recognised in other comprehensive income
or directly in equity.

Current tax

Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is recognized using the balance sheet
approach, providing for temporary differences between
the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes. Deferred tax assets and liabilities are
recognised for deductible temporary differences arising
between the tax base of the assets and liabilities and their
carrying amounts, except when the deferred income tax
arises from the initial recognition of an asset or liability
is a transaction that is not a business combination and
affects neither accounting nor taxable profit or loss at
the time of the transaction.

Deferred tax are recognised to the extent that it is
probable that taxable profit will be available, against
which the deductible temporary differences can be
utilised.

Deferred tax assets and liabilities are measured using
substantively enacted tax rates expected to apply to
taxable income in the years in which the temporary
differences are expected to be resolved or settled.

Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same tax authority
and the relevant entity intends to settle its current tax
assets and liabilities on a net basis.

Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.

3.5 Earnings per share

The Company presents basic and diluted earnings per
share ("EPS") data for its ordinary shares. The basic
earnings per share is computed by dividing the net profit
attributable to equity shareholders for the period by the
weighted average number of equity shares outstanding
during the year.

Diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year
relating to the dilutive potential equity shares, by the
weighted average number of equity shares considered
for deriving basic earnings per share and the weighted
average number of equity shares which could have been
issued on the conversion of all dilutive potential equity
shares. Potential equity shares are deemed to be dilutive
only if their conversion to equity shares would decrease

3.6 Property, plant and equipment (PPE)

Tangible assets and intangible assets

The initial cost of PPE comprises its purchase price,
including import duties and non-refundable purchase
taxes, and any directly attributable costs of bringing
an asset to working condition and location for its
intended use, including relevant borrowing costs and any
expected costs of decommissioning, less accumulated
depreciation and accumulated impairment losses, if any.
Expenditure incurred after the PPE have been put into
operation, such as repairs and maintenance, are charged
to the Statement of Profit and Loss in the period in which
the costs are incurred.

If significant parts of an item of PPE have different useful
lives, then they are accounted for as separate items
(major components) of PPE.

Material items such as spare parts, stand-by equipment
and service equipment are classified as PPE when they
meet the definition of PPE as specified in Ind AS 16 -
Property, Plant and Equipment.

Expenditure during construction period (including
financing cost related to borrowed funds for construction
or acquisition of qualifying PPE) is included under Capital
Work-in-Progress, and the same is allocated to the
respective PPE on the completion of their construction.
Advances given towards acquisition or construction of
PPE outstanding at each reporting date are disclosed
as Capital advances under "Other non-current
Assets".

3.7 Depreciation and amortisation

Depreciation is the systematic allocation of the
depreciable amount of PPE over its useful life and is
provided on a straight-line basis over the useful lives as
prescribed in Schedule II to the Act or as per technical
assessment.

Depreciable amount for PPE is the cost of PPE less its
estimated residual value. The useful life of PPE is the
period over which PPE is expected to be available for use
by the Company, or the number of production or similar
units expected to be obtained from the asset by the
Company.

The Company has componentised its PPE and has
separately assessed the life of major components.
In case of certain classes of PPE, the Company uses
different useful lives than those prescribed in Schedule
II to the Act. The useful lives have been assessed based
on technical advice, taking into account the nature of the
PPE and the estimated usage of the asset on the basis
of management''s best estimation of obtaining economic
benefits from those classes of assets.

3.8 Research and development

Expenditures on research activities undertaken with the
prospect of gaining new scientific or technical knowledge
and understanding are recognized in the statement of
profit and loss when incurred.

Development activities involve a plan or design for the
production of new or substantially improved products
and processes. Development expenditures are capitalized
only if development costs can be measured reliably;
the product or process is technically and commercially
feasible; future economic benefits are probable; and
the Company intends to and has sufficient resources to
complete development and to use or sell the asset.

Expenditure on research and development eligible
for capitalization are carried as tangible assets under
development where such assets are not yet ready for
their intended use.

The expenditures to be capitalized include the cost
of materials and other costs directly attributable
to preparing the asset for its intended use. Other
development expenditures are recognized as expense in
the statement of profit and loss as incurred.

Tangible assets relating to products in development are
subject to impairment testing at each reporting date. All
other tangible assets are tested for impairment when
there are indications that the carrying value may not
be recoverable. All impairment losses are recognized
immediately in the statement of profit and loss.

The amortization period and the amortization method
for tangible assets with a finite useful life are reviewed at
each reporting date.

3.9 Intangible assets

Intangible assets including software licenses of enduring
nature and contractual rights acquired separately are
measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less
accumulated amortisation and accumulated impairment
losses, if any. Cost comprises the purchase price and
any directly attributable cost of bringing the asset to its
working condition for its intended use.

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 amortisation period and
the amortisation 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 amortisation period or method, as appropriate, and
are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite
lives is recognised in the statement of profit and loss
unless such expenditure forms part of carrying value of
another asset.

Gains or losses arising upon 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
and loss when the asset is disposed.

3.10 Inventories

Inventories are valued as follows:

• Raw materials, fuel, stores & spare parts and packing
materials:

Valued at lower of cost and net realisable value
(NRV). However, these items are considered to be
realisable at cost, if the finished products, in which
they will be used, are expected to be sold at or above
cost. Cost is determined on weighted average basis.

• Work-in- progress (WIP), finished goods and stock-
in-trade:

Valued at lower of cost and NRV. Cost of finished
goods and WIP includes cost of raw materials, cost of
conversion and other costs incurred in bringing the
inventories to their present location and condition.
Cost of inventories is computed on weighted average
basis.

3.11 Cash and cash equivalents

Cash and cash equivalents in the Balance Sheet
comprise cash at bank and in hand and short-term
deposits with banks that are readily convertible into
cash which are subject to insignificant risk of changes
in value and are held for the purpose of meeting short¬
term cash commitments.

3.12 Impairment of financial and non financial assets

(i) Impairment of financial assets

Non-financial assets other than inventories,
deferred tax asset and non-current asset classified
as held for sale are reviewed at Balance sheet date
to determine whether there is any indication of
impairment. If any such indication exists, or when
annual impairment testing for an asset is required,
the Company estimates the asset recoverable
amount. The recoverable amount is higher of
the asset''s or Cash-Generating Unit'' (CGU) fair
value is less cost of disposal and its value in use.
Recoverable amount is determined for individual
asset, unless the asset does not generate cash
inflows that are largely independent of those
from other assets or group of assets.

When carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered

impaired and is written down to its recoverable
amount.

(ii) Impairment of non- financial assets:

In accordance with IND-AS 109, the Company
applies expected credit loss ("ECL") model for
measurement and recognition of impairment loss
on the financial assets measured at amortized
cost and debt instrument measured at FVOCI.

Loss allowances on receivable from customers
are measured following the ''simplified approach''
at an amount equal to the life time ECL, at each
reporting date. In respect of other financial
assets such as debt securities and bank balances,
the loss allowance is measured at 12 month ECL
only if there is no significant deterioration in the
credit risk since initial recognition of the asset or
asset is determined is have a low credit risk at the
reporting date.

The Company has carried out annual review of
impairment of fixed assets, based on the report
of the technical executives it is observed there is
no necessity for any impairment.

3.13 Employee benefits

Short-term employee benefits

Short-term employee benefits are expensed as the
related service is provided. A liability is recognized for
the amount expected to be paid if the Company has
a present legal or constructive obligation to pay this
amount as a result of past service provided by the
employee and the obligation can be estimated reliably.

Defined contribution plans (like contribution to
provident fund, ESI)

The Company''s contributions to defined contribution
plans are charged to the income statement as and
when the services are received from the employees.

Defined benefit plan-Gratuity

The liability in respect of defined benefit plans and
other post-employment benefits are calculated using
the projected unit credit method using actuarial
valuation. The present value of the defined benefit
obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality

corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms
to maturity approximating to the terms of the related
defined benefit obligation. In countries where there
is no deep market in such bonds, the market rates on
government bonds are used. The current service cost
of the defined benefit plan, recognized in the income
statement in employee benefit expense, reflects the
increase in the defined benefit obligation resulting from
employee service in the current year, benefit changes,
curtailments and settlements. Past service costs are
recognized immediately in income. The net interest cost
is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair
value of plan assets. This cost is included in employee
benefit expense in the income statement. Actuarial
gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in
the period in which they arise.

Termination benefits

Termination benefits are recognized as an expense
when the Company is demonstrably committed,
without realistic possibility of withdrawal, to a formal
detailed plan to either terminate employment before
the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for
voluntary redundancies are recognized as an expense
if the Company has made an offer encouraging
voluntary redundancy, it is probable that the offer will
be accepted, and the number of acceptances can be
estimated reliably.

3.14 Provisions

A provision is recognized if, as a result of a past event, the
Company has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle
the obligation. If the effect of the time value of money is
material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of
time is recognized as a finance cost.

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Mar 31, 2018

1 Significant accounting policies

1.1 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the amount can be reliably measured.

- Revenue is measured at the fair value of consideration received or receivable taking into account the amount of discounts, volume rebates and VAT/ GST are recognised when all significant risks and rewards of ownership of the goods sold are transferred.

- Revenue from the sale of goods includes excise duty.

- Dividend income is accounted for when the right to receive the income is established.

- Difference between the sale price and carrying value of investment is recognised as profit or loss on sale / redemption on investment on trade date of transaction.

- Interest income is accrued on, time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

1.2 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Assets held under leases that do not transfer substantially all the risks and reward of ownership are not recognized in the balance sheet.

Lease payments under operating lease are generally recognised as an expense in the statement of profit and loss on a straight-line basis over the term of lease unless such payments are structured to increase in line with the expected general inflation to compensate for the lessor’s expected inflationary cost increases.

Further, at the inception of above arrangement, the Company determines whether the above arrangement is or contains a lease. At inception or on reassessment of an arrangement that contains a lease, the Company separates a payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values.

If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Company’s incremental borrowing rate.

Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

1.3 Foreign currencies

In preparing the financial statements of the Company, transactions in currencies other than the company’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

1.4 Borrowing costs

Specific borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of such asset till such time the asset is ready for its intended use and borrowing costs are being incurred. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are recognised as an expense in the period in which they are incurred.

Borrowing cost includes interest expense, amortization of discounts, ancillary costs incurred in connection with borrowing of funds and exchange difference arising from foreign currency borrowings to the extent they are regarded as an adjustment to the Interest cost.

1.5 Taxation

Income tax expense consists of current and deferred tax. Income tax expense is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising upon the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

1.6 Earnings per share

The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. The basic earnings per share is computed by dividing the net profit attributable to equity shareholders for the period by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the net profit attributable to equity shareholders for the year relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share.

1.7 Property, plant and equipment

The initial cost of PPE comprises its purchase price, including import duties and non-refundable purchase taxes, and any directly attributable costs of bringing an asset to working condition and location for its intended use, including relevant borrowing costs and any expected costs of decommissioning, less accumulated depreciation and accumulated impairment losses, if any. Expenditure incurred after the PPE have been put into operation, such as repairs and maintenance, are charged to the Statement of Profit and Loss in the period in which the costs are incurred.

If significant parts of an item of PPE have different useful lives, then they are accounted for as separate items (major components) of PPE.

Material items such as spare parts, stand-by equipment and service equipment are classified as PPE when they meet the definition of PPE as specified in Ind AS 16 - Property, Plant and Equipment.

1.8 Expenditure during construction period

Expenditure during construction period (including financing cost related to borrowed funds for construction or acquisition of qualifying PPE) is included under Capital Work-in-Progress, and the same is allocated to the respective PPE on the completion of their construction. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under “Other non-current Assets”.

1.9 Depreciation

Depreciation is the systematic allocation of the depreciable amount of PPE over its useful life and is provided on a straight-line basis over the useful lives as prescribed in Schedule II to the Act or as per technical assessment.

Depreciable amount for PPE is the cost of PPE less its estimated residual value. The useful life of PPE is the period over which PPE is expected to be available for use by the Company, or the number of production or similar units expected to be obtained from the asset by the Company.

The Company has componentised its PPE and has separately assessed the life of major components.In case of certain classes of PPE, the Company uses different useful lives than those prescribed in Schedule II to the Act. The useful lives have been assessed based on technical advice, taking into account the nature of the PPE and the estimated usage of the asset on the basis of management’s best estimation of obtaining economic benefits from those classes of assets.

Such classes of assets and their estimated useful lives are as under:

Depreciation on additions is provided on a pro-rata basis from the month of installation or acquisition and in case of Projects from the date of commencement of commercial production. Depreciation on deductions/disposals is provided on a pro-rata basis up to the date of deduction/disposal.

1.10 Inventories

Inventories are valued as follows:

- Raw materials, fuel, stores & spare parts and packing materials:

Valued at lower of cost and net realisable value (NRV). However, these items are considered to be realisable at cost, if the finished products, in which they will be used, are expected to be sold at or above cost. Cost is determined on weighted average basis.

- Work-in- progress (WIP), finished goods and stock-in-trade:

Valued at lower of cost and NRV. Cost of Finished goods and WIP includes cost of raw materials, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of inventories is computed on weighted average basis.

1.11 Cash and cash equivalents

Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand and short-term deposits with banks that are readily convertible into cash which are subject to insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments.

1.12 Cash flow statement

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated. Bank overdrafts are classified as part of cash and cash equivalent, as they form an integral part of an entity’s cash management.

1.13 Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.

Where the Company receives non-monetary grants, the asset and the grant are accounted at fair value and recognised in the statement of profit and loss over the expected useful life of the asset.

1.14 Impairment of non financial assets

The carrying amounts of the Company’s non-financial assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. 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 assessments of the time value of money and the risks specific to the asset or the cash-generating unit. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

An impairment loss is recognized in the income statement if the estimated recoverable amount of an asset or its cash-generating unit is lower than its carrying amount. Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

An impairment loss in respect of equity accounted investee is measured by comparing the recoverable amount of investment with its carrying amount. An impairment loss is recognized in the income statement, and reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

1.15 Employee benefits

Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Defined contribution plans

The Company’s contributions to defined contribution plans are charged to the income statement as and when the services are received from the employees.

Defined benefit plans

The liability in respect of defined benefit plans and other post-employment benefits is calculated using the projected unit credit method consistent with the advice of qualified actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related defined benefit obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. The current service cost of the defined benefit plan, recognized in the income statement in employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognized immediately in income. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the income statement. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Termination benefits

Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

1.16 Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

1.17 Contingent liabilities & contingent assets

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

1.18 Financial instruments

a. Recognition and Initial recognition

The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issues of financial assets and financial liabilities that are not at fair value through profit or loss, are added to the fair value on initial recognition.

A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue.

b. Classification and Subsequent measurement Financial assets

On initial recognition, a financial asset is classified as measured at

- amortised cost;

- FVTPL

Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- 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.

All financial assets not classified as measured at amortised cost as described above are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets: Business model assessment

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

- the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

- how the performance of the portfolio is evaluated and reported to the Company’s management;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

- how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

- the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

- contingent events that would change the amount or timing of cash flows;

- terms that may adjust the contractual coupon rate, including variable interest rate features;

- prepayment and extension features; and

- terms that limit the Company’s claim to cash flows from specified assets (e.g. non- recourse features).

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a significant discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

Financial assets: Subsequent measurement and gains and losses

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets at amortised cost: These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Financial liabilities: Classification, Subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held- for- trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

c. Derecognition

Financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.

Financial liabilities

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit and loss statement.

d. Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

e. Impairment

The Company recognises loss allowances for expected credit losses on financial assets measured at amortised cost;

At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income (FVOCI) are credit impaired. A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit- impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer;

- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;

- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or

- the disappearance of an active market for a security because of financial difficulties.

The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:

- debt securities that are determined to have low credit risk at the reporting date; and

- other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.

12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward-looking information.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Presentation of allowance for expected credit losses in the balance sheet

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the trade receivable does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write- off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.