Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |80| 5. BHARTI AIRTEL LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting policies An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates), and any directly attributable cost of bringing the asset to its working condition and location for its intended use. In case of multiple element contracts whereby the vendor supplies PPE as well as other components, PPE is recorded on the basis of relative fair values. Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and any impairment losses. When significant parts of property, plant and equipment are required to be replaced in regular intervals, the Company recognises such parts as separate component of assets. When an item of PPE is replaced, then its carrying amount is de-recognised from the balance sheet and cost of the new item of PPE is recognised. Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired. The expenditures that are incurred after the item of PPE has been put to use, such as repairs and maintenance, are normally charged to the statement of profit and loss in the period in which such costs are incurred. However, in situations where the said expenditure can be measured reliably, and is probable that future economic benefits associated with it will flow to the Company, it is included in the asset’s carrying value or as a separate asset, as appropriate. Depreciation on PPE is computed using the straightline method over the estimated useful lives. Freehold land is not depreciated as it has an unlimited useful life.The Company has established the estimated range of useful lives of different categories of PPE as follows: Particulars Years Leasehold Land Period of lease Building 20 Building on Leased Land 20 Leasehold Improvements Period of lease or years, whichever is less 10 Plant & Equipment 3-20 Computer 3 Office Equipment 2-5 Furniture and Fixtures 5 Vehicles 5 The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately at-least as at each reporting date so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effects of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPE’s remaining revised useful life. The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are derecognized from the balance sheet and the resulting gains / (losses) are included in the statement of profit and loss within other expenses / other income. The management basis its past experience and technical assessment has estimated the useful life, which is at variance with the life prescribed in Part C of Schedule II of the Companies Act, 2013 and has accordingly, depreciated the assets over such useful life. The cost of capital work-in-progress is presented separately in the balance sheet.
|81| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Critical accounting estimates and assumptions The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below. a. Property, plant and equipment Refer Note 2.6 and 6 for the estimated useful life and carrying value of property, plant and equipment respectively. During the year ended March 31, 2017, the Company has reassessed useful life of certain categories of network assets due to technological developments and accordingly has revised the estimate of its useful life in respect of those assets. Out of these assets, the additional depreciation charge of ` 2,920 on assets for which the revised useful life has expired by March 31, 2016 has been recognised and disclosed as ‘exceptional items’ and additional depreciation charge of ` 6,276 for other assets has been recognised within ‘Depreciation and amortization’. The impact of above change on the depreciation charge for the future years is as follows: Particulars Year ended Future Period till end of life March 31, 2018 March 31, 2019 March 31, 2020 Impact on future depreciation charge (2,764) (2,646) (1,109) 15,715 Notes to accounts 6. Property, plant and equipment (‘PPE’) The following table presents the reconciliation of changes in the carrying value of PPE and capital work-inprogress for the year ended March 31, 2017 and 2016: Particulars PPE Leasehold Improvement Land and Building Plant and machinery Furniture & Fixture Vehicles Office equipment Computer Total Capital work-inprogress Gross carrying value Balance as of April 1, 2015 4,416 8,366 607,176 1,597 281 3,661 29,018 654,515 26,898 Additions 119 46 - 127 21 661 1,879 2,853 125,379 Disposals / adjustment (4) (52) (8,778) (14) (9) (72) (8,102) (17,031) - Capitalisation /reclassification 143 (213) 123,758 4 - - (3) 123,689 (123,689) Balance as of March 31, 2016 4,674 8,147 722,156 1,714 293 4,250 22,792 764,026 28,588 Additions 221 73 - 98 34 531 3,039 3,996 130,153 Acquisition through Business Combinations@ - - 489 - - - - 489 123 Disposals / adjustment (8) (57) (15,384) (13) (46) (50) 229 (15,329) - Capitalisation /reclassification 7 (7) 147,104 - - (2) (56) 147,046 (147,046) Balance as of March 31, 2017 4,894 8,156 854,365 1,799 281 4,729 26,004 900,228 11,818 Accumulated depreciation Balance as of April 1, 2015 3,154 2,274 360,217 1,329 219 2,474 26,692 396,359 - Charge* 397 334 66,415 115 18 485 1,838 69,602 - Disposals / adjustment 33 (51) (6,437) (14) (3) (64) (8,072) (14,608) - Reclassification 40 (52) 1 - - 3 8 - - Balance as of March 31, 2016 3,624 2,505 420,196 1,430 234 2,898 20,466 451,353 - Charge* 393 312 76,174 116 20 593 1,727 79,335 - Disposals / adjustment (3) (26) (11,784) (4) (30) (46) 257 (11,636) - Balance as of March 31, 2017 4,014 2,791 484,586 1,542 224 3,445 22,450 519,052 - Net carrying value As of April 1, 2015 1,262 6,092 246,959 268 62 1,187 2,326 258,156 26,898 As of March 31, 2016 1,050 5,642 301,960 284 59 1,352 2,326 312,673 28,588 As of March 31, 2017 880 5,365 369,779 257 57 1,284 3,554 381,176 11,818
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |82| @ Refer Note 5(ii) * Includes exceptional item of ` 1,672 and ` 2,925 for the year ended March 31, 2017 and 2016 with respect to plant and machinery (refer Note 29 (i) a, b, c & (ii) b) Refer note 22(ii)(a) for assets given on operating lease. Capital work in progress mainly includes ` 10,928, ` 27,950 and ` 26,260 towards plant and machinery as of March 31, 2017, March 31, 2016 and April 1, 2015 respectively. The following table summarises the detail of lease hold land taken on finance lease which represents the significant part of assets taken on finance lease: Particulars Grossing Carrying value Accumulated depreciation Net carrying value As of March 31, 2017 411 46 365 As of March 31, 2016 411 44 367 As of April 1, 2015 411 40 371 Refer Note 2.8 and 6 for the estimated useful life and carrying value of property, plant and equipment respectively. During the year ended March 31, 2017, the Group has reassessed useful life of certain categories of network assets due to technological developments and accordingly, has revised the estimate of its useful life in respect of those assets. Out of these assets, the additional depreciation charge of ` 3,258 on assets for which the revised useful life has expired by March 31, 2016 has been recognized and disclosed as ‘exceptional items’, net’ and additional depreciation charge of ` 6,969 for other assets has been recognised within ‘Depreciation and amortization’. The impact of above change on the depreciation charge for the future year is as follows: Particulars Year ended Future Period March 31, 2018 March 31, 2019 March 31, 2020 till end of life Impact on future depreciation charge (2,863) (2,765) (1,133) 16,988 6. DR. REDDY’S LABORATORIES LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and other costs directly attributable to bringing the asset to a working condition for its intended use. Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalised as part of the cost of that asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in the statement of profit and loss. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognised in the statement of profi t and loss as incurred. Items of property, plant and equipment acquired through exchange of non-monetary assets are measured at fair value, unless the exchange transaction lacks commercial substance or the fair value of either the asset received or asset given up is not reliably measurable, in which case the asset exchanged is recorded at the carrying amount of the asset given up.
|83| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Depreciation Depreciation is recognised in the statement of profit and loss on a straight line basis over the estimated useful lives of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. Leasehold improvements are depreciated over the period of the lease agreement or the useful life, whichever is shorter. Depreciation methods, useful lives and residual values are reviewed at each reporting date and, if expectations differ from previous estimates, the change(s) are accounted for as a change in an accounting estimate in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The estimated useful lives are as follows: PPE Years Buildings - Factory and administrative buildings 20 to 30 - Ancillary structures 3 to 10 Plant and machinery 5 to 10 Furniture, fixtures and office equipment 4 to 8 Vehicles 4 to 5 Schedule II to the Companies Act, 2013 (“Schedule”) prescribes the useful lives for various classes of tangible assets. For certain class of assets, based on the technical evaluation and assessment, the Company believes that the useful lives adopted by it best represent the period over which an asset is expected to be available for use. Accordingly, for these assets, the useful lives estimated by the Company are different from those prescribed in the Schedule. Software for internal use, which is primarily acquired from third-party vendors and which is an integral part of a tangible asset, including consultancy charges for implementing the software, is capitalised as part of the related tangible asset. Subsequent costs associated with maintaining such software are recognised as expense as incurred. The capitalised costs are amortised over the estimated useful life of the software or the remaining useful life of the tangible fixed asset, whichever is lower. Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date is disclosed as capital advances under other non-current assets. The cost of property, plant and equipment not ready to use before such date are disclosed under capital work-in-progress. Assets not ready for use are not depreciated. Determination of fair values The Company’s accounting policies and disclosures require the determination of fair value, for certain financial and non-financial assets and liabilities. Fair values have been determined for measurement and/ or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. a) Property, plant and equipment Property, plant and equipment, if acquired in a business combination or through an exchange of nonmonetary assets, is measured at fair value on the acquisition date. For this purpose, fair value is based on appraised market values and replacement cost. Disclosures 2.39 Research and Development Property, Plant and Equipment and Intangibles (Included In Note 2.1 and Note 2.2)
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |84| Particulars Gross Carrying Value Accumulated Depreciation/ Amortisation Net Carrying Value As At 1 April 2016 Additions (A) Disposals (B) As At 31 March 2017 As At 1 April 2016 For The Year (A) Disposals (B) As At 31 March 2017 As At 31 March 2017 As At 31 March 2016 Property, plant and equipment Land 70 - - 70 - - - - 70 70 Buildings 937 93 - 1,030 279 37 - 316 714 658 Plant and machinery 4,698 864 88 5,474 2,664 506 77 3,093 2,381 2,034 Furniture and fixtures 196 17 1 212 147 14 1 160 52 49 Offi ce equipment 354 67 14 407 241 73 14 300 107 113 Total (A) 6,255 1,041 103 7,193 3,331 630 92 3,869 3,324 2,924 Intangible assets Softwares 146 59 14 191 49 45 - 94 97 97 Others 102 - - 102 16 25 - 41 61 86 Total (B) 248 59 14 293 65 70 - 135 158 183 Total (A+B) 6,503 1,100 117 7,486 3,396 700 92 4,004 3,482 3,107 Previous year 5,542 1,405 444 6,503 3,215 611 430 3,396 3,107 (a) Includes gross carrying value of ` 10 (31 March 2016: ` 17) and accumulated depreciation of ` 9 (31 March 2016: ` 11) towards transfers from non research and development to research and development property, plant and equipment during the year. (b) Includes gross carrying value of ` 55 (31 March 2016: ` 32) and accumulated depreciation of ` 31 (31 March 2016: ` 23) towards transfers from research and development to non research and development property, plant and equipment during the year. 7. HINDUSTAN UNILEVER LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated impairment losses, if any. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Profit and Loss during the period in which they are incurred. Gains or losses arising on retirement or disposal of property, plant and equipment are recognised in the Statement of Profit and Loss. Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as “Capital work-in-progress”. Depreciation is provided on a pro-rata basis on the straight line method based on estimated useful life prescribed under Schedule II to the Companies Act, 2013 with the exception of the following: i. plant and equipment is depreciated over 3 to 21 years based on the technical evaluation of useful life done by the management. ii. assets costing ` 5,000 or less are fully depreciated in the year of purchase. Freehold land is not depreciated. The residual values, useful lives and method of depreciation of property, plant and equipment is reviewed at each financial year end and adjusted prospectively, if appropriate.
|85| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Upon first-time adoption of Ind AS, the Company has elected to measure all its property, plant and equipment at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e., 1st April, 2015. Disclosures The movement in carrying value of property, plant and equipment as per IGAAP is mentioned below: The Company has elected to measure all its property, plant and equipement at the previous GAAP carrying amount i.e 31st March 2015 as its deemed cost (Gross Block Value) on the date of transition to Ind AS i.e 1st April 2015. The movement in carrying value of property, plant and equipement as per IGAAP is mentioned below: Land Buildings Plant and equipment Furniture and fixtures Vehicles Office equipment Total - Freehold - Leasehold Gross Block Balance as at 1st April, 2015 (GAAP) 59 32 1,076 3,060 83 1 97 4,408 Additions - - 102 709 7 - 25 843 Disposals (1) - (29) (142) (1) (0) (10) (183) Balance as at 31st March, 2016 58 32 1,149 3,627 89 1 112 5,068 Additions - - 279 848 7 - 22 1,156 Disposals (0) (0) (8) (82) (5) (0) (6) (101) Balance as at 31st March, 2017 58 32 1,420 4,393 91 1 128 6,123 Accumulated Depreciation Balance as at 1st April, 2015 0 5 279 1,564 47 1 77 1,973 Additions - 0 33 259 8 0 10 310 Disposals - - (2) (110) (1) (0) (4) (117) Balance as at 31st March, 2016 0 5 310 1,713 54 1 83 2,166 Additions - 0 38 325 9 - 12 384 Disposals - (0) (3) (68) (5) (0) (5) (81) Balance as at 31st March, 2017 0 5 345 1,970 58 1 90 2,469 Net Block Balance as at 1st April, 2015 59 27 797 1,496 36 0 20 2,435 Balance as at 31st March, 2016 58 27 839 1,914 35 0 29 2,902 Balance as at 31st March, 2017 58 27 1,075 2,423 33 0 38 3,654 (a) The Property, Plant and Equipment in 4A includes assets given on lease given in the below table: Building Plant & equipment Furniture & fixtures Office equipment Total Gross Block as at 1st April, 2015 (Deemed cost) 0 57 0 0 57 Accumulated Dep. as at 1st April, 2015 - - - - - Net Block as at 1st April, 2015 0 57 0 0 57 Gross Block as at 31st March, 2016 0 60 0 0 60 Accumulated Dep. as at 31st March, 2016 (0) (1) - (0) (1) Net Block as at 31st March, 2016 0 59 0 0 59 Gross Block as at 31st March, 2017 0 53 0 (0) 53 Accumulated Dep. as at 31st March, 2017 (0) (4) (0) 0 (3) Net Block as at 31st March, 2017 0 49 0 0 50
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |86| 8. INDIAN OIL CORPORATION LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Tangible Assets Fixed Assets are stated at acquisition cost less accumulated depreciation/amortization and cumulative impairment. Land acquired on perpetual lease as well as on lease for over 99 years is treated as free hold land. Land acquired on lease for 99 years or less is treated as leasehold land. Technical know-how/license fee relating to plants/facilities are capitalised as part of cost of the underlying asset. Construction Period Expenses on Projects Revenue expenses exclusively attributable to projects incurred during construction period are capitalized. However, such expenses in respect of capital facilities being executed along with the production/ operations simultaneously are charged to revenue. Financing cost incurred during construction period on loans specifically borrowed and utilized for projects is capitalized on quarterly basis up to the date of capitalization. Financing cost, if any, incurred on General Borrowings used for projects is capitalized at the weighted average cost. The amount of such borrowings is determined on quarterly basis after setting off the amount of internal accruals. Capital Stores Capital stores are valued at cost. Specific provision is made for likely diminution in value, wherever required. Depreciation/Amortization Cost of leasehold land for 99 years or less is amortized over the lease period. Cost of tangible fixed assets (net of residual value) is depreciated on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in case of following assets where useful life is considered based on technical assessment: (a) Useful life of 15 years for Plant and Equipment relating to Retail Outlets (other than storage tanks and related equipments) and LPG cylinders & pressure regulators (b) Useful life of 25 years for solar power plant Depreciation/amortization is charged pro rata on quarterly basis on assets, from/up to the quarter of capitalization/sale, disposal/or earmarked for disposal. Residual value is considered between 1% and 5% of cost of assets. Further, in case of catalyst with noble metal content, residual value is considered based on the value of metal content. The Company depreciates components of the main asset that are significant in value and have different useful lives as compared to the main asset separately. Assets, other than LPG Cylinders and Pressure Regulators, costing up to ` 5,000/- per item are depreciated fully in the year of capitalization. Insurance spares are depreciated up to 100% over the remaining life of the main asset. Further, components like catalyst without noble metal content and major overhaul/inspection are also depreciated fully over their respective useful life. Expenditure on the items, ownership of which is not with the Company are charged off to revenue in the year of incurrence of such expenditure. Notes to Accounts Note 12: Capital Work-in-Progress (` in Crore) Particulars March 2016 March 2015 Construction Work in Progress – Tangible Assets (including unallocated capital expenditure, materials at site) A 15,735.43 24,716.43 Less: Provision for Capital Losses 19.19 11.03 15,716.24 24,705.40 Capital stores 1,537.87 3,875.04 Less: Provision for Capital Losses 2.22 3.82 1,635.65 3,871.22 Capital Goods in Transit 325.05 274.70
|87| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Note 12: Capital Work-in-Progress (` in Crore) Particulars March 2016 March 2015 Construction Period Expenses pending allocation: Balance as at beginning of the year 7,866.83 5,853.53 Add: Opening Balance Adjustment – 12.18 Add: Net expenditure during the year (Note – 12.1) 3,716.87 2,138.40 11,583.70 8,004.11 Less: Allocated during the year 6,626.46 137.28 4,957.24 7,866.83 Total 22,634.18 36,718.15 Share of jointly controlled entities 654.36 348.92 A. Includes Capital Expenditure amounting to ` 25.64 crore (2015: 11.94 crore) relating to ongoing Oil & Gas Development activities. Note 12.1: Construction Period Expenses (NET) during the year (` in Crore) Particulars March 2016 March 2015 Employee Benefit expenses 313.63 291.12 Repairs and Maintenance 84.92 18.43 Consumption of Stores and Spares 2.48 5.10 Power & Fuel 268.29 22.52 Rent 78.64 8.55 Insurance 32.35 40.56 Rates and Taxes 0.41 0.96 Travelling Expenses 37.43 33.64 Communication Expenses 1.97 2.71 Printing and Stationery 1.11 1.25 Electricity and Water Charges 62.65 53.74 Bank Charges 0.53 3.76 Technical Assistance Fees 7.14 3.41 Exchange Fluctuation 903.06 653.34 Finance Cost 955.58 893.99 Depreciation, Depletion and Amortisation on: Tangible Assets 237.60 105.93 Intangible Assets 2.29 2.16 Start Up/Trial Run Expenses (net of revenue) 707.78 0.39 Others 44.67 49.68 Total Expenses 3,742.53 2,191.24 Less: Recoveries 25.66 52.84 Net Expenditure during the year 3,716.87 2,138.40 9. INFOSYS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by the Management. The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows: Building (1) 22-25 years Plant and machinery (1) 5 years Office equipment 5 years Computer equipment (1) 3-5 years
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |88| Furniture and fixtures (1) 5 years Vehicles (1) 5 years (1) Based on technical evaluation, the Management believes that the useful lives as given above best represent the period over which the Management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013. Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end. Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss. Assets to be disposed of are reported at the lower of the carrying value or the fair value less cost to sell. Critical Accounting Estimates Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Company’s assets are determined by the Management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Disclosures Gross carrying value of leasehold land represents amounts paid under certain lease-cum-sale agreements to acquire land including agreements where the Company has an option to purchase or renew the properties on expiry of the lease period. The aggregate depreciation has been included under depreciation and amortization expense in the Statement of Profit and Loss. Tangible assets provided on operating lease to subsidiaries as at March 31, 2017 and March 31, 2016 are as follows: Particulars Cost Accumulated depreciation Net book value Buildings 197 82 115 197 75 122 Plant and machinery 33 19 14 33 14 19 Furniture and fixtures 25 16 9 25 12 13 Computer equipment 3 2 1 3 2 1 Office equipment 18 10 8 18 7 11
|89| Chap. 7 – Ind AS 16 — Property, Plant & Equipment The aggregate depreciation charged on the above assets during the years ended March 31, 2017 and March 31, 2016 amounted to ` 19 crore each. The rental income from subsidiaries for the years ended March 31, 2017 and March 31, 2016 amounted to ` 65 crore and ` 51 crore, respectively. 10. ITC LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and impairment, if any. For this purpose, cost includes deemed cost which represents the carrying value of property, plant and equipment recognised as at 1st April, 2015 measured as per the previous GAAP. Cost is inclusive of inward freight, duties and taxes and incidental expenses related to acquisition. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalised. Expenses capitalised also include applicable borrowing costs for qualifying assets, if any. All up gradation/ enhancements are charged off as revenue expenditure unless they bring similar significant additional benefits. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss. Depreciation of these assets commences when the assets are ready for their intended use which is generally on commissioning. Items of property, plant and equipment are depreciated in a manner that amortizes the cost (or other amount substituted for cost) of the assets after commissioning, less its residual value, over their useful lives as specified in Schedule II of the Companies Act,2013 on a straight line basis. Land is not depreciated. The estimated useful lives of property, plant and equipment of the Company are as follows: Buildings 30 – 60 Years Leasehold Improvements Shorter of lease period or estimated useful lives Plant and Equipment 7 – 25 Years Furniture and Fixtures 8 – 10 Years Vehicles 8 – 10 Years Office Equipment 5 Years Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Property, plant and equipment’s residual values and useful lives are reviewed at each Balance Sheet date and changes, if any, are treated as changes in accounting estimate. Key sources of estimation uncertainty Useful lives of property, plant and equipment and intangible assets: As described in the significant accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |90| 11. LARSEN & TOUBRO LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies PPE is recognised when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. PPE is stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation and cumulative impairment, if any. Property, plant and equipment acquired on hire purchase basis are recognized at their cash values. Cost includes professional fees related to the acquisition of PPE and for qualifying assets, borrowing costs capitalised in accordance with the company’s accounting policy. For transition to Ind AS, the company has elected to adopt as deemed cost, the carrying value of PPE measured as per I-GAAP less accumulated depreciation and cumulative impairment on the transition date of April 1, 2015. In respect of revalued assets, the value as determined by valuers as reduced by accumulated depreciation and cumulative impairment is taken as cost on transition date. Own manufactured PPE is capitalised at cost including an appropriate share of overheads. Administrative and other general overhead expenses that are specifically attributable to construction or acquisition of PPE or bringing the PPE to working condition are allocated and capitalised as a part of the cost of the PPE. PPE not ready for the intended use on the date of the Balance Sheet are disclosed as “capital work-in-progress”. (Also refer to policies on leases, borrowing costs, impairment of assets and foreign currency transactions infra). Depreciation is recognised using straight line method so as to write off the cost of the assets (other than freehold land and properties under construction) less their residual values over their useful lives specified in Schedule II to the Companies Act, 2013, or in the case of assets where the useful life was determined by technical evaluation, over the useful life so determined. Depreciation method is reviewed at each financial year end to reflect the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life and residual values are also reviewed at each financial year end and the effect of any change in the estimates of useful life/residual value is accounted on prospective basis. Where cost of a part of the asset (“asset component”) is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part is determined separately and such asset component is depreciated over its separate useful life. Depreciation on additions to/deductions from, owned assets is calculated pro rata to the period of use. Extra shift depreciation is provided on a location basis. Depreciation charge for impaired assets is adjusted in future periods in such a manner that the revised carrying amount of the asset is allocated over its remaining useful life. Assets acquired under finance leases are depreciated on a straight line basis over the lease term. Where there is reasonable certainty that the company shall obtain ownership of the assets at the end of the lease term, such assets are depreciated based on the useful life prescribed under Schedule II to the Companies Act, 2013 or based on the useful life adopted by the company for similar assets. Freehold land is not depreciated. Notes to Accounts – Notes below notes to accounts Depreciation & Amortization charge Depreciation and amortization charge for the year 2016-17 increased by 21.8% at ` 1215 crore as compared to ` 997 crore in the previous year. The increase is mainly attributable to international operations of infrastructure segment.
|91| Chap. 7 – Ind AS 16 — Property, Plant & Equipment 12. PVR LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies (i) PPE and Capital work in progress (including Pre-operative expenses) are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price (net of CENVAT) and any directly attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of PPE which take substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Leasehold improvements represent expenses incurred towards civil works, interior furnishings, etc. on the leased premises at various cinema locations. (ii) Expenditure directly relating to construction activity are capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent expenditure is directly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period, which is not related to the construction activity nor is incidental thereto is charged to the statement of profit and loss. Income earned during construction period is adjusted against the total of the indirect expenditure. Further, Expenditure on additions and betterment of operational properties are capitalized, and expenditures for maintenance and repairs are charged to statement of Profit & loss as incurred. (iii) An item of PPE and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. (iv) The Company identifies any particular component embedded in the main asset having significant value to total cost of asset and also a different life as compared to the main asset. (v) The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. (vi) Deemed cost of transition to Ind AS – For transition to Ind AS, the Company has elected to continue with the carrying value of all of its PPE recognised as on April 01, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date. Depreciation on Property, plant and equipment Leasehold Improvements are amortized over the estimated useful life generally varying in between 20-25 years or unexpired period of lease, whichever is lower, on a straight line basis. Assets costing ` 5,000 and below are fully depreciated in the year of acquisition. Depreciation on all other assets is provided on Straight-line method at the rates computed based on estimated useful life of the assets, which are generally in line with the useful lives as prescribed under Part C of Schedule II to the Companies Act, 2013 except in the following cases, where the management based on technical and internal assessment considers life to be different than prescribed under Schedule II. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Particulars Useful life as per Schedule II Useful life considered by the Company Concession equipments 15 8 Gaming equipments 15 13.33 Furniture and fixtures 8 5 to 10.53 Vehicles 8 5 LCD’s 5 4
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |92| The Company has estimated the residual value @ 5% of original cost for all assets except for sound and projections equipment’s which are taken @ 10% of original cost based on technical assessment. 13. RELIANCE INDUSTRIES LIMITED (RIL) CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Property, plant and equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably. Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Capital Work-in-Progress. Depreciation on property, plant and equipment is provided using written down value method except in case of certain assets from Refining segment and Petrochemical segment & SEZ units/developer which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II; Particular Depreciation Fixed Bed Catalyst (useful life: 2 years or more) Over its useful life as technically assessed Fixed Bed Catalyst (useful life: up to 2 years) 100% depreciated in the year of addition Premium on Leasehold Land Over the period of lease term The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised. Critical Accounting judgments and estimates The preparation of the Company’s financial statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Depreciation / amortisation and useful lives of property plant and equipment / intangible assets Property, plant and equipment / intangible assets are depreciated / amortised over their estimated useful lives, after taking into account estimated residual value. Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation / amortisation to be recorded during any reporting period. The useful lives and residual values are based on the Company’s historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortisation for future periods is revised if there are significant changes from previous estimates
|93| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Disclosures Project Development Expenditure (in respect of Projects up to 31st March, 2017, included under Capital Work-in-Progress and Intangible Assets under Development) (` in crore) 2016-17 2015-16 Opening Balance 11,022 6,770 Add: Transferred from Statement of Profit and Loss (Refer Note 28 - Other Expenses) 1,961 2,507 Interest Expenses (Refer Note 27) 2,852 2,302 4,813 4,809 15,835 11,579 Less: Project Development Expenses Capitalised during the year 291 557 Closing Balance 15,544 11,022 14. TATA COFFEE LIMITED CONSOLIDATED FINANCIAL STATEMENTS Judgments and Estimates The preparation of the financial statements required the management to exercise judgment and to make estimates and assumptions. These estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revision to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future period. The areas involving critical estimates or judgments are: Depreciation and amortization Depreciation and amortisation is based on management estimates of the future useful lives of certain class of property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the depreciation and amortisation charges. Significant Accounting Policies Transition to Ind AS The Company has elected to continue with the net carrying value of all its property, plant and equipment recognized as of April 1, 2015 (transition date) as per the previous GAAP and use that carrying value as its deemed cost. Subsequent to transition i) Recognition and measurement: Property, plant and equipment including Bearer biological assets are carried at cost of acquisition less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure related to an item of fixed asset are added to its book value only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All repairs and maintenance are charged to the Statement of Profit and Loss during the financial year in which they are incurred.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |94| ii) Depreciation: Land is not depreciated. Depreciation of other items of Property, Plant and Equipment are provided on a straight line basis over the estimated useful life of the asset or as prescribed in Schedule II to the Companies Act, 2013 or based on technical evaluation of the asset. Estimated useful life of items of property, plant and equipment are as follows: Type of Asset Estimated Useful Life Leasehold Land Perpetual Lease Buildings including Water supply System 28-58 Years Roads/Carpeted/Non-Carpeted 10 Years Irrigation Systems 10-20 Years Electrical Installations- 20 Plant & Machinery-Continuous Process 18 Other Plant & Machinery 20 Furniture & Fittings 15 Computers 6 Motor Vehicles 10 Office Equipment 5 The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. The Company assesses at each balance sheet date whether there is objective evidence that a asset or a group of assets is impaired. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the sale proceeds with the carrying amount and are recognised within operating profit in the Income statement. Biological Assets Transition to Ind AS Under the previous GAAP, biological assets were not separately recognised. Accordingly, on the transition date, the Company has considered Nil value as the deemed cost for biological assets. Subsequent to transition Biological assets are classified as Bearer biological assets and Consumable biological assets. Consumable biological assets are those that are to be harvested as agricultural produce or sold as biological assets. Bearer Biological Assets which are held to bear agricultural produce are classified as Bearer plants. Tea bushes, Coffee bushes, Pepper vines, Cardamom tiller and Shade trees are recognised as Bearer biological assets. These are classified as mature Bearer Plants and Immature Bearer Plants. Mature Bearer Plants are those that have attained harvestable stage. Cost incurred for new plantations and immature areas are capitalised. Cost includes cost of land preparation, new planting and maintenance till maturity. The cost of areas coming into bearing is transferred to mature plantations and depreciated over their estimated useful lives. Bearer plants relating to Coffee and Tea bushes, Pepper vines and minor produces attain a harvestable stage in about 3-5 years. Bearer biological assets are carried at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure on bearer assets are added to its book value only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably.
|95| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Mature bearer plants are depreciated over their estimated useful life. Immature bearer plants are tested for impairment / obsolescence. The estimated useful life of mature bearer plants are as follows: Type of Bearer Biological Assets Estimated Useful Life Arabica Coffee Plants 30 Years Robusta Coffee Plants 58 Years Tea Bushes 58 Years Pepper Vines & Cardamom Tillers 35 Years Silver Oak and Shade Management Trees 35 Years 15. TATA COMMUNICATIONS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Judgments and estimates Useful lives of assets The Company reviews the useful life of assets at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods. Significant Accounting Policies i. Property, plant and equipment are stated at cost of acquisition or construction, less accumulated depreciation/ amortisation and impairment loss, if any. Cost includes inward freight, duties, taxes and all incidental expenses incurred to bring the assets ready for their intended use. ii. Jointly owned assets are capitalised in proportion to the Company’s ownership interest in such assets. iii. Capital work-in-progress includes cost of property, plant and equipment under installation/ under development as at the balance sheet date and are carried at cost, comprising of direct cost, directly attributable cost and attributable interest. The depreciable amount for property, plant and equipment is the cost of the property, plant and equipment or other amount substituted for cost, less its estimated residual value (wherever applicable). Depreciation on property, plant and equipment has been provided on the straight-line method as per the estimated useful lives. The asset’s residual values, estimated useful lives and methods of depreciation are reviewed at each financial year end and any change in estimate is accounted for on a prospective basis. Estimated useful lives of the assets are as follows: Property, plant and equipment Useful lives of Assets i. Plant and Machinery Network Equipment and Component (Refer 1 Below) 3 to 8 years Sea cable (Refer 1 below) 20 years or Contract period whichever is earlier Land cable (Refer 1 below) 15 years or Contract period whichever is earlier Electrical Equipment and Installations* 10 years Earth station and Switch* 13 years General Plant and Machinery* 15 years ii. Office equipments Integrated Building Management Systems (Refer 1 below) 8 years Others* 5 years
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |96| Property, plant and equipment Useful lives of Assets iii. Leasehold Land Over the lease period iv. Leasehold improvements Asset life or lease period whichever is less v. Buildings* 30 to 60 years vi. Roads* 3 to 10 years vii. Fences, Tubes and Well* 5 years viii. Temporary structures* 3 years ix. Furniture & Fixtures* 10 years x. Computers, server and network* 3 to 6 years * On the above categories of assets, the depreciation has been provided as per useful life prescribed in Schedule II to the Companies Act, 2013. 1. In these cases, the lives of the assets are other than the prescribed lives in Schedule II to the Companies Act, 2013. The lives of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. 2. Property, plant and equipment are eliminated from financial statement, either on disposal or when retired from active use. Losses arising in the case of retirement of property, plant and equipment and gains or losses arising from disposal of property, plant and equipment are recognised in the Statement of Profit and Loss in the year of occurrence. Consolidated Financial Statements Significant Accounting Policies h. Property, plant and equipment i. Property, plant and equipment are stated at cost of acquisition or construction, less accumulated depreciation/ amortisation and impairment loss, if any. Cost includes inward freight, duties, taxes and all incidental expenses incurred to bring the assets ready for their intended use. ii. Jointly owned assets are capitalised in proportion to the Group’s ownership interest in such assets. iii. Assets acquired pursuant to an agreement for exchange of similar assets are recorded at the net book value of the asset given up, with an adjustment for any balancing receipt or payment of cash or any other form of consideration. The depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value, wherever applicable. Depreciation on property, plant and equipment of the Group has been provided on the straight-line method as per the estimated useful lives. The assets residual values, estimated useful lives and methods of depreciation are reviewed at each financial year end and any change in estimate is accounted for on a prospective basis. Estimated useful lives of Property, Plant & Equipment of the Company and its Indian subsidiaries are as follows: Useful lives of assets Plant and Machinery - Sea cable –(Refer 1 below) 20 years or contract period whichever is earlier - Land cable – (Refer 1 below) 15 years or contract period whichever is earlier
|97| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Useful lives of assets - ATM and cash dispensers – (Refer 1 below) 10 years or contract obligation term whichever is less - Network Equipment and Components – (Refer 1 below) 3 to 8 years - Electrical Equipment & Installations* 10 years - Earth station & Switch* 13 years - General Plant & Machinery* 15 years Furniture & Fixture* 10 years Office Equipment* 5 years Computers, servers and network* 3-6 years Vehicles* 8 years Buildings* Building RCC structure 60 years Building NON RCC structure 30 years Others 3 to 10 years Leasehold land – (Refer 1 below) Over the lease period Leasehold improvements – (Refer 1 below) Asset life or lease period whichever is less *Depreciation has been provided as per useful life prescribed in Schedule II to the Companies Act, 2013 1. In the above mentioned cases, the lives of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties, maintenance support, etc. In these cases, the lives of the assets are other than the prescribed lives in Schedule II to the Companies Act, 2013. Estimated useful lives of the company’s foreign subsidiaries: Useful lives of assets Building 15 to 25 years Plant and Machinery 3 to 16 years Sea Cables 20 years or contract period whichever is earlier Computers 3 to 6 years Leasehold Improvement Asset life or lease period whichever is less Furnitures & Fixtures 8 to 15 years Office Equipment 8 to 15 years 1. In the above mentioned cases, the lives of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties, maintenance support, etc. 2. Property, plant and equipment are eliminated from financial statement, either on disposal or when retired from active use. Losses arising in the case of retirement of property, plant and equipment and gains or losses arising from disposal of property, plant and equipment are recognised in the Consolidated Statement of Profit and Loss in the year of occurrence. The asset’s residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |98| 16. TATA MOTORS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated. Heritage assets, comprising antique vehicles purchased by the Company, are not depreciated as they are considered to have a residual value in excess of cost. Residual values are re-assessed on an annual basis. Cost includes purchase price, taxes and duties, labor cost and direct overheads for self-constructed assets and other direct costs incurred up to the date the asset is ready for its intended use. Interest cost incurred for constructed assets is capitalized up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. Depreciation is provided on the Straight Line Method (SLM) over the estimated useful lives of the assets considering the nature, estimated usage, operating conditions, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support. Taking into account these factors, the Company and its domestic group companies have decided to apply the useful life for various categories of property, plant and equipment, which are different from those prescribed in Schedule II of the Act. Estimated useful lives of the assets are as follows: Type of Asset Estimated useful life Buildings, Roads, Bridge and culverts 4 to 60 years Plant, machinery and equipment 3 to 30 years Computers and other IT assets 3 to 6 years Vehicles 3 to 11 years Furniture, fixtures and office appliances 3 to 21 years The useful lives is reviewed at least at each year-end. Changes in expected useful lives are treated as change in accounting estimates. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Depreciation is not recorded on capital work-in-progress until construction and installation are complete and the asset is ready for its intended use. Notes to Accounts 4. Leases The Company has taken land, buildings, plant and equipment, computers and furniture and fixtures under operating and finance leases. The following is the summary of future minimum lease rental payments under non-cancellable operating leases and finance leases entered into by the Company:
|99| Chap. 7 – Ind AS 16 — Property, Plant & Equipment (` in crores) As at March 31, As at April 1, 2017 2016 2015 Operating Finance Operating Finance Operating Finance Minimum Lease Payments Minimum Lease Payments Present value of minimum lease payments Minimum Lease Payments Minimum Lease Payments Present value of minimum lease payments Minimum Lease Payments Minimum Lease Payments Present value of minimum lease payments Not later than one year 659.77 25.82 22.12 503.19 61.18 57.22 462.67 75.51 57.17 Later than one year but not later 1,787.14 41.71 33.81 784.36 58.77 53.31 577.56 91.99 90.75 Later than five years 1,464.55 37.22 20.23 1,309.46 38.18 15.73 1,112.72 - - Total minimum lease 3,911.46 104.75 76.16 2,597.01 158.13 126.26 2,152.95 167.50 147.92 Less: future finance charges (28.61) (31.87) (19.58) Present value of minimum 76.14 126.26 147.92 Included in the financial state- ments as: Other financial liabilities - current 22.13 57.22 57.17 Long-term borrowings 54.01 69.04 90.75 76.14 126.26 147.92 Total operating lease rent expenses were ` 822.48 crores and ` 774.03 crores for the years ended March 31, 2017 and 2016 respectively. 17. TATA STEEL LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies An item of property, plant and equipment is recognized as an asset if it is probable that future economic benefits associated with the item will flow to the Group and its cost can be measured reliably. This recognition principle is applied to the costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred subsequently to add to, replace part of, or service it. All other repair and maintenance costs, including regular servicing, are recognised in the consolidated statement of profit and loss as incurred. When a replacement occurs, the carrying value of the replaced part is de-recognised. Where an item of property, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items. Property, plant and equipment are stated at cost, less accumulated depreciation and impairment. Cost includes all direct costs and expenditures incurred to bring the asset to its working condition and location for its intended use. Trial run expenses (net of revenue) are capitalised. Borrowing costs incurred during the period of construction is capitalized as part of cost of the qualifying asset. The gain or loss arising on disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the consolidated statement of profit and loss. Depreciation and amortisation of property, plant and equipment and intangible assets Depreciation or amortisation is provided so as to write off, on a straight-line basis, the cost of property, plant and equipment and other intangible assets, including those held under finance leases to their residual value. These charges are commenced from the dates the assets are available for their intended use and are spread over their estimated useful economic lives or, in the case of leased assets, over the lease period, if shorter. The estimated useful lives of assets and residual values are reviewed regularly and, when necessary, revised. No further charge is provided in respect of assets that are fully written down but are still in use. Depreciation on assets under construction commences only when the assets are ready for their intended use. The estimated useful lives for the main categories of property, plant and equipment and other intangible assets are:
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |100| Estimated useful life (years) Freehold and long leasehold buildings up to 60 years* Roads 5 years Railway sidings upto 35 years* Plant and machinery 3 to 40 years* Furniture, fixture and office equipment 3 to 25 years Vehicles and aircraft 4 to 20 years Assets covered under the Electricity Act (life as prescribed under the Electricity Act) 3 to 34 years Patents and trademarks 4 years Product and process development costs 5 years Computer software upto 8 years Other assets 1 to 15 years Mining assets are amortised over the useful life of the mine or lease period whichever is lower. Major furnace relining expenses are depreciated over a period of 10 years (average expected life). Freehold land is not depreciated. Assets value upto ` 25,000 are fully depreciated in the year of acquisition. * For these class of assets, based on internal assessment and independent technical evaluation carried out by chartered engineers, the Company and some of its subsidiaries believes that the useful lives as given above best represent the period over which Group expects to use these assets. Hence the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013. Stripping costs The Group separates two different types of stripping costs that are incurred in surface mining activity: Developmental stripping costs and production stripping costs Developmental stripping costs in order to obtain access to quantities of mineral reserves that will be mined in future periods are capitalised as part of mining assets. Capitalisation of developmental stripping costs ends when the commercial production of the mineral reserves begins. A mine can operate several open pits that are regarded as separate operations for the purpose of mine planning and production. In this case, stripping costs are accounted for separately, by reference to the ore extracted from each separate pit. If, however, the pits are highly integrated for the purpose of mine planning and production, stripping costs are aggregated too. The determination of whether multiple pit mines are considered separate or integrated operations depends on each mine’s specific circumstances. The following factors normally point towards the stripping costs for the individual pits being accounted for separately: Mining of the second and subsequent pits is conducted consecutively with that of the first pit, rather than concurrently separate investment decisions are made to develop each pit, rather than a single investment decision being made at the outset the pits are operated as separate units in terms of mine planning and the sequencing of overburden and ore mining, rather than as an integrated unit expenditure for additional infrastructure to support the second and subsequent pits are relatively large the pits extract ore from separate and distinct ore bodies, rather than from a single ore body. The relative importance of each factor is considered by the management to determine whether, on balance, the stripping costs should be attributed to the individual pit or to the combined output from the several pits.
|101| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Production stripping costs are incurred to extract the ore in the form of inventories and/or to improve access to an additional component of an ore body or deeper levels of material. Production stripping costs are accounted for as inventories to the extent the benefit from production stripping activity is realised in the form of inventories. The Group recognises a stripping activity asset in the production phase if, and only if, all of the following are met: it is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the Group the Group can identify the component of the ore body for which access has been improved and the costs relating to the improved access to that component can be measured reliably. Such costs are presented within mining assets. After initial recognition, stripping activity assets are carried at cost less accumulated amortisation and impairment. The expected useful life of the identified component of the ore body is used to depreciate or amortise the stripping asset. 18. THE GREAT EASTERN SHIPPING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS Judgements and estimates Useful lives of property, plant and equipment The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This assessment may result in change in depreciation expense in future periods. Significant Accounting Policies Property, plant and equipment (PPE) are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenses related to acquisition and installation of the concerned assets, borrowing costs during construction period (net off capital subsidy / grant received) and excludes any duties / taxes recoverable. Advances paid towards the acquisition of PPE outstanding at each reporting date is classified as capital advances under Other Non-Current Assets and the cost of assets not put to use before such date are disclosed under capital work in progress. Subsequent expenditure relating to PPE are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other expenses on maintaining property, plant and equipment, including day to day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred except for dry dock expenditure. Grabs and Dry docks are considered as components of Fleet with estimated useful lives different than the main component of Fleet. Cost relating to Dry dock which is mandatorily required to be carried out as per the Classification Rules and Regulations is recognised in the carrying amount of the Ship and is amortised from the completion of survey till the estimated date for next special survey. Losses arising from the retirement of, and gains or losses arising from disposal of property, plant and equipment are recognised in the Statement of Profit And Loss. Exchange differences on repayment and year end translation of foreign currency loans availed upto March 31, 2016 and fair value gains or losses on qualifying cash flow hedges that are transferred from Hedging Reserve relating to acquisition of depreciable capital assets are adjusted to the carrying cost of the assets. Notes to Accounts - Notes below notes to accounts (a) On transition to Ind AS, the Company has elected to measure certain items of Property, Plant and Equipment at the date of transition to Ind AS at their fair values and use those fair values as its deemed cost on the date of transition in accordance with the exemptions available under Ind AS 101,
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |102| the resultant impact being accounted for in reserves. The consequent impact on change in depreciation is reflected in the Statement of Profit and Loss. In other cases where items of PPE have not been fair valued, the Company has restated their written down values as per provisions under Ind AS 16 with restrospective effect. The aggregate of the fair values used as deemed cost as on the date of the transition and the aggregate adjustments to the carrying amount reported under previous GAAP are as under: (` in crores) As at April 1, 2015 Particulars Aggregate fair value Aggregate adjustments to the carrying amount Fleet 1300.97 (815.23) Ships under construction disclosed under Capital Work-in-progress 121.14 (104.92) Total 1422.11 (920.15) b) The ownership flats and buildings include ` 11,760 (Previous Year : ` 11,760) being value of shares held in various co-operative societies. c) The deed of assignment in respect of the Company’s leasehold property at Worli is yet to be transferred in the name of the Company. d) Deductions under Fleet represent vessel acquired and sold on the same day and hence no depreciation has been charged thereon during the year ended March 31, 2016. e) Other adjustments comprise of fluctuation of the rupee against foreign currencies and losses/(gains) on hedging contracts (including on cancellation of forward covers), relating to long term monetary items for acquisition of depreciable capital assets and losses/(gains) on forward contracts for hedging capital commitments for acquisition of depreciable assets. f) Fleet with a carrying amount of ` 3012.15 crores (as at March 31, 2016 : ` 2222.82 crores; as at April 1, 2015 : ` 2657.15 crores) and buildings with a carrying amount of ` 0.26 crore (as at March 31, 2016 : ` 0.26 crore; as at April 1, 2015 : ` 0.27 crore) have been mortgaged to secure borrowings of the Company (Refer Note 16). The Company is not allowed to mortgage these assets as security for other borrowings or to sell them to another entity, without approval of the lenders/security trustees. m) Depreciation on Property, Plant and Equipment and Amortisation of Intangible Asset i) Depreciation or amortisation is provided on Straight Line Method basis so as to write off the original cost of the asset less its estimated residual value over the estimated useful life. The estimated useful life of the assets are as under : Asset Type Estimated Useful Life Property, plant and equipment Fleet (Main) - Crude Oil and Product Tankers 20 years - Dry Bulk Carriers* 23 years - Gas Carriers* 27 years - Offshore Supply Vessels 20 years - Speed Boats 13 years Fleet (Component) - Grabs 10 years - Dry Dock Period from survey certificate date till the estimated date for next special survey Modern Rigs 30 years
|103| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Asset Type Estimated Useful Life Leasehold Land Lease period Leasehold Improvements Lease Period Ownership Flats and Buildings 60 years Furniture & Fixtures, Office Equipment, etc.* 5 years Computers - Servers and Networks 6 years - End User Devices 3 years Vehicles* 4 years Mobiles* 2 years Plant and Equipment* 3 to 10 years Intangible Assets Software 5 years * For these classes of assets, based on internal technical assessment and past experience, the Management believes that the useful lives as given above, best represent the period over which the Management expects the use of the assets. The useful lives of these assets are different from the useful lives as prescribed under Part C of Schedule II to the Companies Act, 2013. i) Estimated useful life of the Fleet, Rigs and Ownership Flats and Buildings is considered from the year of built. Estimated useful life in case of all other assets is considered from the date of acquisition by the Company. ii) Residual value in case of Fleet (other than Offshore Supply Vessels and Speed Boats) is estimated initially as amount equal to product of long tonnes and estimated scrap value per long tonne based on previous ten years moving average of scrap rates. Residual value in case of Offshore Supply Vessels has been estimated on the basis of Light Displacement Weight (LDT) of the vessels and the prevailing average rate for steel scrap. The residual value in case of rigs has been estimated at 5% of the cost of rig. In case of other assets, the residual value, being negligible, has been considered as Nil. iii) The estimated useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. 19. VEDANTA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies (i) Mining properties The costs of mining properties, which include the costs of acquiring and developing mining properties and mineral rights, are capitalised as property, plant and equipment under the heading “Mining properties” in the year in which they are incurred. When a decision is taken that a mining property is viable for commercial production (i.e. when the company determines that the mining property will provide sufficient and sustainable return relative to the risks and the company decided to proceed with the mine development), all further pre-production primary development expenditure other than land, buildings, plant and equipment is capitalised as part of the cost of the mining property until the mining property is capable of commercial production. Exploration and evaluation assets are recognized as assets at their cost of acquisition, subject to meeting the commercial production criteria as above and are subject to impairment review on annual basis, or more frequently if indicators of impairment exist.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |104| The stripping cost incurred during the production phase of a surface mine is deferred to the extent the current period stripping cost exceeds the average period stripping cost over the life of mine and recognized as an asset if such cost provides a benefit in terms of improved access to ore in future periods and certain criteria are met. When the benefit from the stripping costs are realised in the current period, the stripping costs are accounted for as the cost of inventory. If the costs of inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. The Company uses the expected volume of waste compared with the actual volume of waste extracted for a given value of ore production for the purpose of determining the cost of the stripping activity asset. Deferred stripping cost are included in mining properties within property, plant and equipment and disclosed as a part of mining properties. After initial recognition, the stripping activity asset is depreciated on a unit of production method over the expected useful life of the identified component of the ore body. In circumstance, where a property is abandoned, the cumulative capitalized costs relating to the property are written off in the same period. Commercial reserves are proved and probable reserves. Changes in the commercial reserves affecting unit of production calculations are dealt with prospectively over the revised remaining reserves. (ii) Oil and gas assets- (developing/producing assets) For oil and gas assets a successful efforts based accounting policy is followed. Costs incurred prior to obtaining the legal rights to explore an area are expensed immediately to the statements of profit and loss. All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons has been demonstrated are capitalised within property, plant and equipment - development/producing assets on a field-by-field basis. Subsequent expenditure is capitalised only where it either enhances the economic benefits of the development/producing asset or replaces part of the existing development/ producing asset. Any remaining costs associated with the part replaced are expensed. Net proceeds from any disposal of development/ producing assets are credited against the previously capitalised cost. A gain or loss on disposal of a development/producing asset is recognised in the statements of profit and loss to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset. (iii) Other property, plant and equipment The initial cost of property, plant and equipment 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. It also includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Items such as spares are capitalized when they meet the definition of property, plant and equipment. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Likewise, expenditure towards major inspections and overhauls are identified as a separate component and depreciated over the expected period till the next overhaul expenditure Land acquired free of cost or at below market rate from the government is recognized at fair value with corresponding credit to deferred income. On transition to Ind AS, the Company has elected to use the fair value of certain items of plant and equipment and land on the date of transition and designate the same as deemed cost as at April 01, 2015. For the remaining assets, the Company has applied Ind AS retrospectively, from the date of their acquisition. Also Refer note 55 on First time adoption of Ind AS.
|105| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Subsequent costs and disposal Subsequent expenditure related to an item of property plant and equipment is added to its book value only if it increases the future economic benefits from the existing asset beyond its previously assessed standard of performance/life. All other expenses on existing property, plant and equipment, including day-today repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within other income/other expenses in statement of profit and loss. (iv) Capital-work-in-progress Assets in the course of construction are capitalized in capital work in progress account. At the point when an asset is capable of operating in the manner intended by management, the cost of construction is transferred to the appropriate category of property, plant and equipment. Costs (net of income) associated with the commissioning of an asset are capitalised until the period of commissioning has been completed and the asset is ready for its intended use. (v) Depreciation, depletion and amortisation expense Mining properties and other assets in the course of development or construction and freehold land are not depreciated. Mining properties The capitalised mining properties are amortised on a unit of- production basis over the total estimated remaining commercial reserves of each property or group of properties and are subject to impairment review. Estimated useful life of assets are as follows: Asset Useful Life (In years) Buildings (Residential, factory etc.) 30-60 Plant and equipment 15-40 Railway siding 15 Roads (grouped under buildings) 3-10 Office equipment 3-6 Furniture and fixture 8-10 Vehicles 8-10 Ships 25 Aircraft 20 River fleet 28 Lease hold buildings are amortised over the duration of the shorter of the useful life or lease term. Oil and gas assets All expenditures carried within each field are amortized from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, generally on a field-by-field basis or group of fields which are reliant on common Infrastructure Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |106| data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs required to access commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively Other assets Depreciation on other property, plant and equipment is calculated using the straight-line method (SLM) to allocate their cost, net of their residual values, over their estimated useful lives (determined by the management based on technical estimates) or, in the case of certain leased assets, the shorter lease term as given below. The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Restoration, rehabilitation and environmental costs An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a mine or oil fields. Such costs, discounted to net present value, are provided for and a corresponding amount is capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are charged to profit or loss over the life of the operation through the depreciation of the asset and the unwinding of the discount on the provision. The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The cost of the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, changes to lives of operations, new disturbance and revisions to discount rates. The adjusted cost of the asset is depreciated prospectively over the lives of the assets to which they relate. The unwinding of the discount is shown as finance cost in statement of profit or loss. Costs for the restoration of subsequent site damage, which is caused on an ongoing basis during production, are charged to profit or loss as extraction progresses. Where the costs of site restoration are not anticipated to be material, they are expensed as incurred. Carrying value of exploration and evaluation assets The recoverability of a project is assessed under Ind AS 106. Exploration assets are assessed by comparing the carrying value to higher of fair value less cost of disposal or value in use if there exist indicators for impairment. Change to the valuation of exploration assets is an area of judgement. Further details on the Company’s accounting policies on this are set out in accounting policy above. The amounts for exploration and evaluation assets represent active exploration projects. These amounts will be written off to the statement of profit and loss as exploration costs unless commercial reserves are established or the determination process is not completed and there are no indications of impairment. The outcome of ongoing exploration, and therefore whether the carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain. Details of impairment charge/reversal impact and the assumptions used are disclosed in note 34 and carrying values of exploration and evaluation assets in note 5. Site restoration, rehabilitation and environmental costs Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at the end of the life of the mine. The costs are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling and removing these facilities and the costs of restoration are capitalised when incurred reflecting the Company’s obligations at that time. The provision for decommissioning oil and gas assets is based on the current estimates of the costs for removing and decommissioning production facilities, the forecast timing of settlement of decommissioning liabilities and the appropriate discount rate.A corresponding provision is created on the liability side. The capitalised asset is charged to profit or loss over the life of the asset through depreciation over the life of the operation and the provision is increased each period via unwinding the discount on the provision.
|107| Chap. 7 – Ind AS 16 — Property, Plant & Equipment Management estimates are based on local legislation and/or other agreements. The actual costs and cash outflows may differ from estimates because of changes in laws and regulations, changes in prices, analysis of site conditions and changes in restoration technology. Details of such provisions are set out in note 21 and 27. Items capitalised during the year on assets under construction* (` in Crore) Particulars For the year ended March 31, 2017 For the year ended March 31, 2016 (i) Cost of materials consumed 962.52 453.64 (ii) Power and fuel charges 613.16 298.95 (iii) Repairs others 0.95 2.72 (iv) Consumption of stores and spare parts 52.42 5.52 (v) Rent, rates and taxes 0.13 1.47 (vi) Employee benefits expense 14.20 36.64 (vii) Miscellaneous expenses 5.21 40.55 (viii) Borrowing cost (Refer note 32) 555.87 25.21 (ix) Insurance 0.57 6.64 (x) Conveyance and travelling expenses 0.09 0.48 (xi) Net (gain)/loss on foreign currency transactions and translation (27.12) 114.44 Total expenditure (a) 2,178.00 986.26 (xii) Revenue during trial run 1,119.29 571.51 (xiii) Interest and Other income 0.06 8.46 Total income (b) 1,119.35 579.97 Net amount capitalised (a)-(b) 1,058.65 406.29 Sectoral Benefit - Power Plants To encourage the establishment of certain power plants, provided certain conditions are met, tax incentives exist to exempt 100% of profits and gains for any ten consecutive years within the 15 year period following commencement of the power plant’s operation. However, such undertakings generating power would continue to be subject to the MAT provisions. Sectoral benefit – Oil & Gas Provided certain conditions are met, profits of newly constructed industrial undertakings engaged in the oil & gas sector may benefit from a deduction of 100% of the profits of the undertaking for a period of seven consecutive years. This deduction is only available to blocks licensed prior to March 31, 2011. However, such businesses would continue to be subject to the MAT provisions. Erstwhile Cairn India Limited (now merged with Vedanta Limited) benefited from such deductions till March 31, 2016. 20. WIPRO LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Recognition and measurement Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing costs directly attributable to the construction of a qualifying asset are capitalized as part of the cost.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |108| Depreciation The Company depreciates property, plant and equipment over the estimated useful life on a straight-line basis from the date the assets are available for use. Assets acquired under finance lease and leasehold improvements are amortized over the shorter of estimated useful life of the asset or the related lease term. Term licenses are amortized over their respective contract term. Freehold land is not depreciated. The estimated useful life of assets are reviewed and where appropriate are adjusted, annually. The estimated useful lives of assets are as follows: Category Useful life Buildings 28 to 40 years Plant and machinery 5 to 21 years Computer equipment and software 2 to 7 years Furniture, fixtures and equipment 3 to 10 years Vehicles 4 to 5 years When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. The cost of property, plant and equipment not available for use as at each reporting date is disclosed under capital work-in-progress. The Company assesses long-lived assets such as property, plant, equipment and acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. If any such indication exists, the Company estimates the recoverable amount of the asset or group of assets. The recoverable amount of an asset or cash generating unit is the higher of its fair value less cost of disposal (FVLCD) and its value-in-use (VIU). The VIU of longlived assets is calculated using projected future cash flows. FVLCD of a cash generating unit is computed using turnover and earnings multiples. If the recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount,the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the reporting date, there is an indication that a previously assessed impairment loss no longer exists,the recoverable amount is reassessed and the impairment losses previously recognized are reversed such that the asset is recognized at its recoverable amount but not exceeding written down value which would have been reported if the impairment losses had not been recognized initially. Goodwill is tested for impairment at least annually at the same time and when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The goodwill impairment test is performed at the level of cash-generating unit or groups of cashgenerating units which represent the lowest level at which goodwill is monitored for internal management purposes. An impairment in respect of goodwill is not reversed. ll
|109| Chap. 8 – Ind AS 17 — Leases Chapter 8 Ind AS 17 — Leases 1. ASIAN PAINTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies 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. In respect of assets taken on operating lease, lease rentals are recognized as an expense in the Statement of Profit and Loss on straight line basis over the lease term unless another systematic basis is more representative of the time pattern in which the benefit is derived from the leased asset; or the payments to the lessor are structured to increase in the line with expected general inflation to compensate for the lessor’s expected inflationary cost increases. Disclosures Pursuant to Ind AS 17 — ‘Leases’, the following information is disclosed. Assets given on operating lease The Company does not have any assets given on operating lease during the reporting period. Assets taken on operating lease The Company has taken certain assets such as Vehicles, Computers, Information Technology hardware and Office space on operating lease. The lease rentals are payable by the Company on a monthly or quarterly basis. Future minimum lease rentals payable under non-cancellable lease agreements are as under: (` in Crore) As at 31.3.2017 As at 31.3.2016 As at 1.4.2015 i) Not later than one year 15.67 8.67 8.22 ii) Later than one year and not later than five years 19.46 12.46 10.99 iii) Later than five years - - - TOTAL 35.13 21.13 19.21 Lease payments recognised in the Statement of Profit and Loss for the year is ` 195.56 crore (Previous year ` 156.13 crore). Assets taken on Operating Leases a) The parent company has taken certain assets such as Vehicles, Computers, Information Technology hardware, and Office spare on operating lease. The lease rentals are payable by Company on a monthly or quarterly basis. In addition, certain overseas subsidiaries have also taken certain assets on operating lease.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |110| b) The future minimum lease rentals payable under non-cancellable lease agreements are as under: (` in Crore) Particulars As at 31.3.2017 As at 31.3.2016 As at 1.4.2015 Not Later than 1 year 23.41 16.49 15.58 Later than 1 year and not later than 5 years 28.24 23.14 27.81 Later than five years 17.99 22.74 34.29 TOTAL 69.64 62.37 77.68 c) Lease payments recognized in the consolidated Statement of Profit and Loss for the year is ` 217.91 crore (Previous year ` 179.44 crore). Assets taken on finance lease a) Certain subsidiaries have taken vehicles on finance lease which effectively transferred to the respective subsidiaries substantially all of the risks and benefits incidental to the ownership. b) Future minimum lease rentals payable as at 31st March, 2017 as per the lease agreements are as under: (` in crore) Particulars As at 31.3.2017 As at 31.3.2016 As at 1.4.2015 Minimum Lease payment Finance charge allocated to future periods Present Value Minimum lease payment Finance charge allocated to future periods Present Value Minimum lease payment Finance charge allocated to future periods Present Value Not later than 1 year 0.86 0.21 0.65 0.98 0.30 0.67 0.97 0.34 0.63 Later than 1 year and not later than 5 years 1.52 0.37 1.15 1.98 0.42 1.55 2.34 0.51 1.83 Later than five years 0.66 0.25 0.41 0.78 0.29 0.49 0.85 0.33 0.52 TOTAL 3.04 0.83 2.21 3.74 1.01 2.71 4.16 1.18 2.98 c) The information on gross amount of leased assets, depreciation and impairment is given in Note 2. Assets given on Finance Lease a) Certain subsidiaries have leased some of their plant and equipment on finance lease which effectively transferred substantially all of the risks and benefits incidental to the ownership. b) The total gross investment in these leases and the present value of minimum lease payment receivable as on 31st March, 2017 is as under: (` in crore) Particulars As at 31.3.2017 As at 31.3.2016 As at 1.4.2015 Gross investment in lease Unearned mOBODF Income Present value receivables Gross investment in lease Unearned mOBODF Income Present value receivables Gross investment in lease Unearned mOBODF Income Present value receivables Not later than 1 year 0.49 0.34 0.15 0.81 0.28 0.53 1.63 0.88 0.75 Later than 1 year and not later than 5 years 0.11 0.03 0.08 0.08 - 0.08 0.32 0.07 0.25 Later than five years - - - - - - - - - TOTAL 0.60 0.37 0.23 0.89 0.28 0.61 1.95 0.95 1.00
|111| Chap. 8 – Ind AS 17 — Leases 2. ATUL LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies As a lessee Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate expected inflationary cost increases for the lessor. As a lessor Lease income from operating leases where the Company is a lessor is recognised as income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the Balance Sheet based on their nature. Leases of property, plant and equipment where the Company as a lessor has substantially transferred all the risks and rewards are classified as finance lease. Finance leases are capitalised at the inception of the lease at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rent receivables, net of interest income, are included in other financial assets. Each lease receipt is allocated between the asset and interest income. The interest income is recognised in the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the asset for each period. Under combined lease agreements, land and building are assessed individually. Lease rental attributable to the operating lease are charged to Statement of Profit and Loss as lease income whereas lease income attributable to finance lease is recognised as finance lease receivable and recognised on the basis of effective interest rate. Disclosures Operating lease The Company has taken various residential and office premises under operating lease or leave and licence Agreements. These are generally cancellable, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Statement of Profit and Loss under ‘Rent’ in Note 26. Finance lease The Company has given a building on finance lease for a term of 30 years. Future minimum lease payments receivable under finance leases together with the present value of the net minimum lease payments (MLP) are as under: (` crore) Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Minimum lease payments Present value of MLP Minimum lease payments Present value of MLP Minimum lease payments Present value of MLP Not later than one year 0.20 0.20 – – 0.20 0.20 Later than one year and not later than five years 0.40 0.34 0.40 0.35 0.40 0.33 Later than five years 2.00 0.84 2.20 0.94 2.20 0.88 Total minimum lease payments receivable 2.60 1.38 2.60 1.29 2.80 – Less: Unearned finance Income 1.22 – 1.31 – 1.38 –
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |112| (` crore) Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Minimum lease payments Present value of MLP Minimum lease payments Present value of MLP Minimum lease payments Present value of MLP Present value of minimum lease payments receivable 1.38 1.38 1.29 1.29 1.42 – Less: Allowance for uncollectible lease payments – – – – – – 1.38 1.38 1.29 1.29 1.42 – The Company has taken on lease a parcel of land from Gujarat Industrial Development Corporation for a period of 99 years with an option to extend the lease by another 99 years on expiry of lease at a rental that is 100% higher than the current rental. However, the Company has no specific obligation for renewal. The Company believes has considered that such a lease of land transfers substantially all of the risks and rewards incidental to ownership of land, and has thus accounted for the same as finance lease. 3. BATA INDIA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1st April, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition. Company is lessee A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A lease which is not a finance lease is classified as Operating lease. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term unless either (a) another systematic basis is more represantative of the time pattern of the user’s benefit even if the payments to the lessors are not on that basis, or (b) the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases. Significant Accounting judgments, estimates and assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgments In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:
|113| Chap. 8 – Ind AS 17 — Leases Operating lease commitments — Company as lessee The Company has taken shop premises under operating lease agreements. The lease agreements generally have an escalation clause and there are no sub-leases. These leases are generally not non-cancellable and are renewable by mutual consent on mutually agreed terms. The Company based on a evaluation of the terms and conditions of the agreements assessed that the escalation are as per the mutually agreed terms and are not structured to increase necessarily in line with expected general inflation and hence operating lease payments are continued to be recognised as an expense in The Statement of Profit and Loss on straight line basis over the lease term. Disclosures Leases Assets Taken on Operating Lease The Company has taken various residential, office, warehouse and shop premises under operating lease agreements. The lease agreements generally have an escalation clause and there are no sub-leases. These leases are generally not non-cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. The aggregate lease rentals payables are charged as ‘Rent’ in Note 25. Future minimum rentals payable under non-cancellable operating leases as at 31st March are, as follows: (` in Crore) Lease Rentals 31st March, 2017 31st March, 2016 Within one year 66.33 34.75 After one year but not more than five years 5.56 4.16 More than five years - - 4. BHARTI AIRTEL LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an arrangement is a lease is based on whether fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Leases where the lessor transfers substantially all the risks and rewards of ownership of the leased asset are classified as finance lease and other leases are classified as operating lease. Operating lease receipts/payments are recognised as an income/expense on a straight line basis over the lease term unless the lease payments increase in line with expected general inflation. a. Company as a lessee Assets acquired under finance leases are capitalised at the lease inception at lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between finance charges (recognised in the statement of profit and loss) and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability for each period. b. Company as a lessor assets leased to others under finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is recognised based on the periodic rate of return on the net investment outstanding in respect of the finance lease.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |114| Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised in Statement of profit and loss on a stratght line basis over the lease term. The Company enters into ‘Indefeasible right to use’ arrangement wherein the assets are given on lease over the substantial part of the asset life. However, the title to the assets and significant risk associated with the operation and maintenance of these assets remains with the Company. Hence, such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the balance sheet. Critical judgments in applying the Company’s accounting policies Arrangement containing lease The Company assesses the contracts entered with telecom operators/passive infrastructure services providers to share tower infrastructure services so as to determine whether these contracts that do not take the legal form of a lease convey a right to use an asset or not. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, that such contracts are in the nature of leases. Most of these leases are classified as operating unless the term of the agreement is for the major part of the estimated economic life of the leased asset, which is accounted for as finance lease. Disclosures Lease Commitments a) Operating Lease As per the agreements maximum obligation on long- term non-cancellable operating leases are as follows: As lessee The future minimum lease payments obligations are as follows:— Particulars As of March 31, 2017 As of March 31, 2016 As of April 1, 2015 Not later than one year 72,725 68,645 60,478 Later than one year but not later than five years 277,273 215,297 218,622 Later than five years 90,895 102,969 111,760 440,893 386,911 390,860 Lease Rentals 71,059 63,941 Lease equalisation adjustments (421) 1,473 The escalation clause includes escalation ranging from 0 to 25%, includes option of renewal from 1 to 15 years and there is no restrictions imposed by lease arrangements. As lessor The Company has entered into non–cancellable lease arrangements to provide dark fiber on indefeasible right of use (‘IRU’) basis. Due to the nature of the transaction, it is not possible to compute gross carrying amount, depreciation for the year and accumulated depreciation of the asset given on operating lease as of March 31, 2017 and accordingly, disclosures required by Ind AS-17 are not provided. The future minimum lease payment receivables are as follows: As lessor Particulars As of March 31, 2017 As of March 31, 2016 As of April 1, 2015 Not later than one year 221 337 328 Later than one year but not later than five years 929 1,344 1,207 Later than five years 430 430 904 1,580 2,111 2,439
|115| Chap. 8 – Ind AS 17 — Leases b) Finance Lease As lessee Finance lease obligation of the Company as of March 31, 2017 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 668 111 557 Later than one year but not later than five years 1,387 223 1,164 2,055 334 1,721 Finance lease obligation of the Company as of March 31, 2016 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 713 92 621 Later than one year but not later than five years 1,519 228 1,291 2,232 320 1,912 Finance lease obligation of the Company as of April 1, 2015 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 42 12 30 Later than one year but not later than five years 117 16 101 159 28 131 The escalation clause includes escalation ranging from 0% to 7.5%, includes option of renewal in block of 3 years. As lessor The future minimum lease payments receivable of the Company as of March 31, 2017 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 133 25 107 Later than one year but not later than five years 189 17 172 322 42 279 The future minimum lease payments receivable of the Company as of March 31, 2016 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 126 33 94 Later than one year but not later than five years 297 37 260 423 70 354 The future minimum lease payments receivable of the Company as of April 1, 2015 is as follows:— Particulars Future minimum lease payments Interest Present value Not later than one year 45 13 32 Later than one year but not later than five years 123 17 106 168 30 138
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |116| 5. BLUE DART EXPRESS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease rental payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases. Disclosures 34 Operating Leases [Refer Note 3(h)] a. The Company has entered into various non-cancellable operating lease agreements for official/ residential premises for a period of two to five years. Future minimum rentals payable under noncancellable operating leases are as follows: As at March 31, 2017 in ` lakh As at March 31, 2016 in ` lakh As at April 1, 2015 in ` lakh Not later than one year 2,175 1,787 2,505 Later than one year and not later than five years 3,249 2,292 3,384 Later than five years 84 94 316 Charge for the year 2,707 2,397 3,410 b. Company has entered into various cancellable leasing arrangements for motor cars, office equipments and for official/residential premises. The lease rentals for motor cars of ` 591 lakh [Previous year - ` 498 lakh] have been included under the head “Employee Benefits Expense — Salaries, Bonus and Leave Encashment” under note 29 forming part of the Statement of Profit and Loss. Lease rentals for office equipments of ` 321 lakh [Previous year — ` 278 lakh] has been included under the head “Other Expenses — Lease Rentals” under Note 32 forming part of the Statement of Profit and Loss and lease rentals for official and residential premises of ` 9,246 lakh [Previous year — ` 8,430 lakh] has been included under the head “Other Expenses — Rent” under Note 32 forming part of the Statement of Profit and Loss. c. Company has entered into various cancellable leasing arrangements for network vehicles. The lease component included in domestic network operating cost amounting to ` 1,718 [Previous year - ` 1,596 lakh] has been included under the head “Freight, Handling and Servicing Costs- Domestic Network operating cost” under note 28 forming part of the Statement of Profit and Loss. d. Company has entered into Aircraft Crew Maintenance Insurance (ACMI) agreement with Blue Dart Aviation Limited. The lease component included in Aircraft charter costs amounting to ` 8,240 [Previous year - ` 6,953 lakh] has been included under the head “Freight, Handling and Servicing Costs — Aircraft charter costs” under note 28 forming part of the Statement of Profit and Loss. 6. CIPLA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1st April, 2015, the date of inception is deemed to be 1st April, 2015 in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards.
|117| Chap. 8 – Ind AS 17 — Leases (i) Company as a lessee A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Finance leases are capitalised at the commencement of the lease at the inception date 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 reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised 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 certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an expense in the statement of profit and loss on accrual basis as escalation in lease arrangements are for expected inflationary cost. (ii) Company as a lessor Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Estimates and Judgments Key accounting estimates and judgments The preparation of the Company’s financial statements requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Critical accounting estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below: Judgments The Company has evaluated each lease agreement for its classification between finance lease and operating lease. The Company has reached its decisions on the basis of the principles laid down in Ind AS 17 “Leases” for the said classification. The Company has also used Appendix C of Ind AS 17 for determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and based on the assessment whether: fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and the arrangement conveys a right to use the asset. Disclosures Note 42: Lease Accounting Where the Company is a Lessee The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and licence agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |118| arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under ‘Rent’ in Note 36. Where the Company is a Lessor The Company has given certain premises under operating lease or leave and licence agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as Operating lease. Lease income on such operating lease is recognised in Statement of Profit and Loss under ‘Rent’ in Note 29. Consolidated Financial Statements Disclosures Note 50: Lease Accounting Where Group is Lessee The Group has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable and non-cancellable operating lease or leave and licence agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under ‘Rent’ in Note 40. The details of non-cancellable operating leases contracted by subsidiaries/step down subsidiaries, but not recognised in the financial statements are as below: (` in Crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Minimum Lease Payment Not Later than one year 44.90 20.87 Later than one year but not later than five years 116.99 83.16 Later than five years 62.38 53.21 Total 224.27 157.24 Where Company is Lessor The Group has given certain premises under operating lease or leave and licence agreement. The Group retains substantially all risks and benefits of ownership of the leased asset and hence classified as Operating lease. Lease income on such operating lease is recognised in statement of Profit and Loss under ‘Rent Income’ in Note 34. 7. COLGATE PALMOLIVE (INDIA) LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies As a Lessee Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives
|119| Chap. 8 – Ind AS 17 — Leases received from the lessor) are charged to the Statement of Profit and Loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases. Disclosures B. Operating Leases (i) The Company has taken operating leases for machinery, office premises, residential premises, warehouses, laptops, printers and vehicles. These lease arrangements include both cancellable and non-cancellable leases. Description of significant operating lease arrangements in respect of premises (including warehouses): The Company has given refundable interest free security deposit under the lease agreements. All agreements contain provision for renewal at the option of either party and also include escalation clause. All agreements provide for restriction on sub lease. Future minimum lease payments under non-cancellable operating leases are as follows: Year ended March 31, 2017 Year ended March 31, 2016 ` Lacs ` Lacs Up to 1 year 24,94.87 26,18.97 Greater than 1 year but less than 5 years 63,93.65 83,19.94 Greater than 5 years – 5,29.05 Lease payments recognised in Statement of Profit and Loss are shown as “Lease Rentals” under Other Expenses in Note 30. 40,56.25 39,53.37 Operating lease expense pertaining to Contract Manufacturers included in Cost of Materials Consumed 9,88.82 8,21.78 8. DR. REDDY’S LABORATORIES LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies At the inception of each lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement. Finance leases A finance lease is recognised as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of the minimum lease payments. Initial direct costs, if any, are also capitalised and, subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense 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. Operating leases Other leases are operating leases, and the leased assets are not recognised on the Company’s balance sheet. Payments made under operating leases are recognised in the statement of profit and loss on a straight line basis over the term of the lease. Operating lease incentives received from the landlord are recognised as a reduction of rental expense on a straight line basis over the lease term.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |120| Disclosures 2.32 Operating Leases The Company has leased offices and vehicles under various operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. Rental expense under these leases was `297 and ` 271 for the years ended 31st March, 2017 and 31st March, 2016, respectively. The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below: Particulars As at 31st March, 2017 As at 31st March, 2016 Less than one year 107 85 Between one and five years 122 96 Total 229 181 2.33 Finance Lease The Company has taken vehicles on finance lease. The future minimum lease payments and their present values as at 31st March, 2017 are as follows: Particulars Present Value of Minimum Lease Payments Future Interest Future Minimum Lease Payments Not later than one year 1 -* 1 Later than one year and not later than five years - - - Total 1 -* 1 *Rounded off to millions above The future minimum lease payments and their present values as at 31st March, 2016 were as follows: Particulars Present Value of Minimum Lease Payments Future Interest Future Minimum Lease Payments Not later than one year 7 5 12 Later than one year and not later than five years 1 - 1 Total 8 5 13 9. HAVELLS INDIA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. For arrangements into prior to April 1, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition. Company as a lessee A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Finance leases are capitalised at the commencement of the lease at the inception date at 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 reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with Company’s general policy on the borrowing cost.
|121| Chap. 8 – Ind AS 17 — Leases A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an expense in the statement of profit or loss account on straight line basis over the lease term, unless the payments are structured to increase in line with the expected general inflation to compensate for the lessor in expected inflationary cost increase. Company as a lessor Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straightline basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Significant accounting judgments, estimates and assumptions The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgments In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements. Operating lease commitments — Company as lessor The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a substantial portion of the economic life of the commercial property, and that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Operating lease commitments — Company as lessee The Company has taken various commercial properties on leases. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a substantial portion of the economic life of the commercial property, and that it does not retain all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Assessment of lease contracts Significant judgment is required to apply lease accounting rules under Appendix C to Ind AS 17: determining whether an Arrangement contains a Lease. In assessing the applicability to arrangements entered into by the Company, management has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements and other significant terms and conditions of the arrangement to conclude whether the arrangements meet the criteria under Appendix C to Ind AS 17.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |122| Notes/Disclosures 12. Assets Classified As Held For Sale (` in crore) As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Property, plant and equipment Plant and machinery retired from active use 0.06 0.10 0.39 Investment in associate Company (unquoted) Feilo Exim Limited (erstwhile Havells Exim Limited) {refer Note No. 32(1)} - 0.00* - Nil (March 31, 20 : 200) (April 1, 2015: Nil) Equity Shares of 1 Hong Kong dollar each fully paid up *carrying value of investment is ` 1,160 Investment in joint venture Jiangsu Havells Sylvania Lighting Co., Limited {refer note no. 32(1)} (50% contribution paid in capital) 16.21 - - 16.27 0.10 0.39 Note: (a) On March 31, 2017, the Company classified certain plant and machinery retired from active use and held for sale recognised and measured in accordance with Ind AS 105 “Non-Current Assets Held For Sale and Discontinued Operations” at lower of its carrying amount and fair value less cost to sell. The Company expects to complete the sale by 30th September, 2017 by selling it in the open market. (b) Refer to Note 32(1) for information of investment in associate and joint venture held for sale. 10. IDEA CELLULAR INDIA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Leases The Company evaluates whether an arrangement is (or contains) a lease based on the substance of the arrangement at the inception of the lease. An arrangement which is dependent on the use of a specific asset or assets and conveys a right to use the asset or assets, even if it is not explicitly specified in an arrangement is (or contains) a lease. Leases are classified as finance lease 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. Company as a lessee Finance lease Assets held under finance leases are initially recognised as assets at the commencement of the lease at their fair value or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company’s general policy on borrowing costs. Such assets are depreciated/amortised over the period of lease or estimated useful life of the assets whichever is less. Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease Operating lease payments are recognised as an expense in the statement of profit and loss on a straight line basis unless payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increase; such increases are recognised in the year in
|123| Chap. 8 – Ind AS 17 — Leases which such benefits accrue. Contingent rentals arising, if any, under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Company as a lessor Finance lease Amounts due from lessees under finance leases are recognised as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting period so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Operating lease Rental income from operating lease is recognised on a straight line basis over the lease term unless payments to the Company are structured to increase in line with expected general inflation to compensate for the Company’s expected inflationary cost increase; such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. Contingent rents are recognised as revenue in the period in which they are earned. Estimates and Judgments Operating lease commitments – Company as lessee The Company has entered into lease agreements for properties and cell sites, where it has, on the basis of evaluation of the terms and conditions of the arrangement determined that the significant risks and rewards related to the assets and properties are retained with the lessors. Accordingly, such lease agreements are accounted for as operating leases. Further details about operating lease are given in Note 45. Disclosures Operating Lease Company as lessee The Company has entered into non-cancellable operating leases for offices, switches and cell sites for periods ranging from 36 months to 240 months. Lease payments amounting to ` 52,522.45 million (Previous year: ` 44,973.69 million) are included in rental and passive infrastructure expenses in the statement of profit and loss during the current year. Future minimum lease rentals payable under non-cancellable operating leases are as follows: ` million Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Within one year 48,254.95 42,264.91 36,965.54 After one year but not more than five years 140,612.85 122,015.51 120,216.08 More than five years 75,755.79 48,364.15 47,163.75 Company as lessor The Company has leased certain Optical Fibre Cables pairs (OFC) on Indefeasible Rights of Use (“IRU”) basis and certain cell sites under operating lease arrangements. The gross block, accumulated depreciation and depreciation expense of the assets given on lease are not separately identifiable and hence not disclosed.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |124| Future minimum lease rentals receivable under non-cancellable operating leases are as follows: ` million Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Within one year 402.76 1,404.54 757.18 After one year but not more than five years - 5,257.19 2,108.17 More than five years - 5,140.92 2,136.62 The Company has composite IT outsourcing agreements where in property, plant and equipment, computer software and services related to IT has been supplied by the vendor. Such property, plant and equipment received have been accounted for as finance lease. Correspondingly, such assets are recorded at fair value at the time of receipt and depreciated on the stated useful life applicable to similar IT assets of the company. 11. INFOSYS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the Statement of Profit and Loss over the lease term. Disclosures 2.21 Leases The lease rentals charged during the period are as follows : in ` crore Particulars Year ended March 31, 2017 2016 Lease rentals 284 175 The obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows : in ` crore Future minimum lease payable As at March 31, April 1, 2015 2017 2016 Not later than 1 year 275 170 101 Later than 1 year and not later than 5 years 809 417 284 Later than 5 years 631 315 158 The operating lease arrangements, are renewable on a periodic basis and for most of the leases, extend up to a maximum of 10 years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses. 12. JSW ENERGY LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies A lease is classified at the inception date as a finance lease or an operating lease. Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
|125| Chap. 8 – Ind AS 17 — Leases The Company as lessor Rental income from operating leases is generally recognised on a straight line basis over the term of the relevant lease except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. The Company as lessee Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments (discounted at the interest rate implicit in the lease or at the entity’s incremental borrowing rate). The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. Lease payments under an operating lease shall be recognised on a straight line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. Accounting for arrangements in the nature of lease Under appendix C to Ind AS 17, an entity may enter into an arrangement comprising a transaction or a series of related transactions, that do not take the legal form of lease but conveys a right to use an asset in return for a payment or series of payments. Arrangements meeting these criteria should be identified as either operating leases or finance leases. For determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an assessment of whether: a) Fulfilment of the arrangement is dependent on the use of specific asset or assets; and b) The arrangement conveys a right to use the asset. Disclosures The Company enters into agreements, comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments. In case of such arrangements, the Company applies the requirements of Ind AS 17 – Leases to the lease element of the arrangement. For the purpose of applying the requirements under Ind AS 17 – Leases, payments and other consideration required by the arrangement are separated at the inception of the arrangement into those for lease and those for other elements. Note No. 4A — Property, plant and equipment ` crore Particulars Land - Freeholda Land -Leaseholdb Buildingsd Plant and Equipmentc Office Equipment Furniture and Fixtures Vehicles Leasehold Improvements Total I. Gross carrying value Balance as at 1st April, 2016 105.23 14.32 906.24 4,623.14 41.28 57.49 9.64 0.01 5,757.35 Additions 4.25 - 11.81 116.22 1.25 2.76 3.95 - 140.24 Disposals / discard - - - (2.76) (0.03) - (0.43) - (3.22)
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |126| ` crore Particulars Land - Freeholda Land -Leaseholdb Buildingsd Plant and Equipmentc Office Equipment Furniture and Fixtures Vehicles Leasehold Improvements Total Balance as at 31st March, 2017 109.48 14.32 918.05 4,736.60 42.50 60.25 13.16 0.01 5,894.37 II. Accumulated depreciation Balance as at 1st April, 2016 - - 30.72 309.93 2.74 3.59 0.77 - 347.75 Depreciation expense for the year - - 32.92 318.90 3.31 4.16 1.40 - 360.69 Eliminated on disposal / discard - - - (0.05) (0.03) - (0.25) - (0.33) Balance as at 31st March, 2017 - - 63.64 628.78 6.02 7.75 1.92 - 708.11 III. Net carrying value as at 31st March, 2017 (I-II) 109.48 14.32 854.41 4,107.82 36.48 52.50 11.24 0.01 5,186.26 a) The Company has leased certain land aggregating to 77.61 acres (31st March, 2016 : 77.61 acres and 1st April, 2015 : 77.61 acres) to related parties for an amount aggregating to ` 2.31 crore (31st March, 2016 : ` 2.31 crore and 1st April, 2015 : ` 2.31 crore) for a period ranging from 25 to 99 years. b) Leasehold Land acquired by the Company under lease deed entitles the Company to exercise the option to purchase on an outright basis after 10 years from the date of lease deed and there will be no further consideration payable at the time of conversion of the same from leasehold to freehold. c) Includes net carrying value ` 100 (31st March, 2016 : ` 100 and 1st April, 2015 : ` 100) towards Company’s share of water supply system constructed on land not owned by the Company. d) Includes net carrying value ` 481.70 crore (31st March, 2016 : ` 492.77 crore and 1st April, 2015 : ` 467.69) being cost of office premises located at Mumbai, jointly owned (50%) with an Associate. e) Refer Note 15 for the details in respect of certain property, plant and equipments hypothecated/ mortgaged as security for borrowings. Note No. 30 – Operating lease The Company has taken certain premises on non-cancellable operating lease arrangement. Rentals charged to Statement of Profit and Loss ` 2.25 crore (Previous Year ` 2.43 crore) ` crore Particulars As at 31st March, 2017 As at 31st March, 2016 As at 1st April, 2015 The total of Future Minimum lease payments under non-cancellable operating lease for each of the following period are as under. a) Not later than 1 year 1.36 1.28 1.69 b) Later than 1 year and not later than 5 years * 0.00 1.34 2.59 c) Later than 5 years - - - * Less than ` 1 lakh Note No. 41 — Finance lease receivables The Company has entered into a power purchase agreement (“PPA”) on 23rd February, 2010 with Maharashtra State Electricity Distribution Company Limited for its Ratnagiri (SBU III) power plant unit of 300 MW. Such contract is for a term of 25 years from the date of commercial operation of the said unit. In respect of the said unit, entire capacity is tied up with the tariff which consists of capacity and energy charges. The Company is entitled to get the capacity charges after meeting the availability criterion as mentioned in the PPA.
|127| Chap. 8 – Ind AS 17 — Leases Amounts receivable under finance leases ` crore Particulars Minimum lease payments Present value of minimum lease payments As at 31st March, 2017 As at 31st March, 2016 As at 1st April, 2015 As at 31st March, 2017 As at 31st March, 2016 As at 1st April, 2015 Not later than one year 110.99 121.73 125.12 107.52 117.93 120.63 Later than one year and not later than five years 384.25 403.09 430.02 322.60 339.02 362.40 Later than five years 1,157.65 1,249.79 1,344.59 602.99 634.98 667.06 Total 1,652.88 1,774.61 1,899.73 1,033.11 1,091.93 1,150.09 Less: unearned finance income 619.77 682.68 749.64 - - - Lease Receivable 1,033.11 1,091.93 1,150.09 1,033.11 1,091.93 1,150.09 Unguaranteed residual values of assets leased under finance leases at the end of the reporting period are estimated at ` 150.39 crore (at 31st March, 2016: ` 150.39 crore; at 1st April, 2015: ` 150.39 crore). The interest rate inherent in the leases is determined at the contract date for the entire lease term. The average effective interest rate contracted is approximately 5.91% per annum (as at 31st March, 2016: 5.91% per annum; as at 1st April, 2015: 5.91% per annum). Notes No. 35: Finance lease receivables The Group has entered into a power purchase agreement (“PPA”) on 23rd February, 2010 with Maharashtra State Electricity Distribution Company Limited for its Ratnagiri (SBU III) power plant unit of 300 MW. Such contract is for a term of 25 years from the date of commercial operation of the said unit. In respect of the said unit, entire capacity is tied up with the tariff which consists of capacity and energy charges. The Group is entitled to get the capacity charges after meeting the availability criterion as mentioned in the PPA. Such lease is denominated in Indian Rupees. Amounts receivable under finance leases ` crore Particulars Minimum lease payments Present value of minimum lease payments As at 31st March, 2017 As at 31st March, 2016 As at 1st April, 2015 As at 31st March, 2017 As at 31st March, 2016 As at 1st April, 2015 Not later than one year 110.99 121.73 125.12 107.52 117.93 120.63 Later than one year and not later than five years 384.25 403.09 430.02 322.60 339.02 362.40 Later than five years 1,157.65 1,249.79 1,344.59 602.99 634.98 667.06 Total 1,652.88 1,774.61 1,899.73 1,033.11 1,091.93 1,150.09 Less: unearned finance income 619.77 682.68 749.64 - - - Lease Receivable 1,033.11 1,091.93 1,150.09 1,033.11 1,091.93 1,150.09 Unguaranteed residual values of assets leased under finance leases at the end of the reporting period are estimated at ` 150.39 crore (as at 31st March, 2016: ` 150.39 crore; as at 1st April, 2015: ` 150.39 crore). The interest rate inherent in the leases is determined at the contract date for the entire lease term. The average effective interest rate contracted is approximately 5.91% per annum (as at 31st March, 2016: 5.91% per annum; as at 1st April, 2015: 5.91% per annum).
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |128| 13. LARSEN & TOUBRO LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an agreement is, or contains, a lease is based on the substance of the agreement at the date of inception. (i) Finance leases A. Leases where the company has substantially all the risks and rewards of ownership of the related assets are classified as finance leases. Assets under finance leases are capitalised at the commencement of the lease at the lower of the fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period. B. Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease. Lease income is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease. (ii) Operating leases The leases which are not classified as finance lease are operating leases. A. Lease rentals on assets under operating lease are charged to the Statement of Profit and Loss on a straight line basis over the term of the relevant lease. B. Assets leased out under operating leases are continued to be shown under the respective class of assets. Rental income is recognised on a straight line basis over the term of the relevant lease. (Also refer to policy on depreciation, supra) Disclosures Disclosures pursuant to Ind AS 17 “Leases”: (a) Where the Company is a lessor (i) Operating leases The Company has given a building under non-cancellable operating lease, the future minimum lease payments receivable in respect of which are as follows: ` crore Sr. No. Particulars As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 1. Receivable not later than 1 year 48.69 46.42 20.02 2. Receivable later than 1 year and not later than 5 years 34.41 67.47 12.28 3. Receivable later than 5 years – – – Total 83.10 113.89 32.30 (b) Where the Company is a lessee (i) Finance leases (A) Assets acquired on finance lease comprises plant and equipment and land. The leases have a primary period, which is fixed and non-cancellable. The company has an option to renew the lease for a secondary period. (B) The minimum lease rentals and the present value of minimum lease payments in respect of assets acquired under finance leases are as follows:
|129| Chap. 8 – Ind AS 17 — Leases ` crore Sr. no. Particulars Minimum lease payments Present value of minimum lease payments As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 1. Payable not later than 1 year 0.56 0.01 – 0.50 – – 2. Payable later than 1 year and not later than 5 years 0.16 0.02 – 0.14 – – 3. Payable later than 5 years 0.15 0.15 – 0.06 0.07 – Total (1+2+3) 0.87 0.18 – 0.70 0.07 – Less: Future finance charges 0.17 0.11 – – – – Present value of minimum lease payments 0.70 0.07 – 0.70 0.07 – (C) Contingent rent recognised in the Statement of Profit and Loss: ` Nil (previous year: ` Nil) (ii) Operating leases (A) The Company has taken various commercial premises and plant and equipment under cancellable operating leases. These lease agreements are normally renewed on expiry. (B) Assets acquired on non-cancellable operating lease comprises commercial premises, cars and technology assets, the future minimum lease payments in respect of which are as follows: ` crore Sr. No. Particulars As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 1. Payable not later than 1 year 18.33 18.05 13.09 2. Payable later than 1 year and not later than 5 years 27.13 20.27 9.23 3. Payable later than 5 years – – – Total 45.46 38.32 22.32 (C) Lease rental expense in respect of operating leases: ` 109.10 crore (Previous year: ` 76.97 crore) (D) Contingent rent recognised in the Statement of Profit and Loss: v Nil (Previous year: ` Nil) 14. PVR LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. Where the Company is the lessee Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. A leased asset is depreciated on a straight-line basis over the useful life of the asset. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on an ongoing basis