Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |180| ii. Revenues from Data Managed Services (DMS) are recognised over the period of the respective arrangements based on contracted fee schedules. iii. Revenues from IRU of fibre capacity provided as operating lease are recognised on a straight-line basis over the term of the relevant IRU. iv. Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same and there is a reasonable assurance that the Company will comply with the conditions attached to them. v. Certain transactions with providers of telecommunication services are accounted for as non-monetary transactions depending on the terms of the agreements entered into with such telecommunication service providers. vi. Revenue in respect of annual maintenance service charges is recognised over the period for which services are provided. vii. Revenues from providing infrastructure managed and incidental services to banking sector are recognized on the basis of the contract with the customer at the end of each month based upon the following: 1. On the basis of number of transactions in such month. 2. On the basis of fixed service charge for the number of days of usage in such month. viii. Revenues from telecommunication network management and support services are derived based on unitpriced contracts. Revenue is recognised as the related services are performed, in accordance with the specific terms of the contract with the customers. Legal Cases against TCL for revenue 1. TRAI in December 2012, issued International Telecommunication Access to Essential Facilities at Cable Landing Stations (Amendment) 2012 (“Regulation”) dated 21 December 2012 seeking to regulate access facilitation charges, collocation charges, restoration charges and cancellation charges, wherein TRAI fixed the charges for access facilitation and colocation at cable landing stations, effective 1 January 2013. Since, prescribing such charges, adversely affected the Company, being aggrieved by the Regulation, the Company filed writ petition in the High Court, Chennai to set aside the impugned Regulation. On 24 January 2013, the High Court granted an ex parte, ad-interim stay on applicability of the impugned Regulation. On 11 November 2016, the Company has filed an appeal in the division bench of Madras High Court against the above court order and the same is pending with division bench for hearing. However, given the uncertainty on the timing of resolution, during the current year, the Company has recorded a provision towards reversal of revenue for ` 46.26 crores and other expense include a reversal towards operating and maintenance recovery of ` 98.78 crores. In 2016: `154.54 crores were included under contingent liabilities. 2. Upon expiry of the Company’s ISP license on 24th January 2014, DoT vide letter dated 20 February 2014 extended the validity of the said license for 3 months with condition that entire ISP revenue will be subject to license fees. This conditional extension by DoT, was challenged by the Company in TDSAT, which granted a stay subject to submission of undertaking that if petition fails then applicable license fees would be payable along with interest. Considering the above facts, the Company has disclosed an amount of ` 303.56 crores (2016: ` 176.31 crores, 2015: ` 80.08 crores) under contingent liabilities. 35. TATA MOTORS LIMITED ACCOUNTING POLICY (EXTRACTS) Revenue recognition Revenue is measured at fair value of consideration received or receivable.
|181| Chap. 9 – Ind AS 18 — Revenue from Contracts with Customers i) Sale of products The Company recognizes revenues on the sale of products, net of discounts, sales incentives, customer bonuses and rebates granted, when products are delivered to dealers or when delivered to a carrier for export sales, which is when title and risks and rewards of ownership pass to the customer. Sale of products includes export and other recurring and non-recurring incentives from governments (referred to as “incentives”). Revenues are recognized when collectability of the resulting receivable is reasonably assured. If the sale of products includes a determinable amount for subsequent services (multiple component contracts) the related revenues are deferred and recognized as income over the relevant service period. Amounts are normally recognized as income by reference to the pattern of related expenditure. Incentives are recognized when there is reasonable assurance that the Company will comply with the conditions and the incentive will be received. Incentives are recorded at fair value where applicable. Sale of products include incentives of ` 930.22 crores and ` 2,149.58 crores for the years ended March 31, 2017 and 2016, respectively. These include during the years ended March 31, 2017 and 2016, ` 561.04 crores and ` 996.08 crores, respectively, received by a foreign subsidiary as an indirect tax incentive that requires the subsidiary to meet certain criteria relating to vehicle efficiency and investment in engineering and research and development. The incentive is provided as a partial off set to the higher sales tax payable following implementation of new legislation. ii) Other operating revenues Other operating revenues include incentive of ` 110.01 crores and ` 82.84 crores for the years ended March 31, 2017 and 2016 respectively, towards Exports Promotion Capital Goods (EPCG) scheme. Further, it also includes during the years ended March 31, 2017 and 2016, ` 504.72 crores and ` 501.20 crores, respectively for Research and Development Expenditure Credit (RDEC) on qualifying expenditure by an indirect subsidiary in the UK. 36. TATA POWER LIMITED EXTRACTS FROM INDEPENDENT AUDITORS REPORT Emphasis of Matter We draw attention to the following matters in the notes to the Consolidated Ind AS financial statements: a) Note 36(e) to the consolidated Ind AS financial statements which describes uncertainties relating to the outcome of the Appeal filed before the Hon’ble Supreme Court. Pending outcome of the Appeal filed before the Hon’ble Supreme Court, no adjustment has been made by the Group in respect of the standby charges estimated at ` 519 crore accounted for as revenue in earlier periods and its consequential effects for the period upto 31st March, 2017. The impact of the same on the consolidated Ind AS financial statements for the year ended 31st March, 2017 cannot presently be determined pending the ultimate outcome of the matter. Since the Group is of the view, supported by legal opinion, that the Tribunal’s Order can be successfully challenged, adjustment, if any, will be recorded by the Group based on final outcome of the matter. ACCOUNTING POLICY (EXTRACTS) Revenue recognition Revenue is recognised to the extent that it is probable that economic benefit will flow to the Group and that the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances. (i) Sale of Power Revenue from Generation, Transmission and Distribution of power is recognised on an accrual basis and includes unbilled revenues accrued upto the end of the accounting year.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |182| The Group determines surplus/deficit (i.e. excess/shortfall of/in aggregate gain over Return on Equity entitlement) for the year in respect of its regulated operations based on the principles laid down under the relevant Tariff Regulations/Tariff Orders as notified by respective State Regulatory Commissions. In respect of such surplus/deficit, appropriate adjustments as stipulated under the regulations are made during the year. Further, any adjustments that may arise on annual performance review by respective State Regulatory Commissions under the aforesaid Tariff Regulations/Tariff Orders is made after the completion of such review. (ii) Delayed payment charges Delayed payment charges and interest on delayed payments are recognized, on grounds of prudence when recovered. 37. THE GREAT EASTERN SHIPPING COMPANY LIMITED ACCOUNTING POLICY (EXTRACTS) Revenue Recognition Income from services : In case of completed voyages, freight and demurrage earnings are recognised fully and in case of incomplete voyages, freight and demurrage earnings are recognised prorata on the basis of direct operating expenses incurred as compared to total estimated direct operating expenses for the voyage. Charter hire earnings are accrued on time proportion basis except where the charter party agreements have not been renewed/ finalised, in which case it is recognised on provisional basis. 38. THE INDIAN HOTELS COMPANY LIMITED ACCOUNTING POLICY (EXTRACTS) Revenue recognition Income from operation Revenue is measured at the fair value of the consideration received or receivable. Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management fees for the management of the hotels. Revenue is recognised upon rendering of the service, provided pervasive evidence of an arrangement exists, tariff/rates are fixed or are determinable and collectability is reasonably certain. Revenue from sale of goods or rendering of services is net of Indirect taxes, returns and discounts. The Group operates loyalty programme, which allows its eligible customers to earn points based on their spending at the hotels. The points so earned by such customers are accumulated. The revenue related to award points is deferred and on redemption of the award points, the revenue is recognised. Membership fees received from the loyalty program is recognized as revenue on time-proportion basis. Management fees earned from hotels managed by the Group are usually under long-term contracts with the hotel owner and is recognised when earned in accordance with the terms of the contract. 39. VEDANTA LIMITED ACCOUNTING POLICY (EXTRACTS) Revenue recognition Sale of goods Revenues from sales of goods are recognised when all significant risks and rewards of ownership of the goods sold are transferred to the customer which usually is on delivery of the goods to the shipping agent. Revenues from sale of by-products are included in revenue. Certain of the Group’s sales contracts provide for provisional pricing based on the price on The London Metal Exchange (“LME”), as specified in the contract, when shipped. Final settlement of the price is based
|183| Chap. 9 – Ind AS 18 — Revenue from Contracts with Customers on the applicable price for a specified future period. The Group’s provisionally priced sales are marked to market using the relevant forward prices for the future period specified in the contract and is adjusted in revenue. Revenue from oil, gas and condensate sales represents the Group’s share (net of Government’s share of profit petroleum) of oil, gas and condensate production, recognized on a direct entitlement basis, when significant risks and rewards of ownership are transferred to the buyers. Government’s share of profit petroleum is accounted for when the obligation (legal or constructive), in respect of the same arises. Revenue from sale of power is recognised when delivered and measured based on rates as per bilateral contractual agreements with buyers and at rate arrived at based on the principles laid down under the relevant Tariff Regulations as notified by the regulatory bodies, as applicable. Where the Group acts as a port operator, revenues and costs relating to each construction contract of service concession arrangements are recognised over the period of each arrangement only to the extent of costs incurred that are probable of recovery. Revenues and costs relating to operating phase of the port contract are measured at the fair value of the consideration received or receivable for the services provided. Revenue from rendering of services is recognised on the basis of work performed. 40. WIPRO LIMITED ACCOUNTING POLICY The Company derives revenue primarily from software development, maintenance of software/hardware and related services, business process services, sale of IT and other products. a) Services The Company recognizes revenue when the significant terms of the arrangement are enforceable, services have been delivered and the collectability is reasonably assured. The method for recognizing revenues and costs depends on the nature of the services rendered: Time and materials contracts Revenues and costs relating to time and materials contracts are recognized as the related services are rendered. Fixed-price contracts Revenues from fixed-price contracts, including systems development and integration contracts are recognized using the “percentage-of- completion” method. Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. If the Company does not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable. When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of profit and loss in the period in which such losses become probable based on the current contract estimates. ‘Unbilled revenues’ represent cost and earnings in excess of billings as at the end of the reporting period. ‘Unearned revenues’ represent billing in excess of revenue recognized. Advance payments received from customers for which no services have been rendered are presented as ‘Advance from customers’. Maintenance contracts Revenue from maintenance contracts is recognized ratably over the period of the contract using the percentage of completion method. When services are performed through an indefinite number of
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |184| repetitive acts over a specified period of time, revenue is recognized on a straight-line basis over the specified period unless some other method better represents the stage of completion. In certain projects, a fixed quantum of service or output units is agreed at a fixed price for a fixed term. In such contracts, revenue is recognized with respect to the actual output achieved till date as a percentage of total contractual output. Any residual service unutilized by the customer is recognized as revenue on completion of the term. b) Products Revenue from products are recognized when the significant risks and rewards of ownership have been transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. c) Multiple element arrangements Revenue from contracts with multiple-element arrangements are recognized using the guidance in Ind AS 18, Revenue. The Company allocates the arrangement consideration to separately identifiable components based on their relative fair values or on the residual method. Fair values are determined based on sale prices for the components when it is regularly sold separately, third-party prices for similar components or cost plus an appropriate business-specific profit margin related to the relevant component. d) Others • The Company accounts for volume discounts and pricing incentives to customers by reducing the amount of revenue recognized at the time of sale. • Revenues are shown net of sales tax, value added tax, service tax and applicable discounts and allowances. • The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Company’s historical experience of material usage and service delivery costs. • Costs that relate directly to a contract and incurred in securing a contract are recognized as an asset and amortized over the contract term as reduction in revenue • Contract expenses are recognised as expenses by reference to the stage of completion of contract activity at the end of the reporting period. Use of estimates and judgment The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts. Percentage of completion method accounting relies on estimates of total expected contract revenue and costs. This method is followed when reasonably dependable estimates of the revenues and costs applicable to various elements of the contract can be made. Key factors that are reviewed in estimating the future costs to complete include estimates of future labor costs and productivity efficiencies. Because the financial reporting of these contracts depends on estimates that are assessed continually during the term of these contracts, recognized revenue and profit are subject to revisions as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable. Volume discounts are recorded as a reduction of revenue. When the amount of discount varies with the levels of revenue, volume discount is recorded based on estimate of future revenue from the customer.
|185| Chap. 9 – Ind AS 18 — Revenue from Contracts with Customers 41. ZEE ENTERTAINMENT ENTERPRISES LIMITED ACCOUNTING POLICY Revenue recognition Revenue is recognised to the extent it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. All revenues are accounted on accrual basis except to the extent stated otherwise. • Broadcasting revenue - Advertisement revenue (net of discount and volume rebates) is recognised when the related advertisement or commercial appears before the public i.e. on telecast. Subscription revenue (net of share to broadcaster) is recognised on time basis on the provision of television broadcasting service to subscribers. • Sales - Media content is recognised, when the significant risks and rewards have been transferred to the customers in accordance with the agreed terms. • Services Commission-Space selling is recognised when the related advertisement or commercial appears before the public i.e. on telecast. • Revenue from other services is recognised as and when such services are completed/performed. • Interest income from debt instruments is recognised using the effective interest rate (EIR) method. • Dividend income is recognised when the Company’s right to receive dividend is established. • Rent income is recognised on accural basis as per the agreed terms on straight line basis. Estimates and Judgements Media Content The Company has several types of programming inventory: movies, sports and general entertainment. The key area of accounting for inventory requiring judgment is the assessment of the appropriate nature over which programming inventory should be amortised. The key factors considered by the Company are as follows: • Reality shows, chat shows, events, current affairs, game shows and sports rights: are fully expensed on telecast which represents best estimate of the benefits received from the acquired rights. • The cost of program (own production and commissioned program) are amortised over a period of three financial years over which revenue is expected to be generated from exploitation of programs. • Cost of movie rights - The Company’s expectation is that substantial revenue from such movies is earned during the period of five years from the date of acquisition of license to broadcast. Hence, it is amortised on a straight line basis over the license period or 60 months from the date of acquisition, whichever is shorter. • Music rights are amortised over three financial years starting from the year of commencement of rights over which revenue is expected to be generated from exploitation of rights. ll
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |186| Chapter 10 Ind AS 19 — Employee Benefits 1. ASIAN PAINTS LIMITED ACCOUNTING POLICY Employee benefits Short Term Employee Benefits All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognized in the period in which the employee renders the related service. The Company recognizes the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid. Post-Employment Benefits I. Defined Contribution plans Defined contribution plans are employee state insurance scheme and Government administered pension fund scheme for all applicable employees and superannuation scheme for eligible employees. Recognition and measurement of defined contribution plans The Company recognizes contribution payable to a defined contribution plan as an expense in the Statement of Profit and Loss when the employees render services to the Company during the reporting period. If the contributions payable for services received from employees before the reporting date exceeds the contributions already paid, the deficit payable is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the reporting date, the excess is recognized as an asset to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund. II. Defined Benefit plans i) Provident Fund scheme: The Company makes specified monthly contributions towards Employee Provident Fund scheme to a separate trust administered by the Company. The minimum interest payable by the trust to the beneficiaries is being notified by the Government every year. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate. ii) Gratuity scheme: The Company operates a defined benefit gratuity plan for employees. The Company contributes to a separate entity (a fund), towards meeting the Gratuity obligation. iii) Pension Scheme: The Company operates a defined benefit pension plan for certain specified employees and is payable upon the employee satisfying certain conditions, as approved by the Board of Directors. iv) Post-Retirement Medical benefit plan: The Company operates a defined post-retirement medical benefit plan for certain specified employees and is payable upon the employee satisfying certain conditions.
|187| Chap. 10 – Ind AS 19 — Employee Benefits Recognition and measurement of Defined Benefit plans The cost of providing defined benefits is determined using the Projected Unit Credit method with actuarial valuations being carried out at each reporting date. The defined benefit obligations recognized in the Balance Sheet represent the present value of the defined benefit obligations as reduced by the fair value of plan assets, if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this calculation) is recognized representing the present value of available refunds and reductions in future contributions to the plan. All expenses represented by current service cost, past service cost, if any, and net interest on the defined benefit liability/(asset) are recognized in the Statement of Profit and Loss. Remeasurements of the net defined benefit liability/(asset) comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liability/ asset), are recognized in Other Comprehensive Income. Such remeasurements are not reclassified to the Statement of Profit and Loss in the subsequent periods. The Company presents the above liability/(asset) as current and non-current in the Balance Sheet as per actuarial valuation by the independent actuary; however, the entire liability towards gratuity is considered as current as the Company will contribute this amount to the gratuity fund within the next twelve months. Other Long Term Employee Benefits Entitlements to annual leave and sick leave are recognized when they accrue to employees. Sick leave can only be availed while annual leave can either be availed or encashed subject to a restriction on the maximum number of accumulation of leave. The Company determines the liability for such accumulated leaves using the Projected Accrued Benefit method with actuarial valuations being carried out at each Balance Sheet date. Disclosure Note 40 : Employee Benefits 1) Post-employment benefits The company has the following post-employment benefit plans: a) Defined benefit gratuity plan (Funded) The company has defined benefit gratuity plan for its employees, which requires contributions to be made to a separately administered fund. It is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The fund has the form of a trust and it is governed by the Board of Trustees. The Board of Trustees is responsible for the administration of the plan assets including investment of the funds in accordance with the norms prescribed by the Government of India. Each year, the Board of Trustees and the Company review the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and assessment of the investment risk. The Company decides its contribution based on the results of this annual review. Generally, it aims to have a portfolio mix of sovereign debt instruments, debt instruments of Corporates and equity instruments. The Company aims to keep annual contributions relatively stable at a level such that no significant plan deficits (based on valuation performed) will arise. Every two years an Asset-Liability-Matching study is performed in which the consequences of the investments are analysed in terms of risk and return profiles. The Board of Trustees, based on the study, takes appropriate decisions on the duration of instruments in which investments are done. As per the latest study, there is no Asset-Liability-Mismatch. There has been no change in the process used by the Company to manage its risks from prior periods.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |188| As the plan assets include significant investments in quoted debt and equity instruments, the Company is exposed to the risk of impacts arising from fluctuation in interest rates and risks associated with equity market. Fair value of the Company’s own transferable financial instruments held as plan assets: NIL b) Defined benefit pension plant (unfunded) The company operates a defined benefit pension plan for certain specified employees and is payable upon the employee satisfying certain conditions, as approved by the Board of Directors. c) Defined benefit post-retirement medical benefit plan (Uunfunded) The company operates a defined post-retirement medical benefit plan for certain specified employees and payable upon the employee satisfying certain conditions. Aforesaid post-employment benefit plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk. Investment Risk The present value of the defined benefit liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. Interest Risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan's investments. Longevity Risk The present value of the defined benefit liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan's liability. Salary Risk The present value of the defined benefit liability is calculated by reference to the future salaries of plan participants. As such, an increase in salary of the plan participants will increase the plan's liability. The most recent actuarial valuation of the plan assets and the present value of defined obligation were carried out as at 31st March, 2017 by Mr. Saket Singhal, Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation and the related current service cost were measured using the projected unit credit method. The following tables summarise the components of defined benefit expense recognised in the statement of profit or loss/OCI and the funded status and amounts recognised in the Balance Sheet for the respective plans: (` in Crores) Gratuity (Funded Plan) Pension (Unfunded Plan) Post-Retirement Medical (Unfunded Plan) As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 (i) Opening defined benefit obligation 145.24 130.70 2.28 2.53 1.29 1.25 (ii) Current service cost 9.99 10.34 - - 0.06 0.06 (iii) Interest cost 11.32 10.08 0.05 0.19 0.13 0.04 (iv) Past Service Cost - 0.71 - - - - (v) Sub-total included in Statement of Profit and Loss (ii+iii+iv) 21.31 21.13 0.05 0.19 0.19 0.10 (vi) Actuarial loss/ (gain) from changes in financial assumptions 6.50 (0.31) 0.04 0.03 0.09 0.02
|189| Chap. 10 – Ind AS 19 — Employee Benefits (` in Crores) Gratuity (Funded Plan) Pension (Unfunded Plan) Post-Retirement Medical (Unfunded Plan) As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 (vii) Experience adjustment (9.44) (0.74) (0.04) (0.03) (0.09) (0.02) (viii) Sub-total included in other comprehensive income (vi+vii) (2.94) (1.05) - - - - (ix) Benefits paid (8.87) (5.54) (0.43) (0.44) (0.06) (0.06) (x) Closing defined benefit obligation (i+v+viii+ix) 154.74 145.24 1.90 2.28 1.42 1.29 (xi) Opening fair value of plan assets 145.03 128.74 - - - - (xii) Expected return on plan assets 11.31 10.00 - - - - (xiii) Sub-total included in Statement of Profit and Loss (xii) 11.31 10.00 - - - - (xiv) Actuarial gains 5.28 1.58 - - - - (xv) Sub-total included in other comprehensive income (xiv) 5.28 1.58 - - - - (xvi) Contributions by employer 10.21 10.25 0.43 0.44 0.06 0.06 (xvii) Benefits paid (8.87) (5.54) (0.43) (0.44) (0.06) (0.06) (xviii) Closing fair value of plan assets (xi+xiii+xv+xvi+xvii) 162.96 145.03 - - - - (xix) Net (Asset)/ Liability (x-xviii) (Refer Note 8 and 17) (8.22) 0.21 1.90 2.28 1.42 1.29 Expense recognised in: (xx) Statement of Profit and Loss (v-xiii) 10.00 11.13 0.05 0.19 0.19 0.10 (xxi) Statement of other comprehensive income (viii-xv) (8.22) (2.63) - - - - The major categories of plan assets of the fair value of the total plan assets are as follows: (` in Crores) Gratuity (Funded Plan) As at 31.03.2017 Gratuity (Funded Plan) As at 31.03.2016 Gratuity (Funded Plan) As at 01.04.2015 Government of India securities (Central and State) 88.05 78.72 66.95 High quality corporate bonds (including Public Sector Bonds) 64.81 61.26 60.51 Diversified equity mutual funds focused on large cap stocks 2.51 1.15 - Cash (including liquid mutual funds) 1.11 0.46 - Others 6.49 3.43 1.29 The principal assumptions used in determining gratuity, pension and post-retirement medical benefit obligations for the Company’s plans are shown below:
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |190| Gratuity (Funded Plan) Pension (Unfunded Plan) Post-Retirement Medical (Unfunded Plan) As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Discount Rate 7.31% 7.87% 7.78% 7.31% 7.87% 7.78% 7.31% 7.87% 7.78% Salary Escalation Rate All Grades11% for first year 10% for next 3 years 8% thereafter All Grades11% for first 2 years 10% for next 3 years 8% thereafter All Grades12% for first year 11% for next 2 years 10% for next 3 years 8% thereafter - - - - - - Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. (` in Crores) Gratuity (Funded Plan) Pension (Unfunded Plan) Post-Retirement Medical (Unfunded Plan) As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 As at 31.03.2017 As at 31.03.2016 Defined Benefit Obligation - Discount Rate + 100 basis points (13.99) (14.74) (0.09) (0.09) (0.20) (0.19) Defined Benefit Obligation - Discount Rate - 100 basis points 14.12 15.08 0.09 0.10 0.20 0.19 Defined Benefit Obligation – Salary Escalation Rate + 100 basis points 12.44 12.12 - - - - Defined Benefit Obligation - Salary Escalation Rate - 100 basis points (12.17) (11.90) - - - - The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance Sheet. The average duration of the defined benefit plan obligation at the end of the reporting period is 11.17 years. The Company expects to make a contribution of ` 3.72 crores (Previous year ` 10.20 crores) to the defined benefit plans during the next financial year. d) Provident Fund The Provident Fund assets and liabilities are managed by ‘Asian Paints Office Provident Fund’ and ‘Asian Paints Factory Employees Provident Fund’ in line with The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
|191| Chap. 10 – Ind AS 19 — Employee Benefits The plan guarantees minimum interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefit vests immediately on rendering of the services by the employee. In terms of the guidance note issued by the Institute of Actuaries of India for measurement of provident fund liabilities, the actuary has provided a valuation of provident fund liability and based on the assumptions provided below, there is no shortfall as at 31st March, 2017. The Company contributed ` 11.76 crores (Previous Year ` 10.29 crores) towards Asian Paints Office Provident Fund during the year ended 31st March, 2017. The Company contributed ` 6.11 crores (Previous Year ` 5.52 crores) crores towards Asian Paints Factory Employees Provident Fund during the year ended 31st March, 2017. The details of the Asian Paints Office Provident Fund and plan assets position as at 31st March, 2017 is given below: (` in Crores) Particulars As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Present value of benefit obligation at period end 230.98 197.14 161.75 Plan assets at period end, at fair value, restricted to 230.98 197.14 161.75 Asset recognized in Balance Sheet The details of the Asian Paints Factory Employees Provident Fund and plan assets position as at 31st March, 2017 is given below: (` in Crores) Particulars As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Present value of benefit obligation at period end 184.38 160.43 137.49 Plan assets at period end, at fair value, restricted to 184.38 160.43 137.49 Asset recognized in Balance Sheet Assumptions used in determining the present value obligation of the interest rate guarantee under the Projected Unit Credit Method (PUCM): (` in Crores) Particulars As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Discounting Rate 7.31% 7.87% 7.78% Expected Guaranteed interest rate 8.65%* 8.80% 8.75% * Rate mandated by EPFO for the FY 2016-17 and the same is used for valuation purpose. 2) Other Long term employee benefits: Annual Leave and Sick Leave assumptions The liability towards compensated absences (annual leave and sick leave) for the year ended 31st March, 2017 based on actuarial valuation carried out by using Projected Accrued Benefit Method resulted in increase in liability by ` 14.61 crores. (Previous Year ` 12.58 crores)
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |192| (a) Financial Assumptions (` in Crores) Particulars As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Discount Rate 7.31% 7.87% 7.78% Basic salary increases allowing for Price inflation All Grades 11.00% for first year 10.00% for next 3 years 8.00% thereafter All Grades 11.00% for first 2 years 10.00% for next 3 years 8.00% thereafter All Grades 12.00% for first year 11.00% for next 2 years 10.00% for next 3 years 8.00% thereafter (b) Demographic Assumptions (` in Crores) Particulars As at 31.03.2017 As at 31.03.2016 As at 01.04.2015 Mortality IALM (2006-08) Ultimate IALM (2006-08) Ultimate IALM (2006-08) Ultimate Employee Turnover Up to 44yrs - 5.00%, Above 44yrs - 2.00% Up to 44yrs - 5.00%, Above 44yrs - 2.00% Up to 44yrs - 5.00%, Above 44yrs - 2.00% Leave Availment Ratio 5% 5% 5% 2. BAJAJ AUTO LIMITED ACCOUNTING POLICY Employee benefits a) Privilege leave entitlements Privilege leave entitlements are recognised as a liability, in the calendar year of rendering of service, as per the rules of the Company. As accumulated leave can be availed and/or encashed at any time during the tenure of employment, subject to terms and conditions of the scheme, the liability is recognised on the basis of an independent actuarial valuation. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. b) Gratuity Payment for present liability of future payment of gratuity is being made to approved gratuity fund, which fully covers the same under Cash Accumulation Policy and Debt fund of the Life Insurance Corporation of India (LIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC). However, any deficit in plan assets managed by LIC and BALIC as compared to the liability on the basis of an independent actuarial valuation is recognised as a liability. The liability or asset recognised in the Balance Sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method in conformity with the principles and manner of computation specified in Ind AS 19. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss.
|193| Chap. 10 – Ind AS 19 — Employee Benefits c) Superannuation Defined contribution to superannuation fund is being made as per the scheme of the Company. d) Provident fund contributions are made to Company’s Provident Fund Trust. The contributions are accounted for as defined benefit plans and the contributions are recognised as employee benefit expense when they are due. Deficits, if any, of the fund as compared to liability on the basis of an independent actuarial valuation is to be additionally contributed by the Company and hence recognised as a liability. e) Defined contribution to Employees Pension Scheme 1995 is made to Government Provident Fund Authority. Disclosure 36 Employee benefits Liability for employee benefits has been determined by an actuary, appointed for the purpose, in conformity with the principles set out in the Indian Accounting Standard 19 the details of which are as hereunder. Funded schemes Gratuity The Company provides for gratuity payments to employees. The gratuity benefit payable to the employees of the Company is greater of the provisions of the Payment of Gratuity Act, 1972 and the Company’s gratuity scheme. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The gratuity plan is a funded plan and the Company makes contributions to approved gratuity fund (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Amount recognised in Balance Sheet Present value of funded defined benefit obligation 452.75 393.06 351.65 Fair value of plan assets (378.57) (349.92) (274.04) Net funded obligation 74.18 43.14 77.61 Expense recognised in the Statement of Profit and Loss Current service cost 21.99 20.47 – Interest on net defined benefit liability/(asset) (0.98) 3.41 – Total expense charged to Profit and Loss Account 21.01 23.88 – Amount recorded as Other Comprehensive Income Opening amount recognised in OCI outside Profit and Loss Account 1.32 – – Remeasurements during the period due to: Changes in financial assumptions 21.33 (1.61) – Experience adjustments 5.41 3.85 – Actual return on plan assets less interest on plan assets (6.12) (0.92) – Closing amount recognised in OCI outside Profit and Loss Account 21.94 1.32 – Reconciliation of net liability/(asset) Opening net defined benefit liability/(asset) 43.14 77.61 – Expense charged to Profit and Loss Account 21.01 23.88 – Amount recognised outside Profit and Loss Account 20.62 1.32 – Employer contributions (10.59) (59.67) – Closing net defined benefit liability/(asset) 74.18 43.14 77.61 Movement in benefit obligation Opening of defined benefit obligation 393.06 351.65 – Current service cost 21.99 20.47 –
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |194| (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Interest on defined benefit obligation 29.53 26.41 – Remeasurements due to: Actuarial loss/(gain) arising from change in financial assumptions 21.33 (1.61) – Actuarial loss/(gain) arising on account of experience changes 4.19 5.07 – Benefits paid (17.35) (8.93) – Closing of defined benefit obligation 452.75 393.06 351.65 Movement in plan assets Opening fair value of plan assets 349.92 274.04 – Employer contributions 10.59 59.67 – Interest on plan assets 29.29 24.22 – Remeasurements due to: Actual return on plan assets less interest on plan assets 6.12 0.92 – Benefits paid (17.35) (8.93) – Closing fair value of plan assets 378.57 349.92 274.04 Disaggregation of assets Category of assets Insurer managed funds 378.57 349.92 274.04 Others – – – Grand Total 378.57 349.92 274.04 Sensitivity Analysis Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarises the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points. (` in Crore) Particulars As at 31 March 2017 31 March 2016 Discount rate Salary escalation rate Discount rate Salary escalation Senior staff Impact of increase in 50 bps on DBO (3.51%) 3.62% (3.51%) 3.64% Impact of decrease in 50 bps on DBO 3.73% (3.44%) 3.73% (3.46%) Junior staff Impact of increase in 50 bps on DBO (4.32%) 4.55% (4.27%) 4.49% Impact of decrease in 50 bps on DBO 4.69% (4.24%) 4.60% (4.21%) These sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date. There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analysis. Funding arrangement and policy The money contributed by the Company to the fund to finance the liabilities of the plan has to be invested. The trustees of the plan have outsourced the investment management of the fund to insurance companies. The insurance companies in turn manage these funds as per the mandate provided to them by the trustees and the asset allocation which is within the permissible limits prescribed in the insurance regulations.
|195| Chap. 10 – Ind AS 19 — Employee Benefits There is no compulsion on the part of the Company to fully pre fund the liability of the plan. The Company’s philosophy is to fund the benefits based on its own liquidity and tax position as well as level of under funding of the plan. The expected contribution payable to the plan next year is ` 65 crore. Projected plan cash flow The table below shows the expected cash flow profile of the benefits to be paid to the current membership of the plan: (` in Crore) Particulars Less than a year Between 1 - 2 years Between 2 -5 years Over 5 years Total 31 March 2017 Senior staff 37.87 8.31 42.71 299.90 388.79 Junior staff 13.82 15.19 84.23 493.52 606.76 31 March 2016 Senior staff 31.20 10.43 35.46 263.93 341.02 Junior staff 11.69 9.18 65.68 489.12 575.67 Weighted average duration of defined benefit obligation (in years) As at 31 March 2017 31 March 2016 Senior Staff 7.23 7.24 Junior Staff 9.00 8.86 Particulars As at 31 March 2017 31 March 2016 1 April 2015 Principal actuarial assumptions (Expressed as weighted averages) Discount rate (p.a.) 7.35% 7.95% 7.90% Salary escalation rate (p.a.) - senior staff 10.00% 10.00% 10.00% Salary escalation rate (p.a.) - junior staff 10.00% 10.00% 10.00% The estimates of future salary increases, considered in actuarial valuation, takes into account, inflation, seniority, promotions and other relevant factors, such as demand and supply in the employment market. Provident Fund (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Amount recognised in Balance Sheet Present value of funded defined benefit obligation 931.68 813.24 664.68 Fair value of plan assets (931.68) (813.24) (664.68) Net funded obligation – – – Expense recognised in the Statement of Profit and Loss Current service cost 25.60 23.04 – Administration expenses – – – Interest on net defined benefit liability/(asset) – – – (Gains)/losses on settlement – – – Total expenses charged to Statement of Profit and Loss 25.60 23.04 – Amount recorded as Other Comprehensive Income
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |196| (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Opening amount recognised in OCI outside Profit and Loss Account – – – Remeasurements during the period due to Changes in financial assumptions – – – Changes in demographic assumptions – – – Experience adjustments 7.56 49.98 – Actual return on plan assets less interest on plan assets (7.56) (49.98) – Adjustment to recognise the effect of asset ceiling – – – Closing amount recognised in OCI outside Profit and Loss Account – – – Reconciliation of net liability/(asset) Opening net defined benefit liability/(asset) – – – Expense charged to Profit and Loss Account 25.60 23.04 – Amount recognised outside Profit and Loss Account – – – Employer contributions (25.60) (23.04) – Closing net defined benefit liability/(asset) – – – Movement in benefit obligation Opening of defined benefit obligation 813.24 664.68 – Current service cost 25.60 23.04 – Interest on defined benefit obligation 65.22 53.16 – Remeasurements due to: Actuarial loss/(gain) arising on account of experience changes 7.56 49.98 – Employee contributions 54.20 50.45 – Benefits paid (36.87) (29.61) – Liabilities assumed/(settled) 2.73 1.54 – Closing defined benefit obligation 931.68 813.24 664.68 Movement in plan assets Opening fair value of plan assets 813.24 664.68 – Interest on plan assets 65.22 53.16 – Remeasurements due to: Actual return on plan assets less interest on plan assets 7.56 49.98 – Employer contributions during the period 25.60 23.04 – Employee contributions during the period 54.20 50.45 – Benefits paid (36.87) (29.61) – Assets acquired/(settled) 2.73 1.54 – Closing fair value of plan assets 931.68 813.24 664.68 (` in Crore) Particulars As at 31 March 2017 Disaggregation of assets Quoted Property – Government debt instruments 481.18 Other debt instruments 329.88 Entity's own equity instruments –
|197| Chap. 10 – Ind AS 19 — Employee Benefits (` in Crore) Particulars As at 31 March 2017 Insurer managed funds – Others 120.62 Total 931.68 (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Key actuarial assumptions Discount rate (p.a.) 7.35% 7.95% 7.90% Future derived return on assets (p.a.) 8.90% 8.88% 8.67% Discount rate for the remaining term to maturity of the investment (p.a.) 7.15% 7.80% 7.95% Average historic yield on the investment (p.a.) 8.70% 8.73% 8.72% Guaranteed rate of return (p.a.) 8.65% 8.75% 8.75% (` in Crore) Particulars As at 31 March 2017 As at 31 March 2016 Compensated Absences Welfare Scheme Compensated Absences Welfare Scheme Present value of unfunded obligations 99.65 4.24 87.24 4.84 Expense recognised in the Statement of Profit and Loss 21.84 0.53 15.63 0.06 Amount recorded as Other Comprehensive Income (0.68) – Discount rate (p.a.) 7.35% 7.35% 7.95% 7.95% Salary escalation rate (p.a.) - senior staff 10.00% N.A. 10.00% N.A. Salary escalation rate (p.a.) - junior staff 10.00% N.A. 10.00% N.A. Compensated absences The compensated absences cover the Company’s liability for casual and earned leave. Entire amount of the provision is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. (` in Crore) Particulars As at 31 March 2017 31 March 2016 1 April 2015 Compensated absences expected to be settled after 12 months 94.99 83.17 75.85
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |198| (` in Crore) Particulars As at 31 March 2017 31 March 2016 Amount recognised in the Statement of Profit and Loss Defined contribution plans: Superannuation paid to trust 8.68 8.13 Pension fund paid to Government authorities 12.14 12.03 Others 1.37 0.70 Defined benefit plans: Gratuity 21.01 23.88 Provident fund paid to trust 25.60 23.04 Others 0.39 0.33 Total 69.19 68.11 3. BHARAT FORGE LIMITED ACCOUNTING POLICY Post employment and other employee benefits Provident fund The Company operates two plans for its employees to provide employee benefits in the nature of provident fund. Eligible employees receive benefits from a provident fund, which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The Company contributes a part of the contributions to the “Bharat Forge Company Limited Staff Provident Fund Trust”. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The cost of providing benefits under above mentioned defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each balance sheet date, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet as an asset/liability with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. The employees which are not covered under the above scheme, their portion of provident fund is contributed to the government administered pension fund which is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, a reduction in future payment or a cash refund. Gratuity The Company operates two defined benefits plan for its employees viz. gratuity and special gratuity scheme. Payment for present liability of future payment of gratuity is being made to approved gratuity funds. The
|199| Chap. 10 – Ind AS 19 — Employee Benefits special gratuity scheme is unfunded. The cost of providing benefits under these plans is determined on the basis of actuarial valuation at each year end. Separate actuarial valuation is carried out for each plan using the project unit credit method. Remeasurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet as asset/liability with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in statement of profit and loss on the earlier of: - The date of the plan amendment or curtailment, and - The date that the Company recognises related restructuring costs Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss: - Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements; and - Net interest expense or income Superannuation Retirement benefit in the form of superannuation plan is a defined contribution plan. Defined contributions to insurance Company for employees covered under Superannuation scheme are accounted at the rate of 15% of such employees’ basic salary. The Company recognizes expense toward the contribution paid/ payable to the defined contribution plan as and when an employee renders the relevant service. If the contribution already paid exceeds the contribution due for service before the balance sheet date, the Company recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or cash refund. If the contribution already paid is lower than the contribution due for service before the balance sheet date, the Company recognises that difference as a liability. The Company has no obligation, other than the contribution payable to the superannuation fund. Privilege leave benefits Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where the Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as noncurrent liability. Termination benefits Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination benefits at the earlier of the following dates: (a) when the Company can no longer withdraw the offer of these benefits; and (b) when the entity recognizes cost for a restructuring that is within the scope of Ind AS 37 and involves payment of termination benefits.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |200| In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. Disclosure 37. Gratuity and other post-employment benefit plans (a) Gratuity plan Funded scheme The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee’s length of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. The scheme is funded with insurance companies in the form of a qualifying insurance policy. Risk exposure and asset-liability matching Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments. 1) Liability risks a) Asset-liability mismatch risk Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. b) Discount rate risk Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities. c) Future salary escalation and inflation risk Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk. 2) Asset risks All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also interest rate and inflation risk are taken care of. The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plan.
|201| Chap. 10 – Ind AS 19 — Employee Benefits The principal assumptions used in determining gratuity for the Company’s plan is shown below: Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Mortality table IALM(2006-08) ult IALM(2006-08) ult IALM(2006-08) ult Discount rate 7.20% 7.80% 7.80% Expected rate of return on plan assets 7.80% 7.80% 9.10% Rate of increase in compensation levels 6.00% 6.00% 6.00% Expected average remaining working lives (in years) 7.48 7.36 7.35 Withdrawal rate (based on grade and age of employees) Age upto 30 years 12.00% 12.00% 12.00% Age 31 - 44 years 12.00% 12.00% 12.00% Age 45 - 50 years 8.00% 8.00% 8.00% Age above 50 years 8.00% 8.00% 8.00% Changes in the present value of the defined benefit obligation recognised in balance sheet are as follows: In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of obligation as at the beginning of the period 713.70 677.23 598.83 Interest expense 53.92 51.12 52.79 Current service cost 51.41 51.81 48.06 Benefits (paid) (44.96) (43.54) (37.34) Remeasurements on obligation [Actuarial (Gain)/Loss] 25.61 (22.92) 14.89 Closing defined benefit obligation 799.68 713.70 677.23 Changes in the fair value of plan assets recognised in the balance sheet are as follows: In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Opening fair value of plan assets 456.14 386.87 322.98 Interest Income 36.94 31.55 30.87 Contributions 79.77 78.82 69.85 Benefits paid (44.96) (43.54) (37.34) Remeasurements Return on plan assets, excluding amount recognized in Interest Income - Gain/(Loss) 1.76 2.44 0.51 Closing fair value of plan assets 529.65 456.14 386.87 Actual return on plan assets 38.70 33.99 31.39 Net Interest (Income/Expense) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Interest (Income)/Expense – Obligation 53.92 51.12 Interest (Income)/Expense – Plan assets (36.94) (31.55) Net Interest (Income)/Expense for the period 16.98 19.57
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |202| Remeasurement for the period [Actuarial (Gain)/loss] In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Experience (Gain)/Loss on plan liabilities 0.95 (15.54) Demographic (Gain)/Loss on plan liabilities - (7.38) Financial (Gain)/Loss on plan liabilities 24.66 - Experience (Gain)/Loss on plan assets (5.08) (7.70) Financial (Gain)/Loss on plan assets 3.32 5.26 Amount recognised in Statement of Other Comprehensive Income (OCI) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Remeasurement for the period-Obligation (Gain)/Loss 25.61 (22.92) Remeasurement for the period-Plan assets (Gain)/Loss (1.76) (2.44) Total Remeasurement cost/(credit) for the period recognised in OCI 23.85 (25.36) The amounts to be recognised in the Balance Sheet In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of obligation as at the end of the period (799.68) (713.70) (677.23) Fair value of plan assets as at the end of the period 529.65 456.14 386.87 Net asset/(liability) to be recognised in balance sheet (270.03) (257.56) (290.36) Expense recognised in the statement of profit and loss In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Current service cost 51.41 51.81 Net Interest (Income)/Expense 16.98 19.57 Net periodic benefit cost recognised in the statement of profit and loss 68.39 71.38 Reconciliation of net asset/(liability) recognised In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Net asset/(liability) recognised at the beginning of the period (257.56) (290.36) (275.85) Company contributions 79.77 78.82 69.85 Expense recognised at the end of period (68.39) (71.38) (69.98) Amount recognised outside profit & loss for the period (23.85) 25.36 (14.38) Net asset/(liability) recognised at the end of the period (270.03) (257.56) (290.36
|203| Chap. 10 – Ind AS 19 — Employee Benefits The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Funds managed by insurer 100.00% 100.00% 100.00% Sensitivity analysis A) Impact of change in discount rate when base assumption is decreased/increased present value of obligation In ` Million Discount rate As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Decrease by 1% 842.25 750.69 709.00 Increase by 1% 761.39 680.24 644.90 B) Impact of change in salary increase rate when base assumption is decreased/increased present value of obligation In ` Million Salary increment rate As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Decrease by 1% 766.61 685.34 649.51 Increase by 1% 835.79 744.71 703.37 C) Impact of change in withdrawal rate when base assumption is decreased/increased present value of obligation In ` Million Withdrawal rate As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Decrease by 1% 798.63 711.46 672.21 Increase by 1% 800.70 715.85 679.39 The estimates of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The following are the expected benefit payments to the defined benefit plan in future years: In ` Million Withdrawal rate As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Within one year 220.98 136.56 195.04 After one year but not more than five years 291.68 357.37 309.33 After five years but not more than ten years 339.17 323.43 294.84 Weighted average duration of the plan (based on discounted cash flows using mortality, withdrawal and interest rate) is 6.7 years.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |204| (b) Special gratuity The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of five months based on last drawn basic salary. The scheme is unfunded. 1) Liability risks a) Asset-liability mismatch risk Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. b) Discount rate risk Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities. c) Future salary escalation and inflation risk Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainties in estimating this increasing risk. 2) Asset risks This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company's financials and also helps the Company to manage the defined benefit risk through increased return on the funds made available for the plan. The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plan. Particulars Year ended March 31, 2017 Year ended March 31, 2016 Year ended April 1, 2015 Mortality table IALM(2006-08) ult IALM(2006-08) ult IALM(2006-08) ult Discount rate 7.20% 7.80% 7.80% Rate of increase in compensation levels 6.00% 6.00% 6.00% Expected average remaining working lives (in years) 6.86 6.27 6.05 Withdrawal rate (based on grade and age of employees) Age upto 30 years 12.00% 12.00% 12.00% Age 31 - 44 years 12.00% 12.00% 12.00% Age 45 - 50 years 8.00% 8.00% 8.00% Age above 50 years 8.00% 8.00% 8.00% Changes in the present value of the defined benefit obligation recognised in balance sheet are as follows: In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of obligation as at the beginning of the period 46.71 45.43 39.11 Interest expense 3.45 3.40 3.24
|205| Chap. 10 – Ind AS 19 — Employee Benefits In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Current service cost 3.59 3.59 8.30 Benefits (paid) (4.85) (3.58) (6.23) Remeasurements on obligation [Actuarial (Gain)/Loss] 11.50 (2.13) 1.01 Closing Defined Benefit Obligation 60.40 46.71 45.43 Net Interest (Income/Expense) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Interest (Income)/Expense – Obligation 3.45 3.40 Interest (Income)/Expense – Plan assets - - Net Interest (Income)/Expense for the period 3.45 3.40 Remeasurement for the period [Actuarial (Gain)/loss] In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Experience (Gain)/Loss on plan liabilities 9.48 (2.13) Demographic (Gain)/Loss on plan liabilities - - Financial (Gain)/Loss on plan liabilities 2.02 - Experience (Gain)/Loss on plan assets - - Financial (Gain)/Loss on plan assets - - Amount recognised in Statement of Other Comprehensive Income (OCI) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Remeasurement for the period-Obligation (Gain)/Loss 11.50 (2.13) Remeasurement for the period-Plan assets (Gain)/Loss - - Total Remeasurement cost/(credit) for the period recognised in OCI 11.50 (2.13) The amounts to be recognised in the Balance Sheet In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of obligation as at the end of the period (60.40) (46.71) (45.43) Fair value of plan assets as at the end of the period - - - Net Asset/(liability) to be recognised in balance sheet (60.40) (46.71) (45.43)
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |206| Expense recognised in the statement of profit and loss In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Current service cost 3.59 3.59 Net Interest (Income)/Expense 3.45 3.40 Net periodic benefit cost recognised in the statement of profit and loss 7.04 6.99 Reconciliation of Net Asset/(Liability) recognised In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Net asset/(liability) recognised at the beginning of the period (46.71) (45.43) (39.11) Company contributions - - - Benefits directly paid by Company 4.85 3.58 6.23 Expense recognised at the end of period (7.04) (6.99) (11.54) Amount recognised outside profit & loss for the period (11.50) 2.13 (1.01) Net asset/(liability) recognised at the end of the period (60.40) (46.71) (45.43 The followings are the expected benefit payments to the defined benefit plan in future years In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Within one year 9.82 8.51 9.57 After one year but not more than five years 32.51 26.49 27.20 After five years but not more than ten years 54.35 37.23 29.37 Weighted average duration of the plan (based on discounted cash flows using mortality, withdrawal and interest rate) is 8.97 years. Sensitivity analysis A) Impact of change in discount rate when base assumption is decreased/increased present value of obligation In ` Million Discount rate Year ended March 31, 2017 Year ended March 31, 2016 Year ended March 2015 Decrease by 1% 64.10 49.22 47.69 Increase by 1% 57.10 44.45 43.40 B) Impact of change in salary increase rate when base assumption is decreased/increased present value of obligation In ` Million Salary increment rate Year ended March 31, 2017 Year ended March 31, 2016 Year ended March 2015 Decrease by 1% 57.54 44.47 43.72 Increase by 1% 63.55 48.82 47.30
|207| Chap. 10 – Ind AS 19 — Employee Benefits C) Impact of change in withdrawal rate when base assumption is decreased/increased present value of obligation In ` Million Withdrawal rate Year ended Year ended March 31, 2017 Year ended March 31, 2016 Year ended March 2015 Decrease by 1% 57.11 46.47 45.22 Increase by 1% 63.57 46.94 45.43 (c) Provident fund In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan. Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund. Under the defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The details of the defined benefit plan based on actuarial valuation report are as follows: 1) Liability risks a. Asset-liability mismatch risk Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities ,the company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt assetliability management. b. Discount rate risk Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities. c. Future salary escalation and inflation risk Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainties in estimating this increasing risk. The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the provident fund. Particulars Year ended March 31, 2017 Year ended March 31, 2016 Year ended April 1, 2015 Mortality table IALM(2006-08) ult IALM(2006-08) ult IALM(2006-08) ult Discount rate 7.20% 7.80% 7.80% Interest Rate declared by EPFO for the year 8.65% 8.80% 8.80% Yield Spread 0.50% 0.50% 0.50% Expected average remaining working lives of employees (in years) 7.50* 7.62* 7.62*
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |208| Particulars Year ended March 31, 2017 Year ended March 31, 2016 Year ended April 1, 2015 Withdrawal Rate Age upto 30 years 12.00% 12.00% 12.00% Age 31 - 44 years 12.00% 12.00% 12.00% Age 45 - 50 years 8.00% 8.00% 8.00% Age above 50 years 8.00% 8.00% 8.00% * It is an actuarially calculated term of the plan using probabilities of death, withdrawal and retirement. Table showing changes in present value of expected interest rate shortfall: In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of expected Interest rate shortfall as at the beginning of the period 22.64 14.40 - Interest cost 1.77 1.12 - Current service cost 2.48 2.30 1.79 Actuarial (Gain)/Loss on obligations 31.64 4.82 12.61 Present value of expected interest rate shortfall as at the end of the period 58.53 22.64 14.40 Table showing changes in fair value of plan assets (Surplus account) In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Fair value of plan assets as at the beginning of the period (Surplus Account) 20.97 16.58 12.09 Interest Income 1.64 1.49 1.09 Actuarial Gain/(Loss) on plan assets 3.81 2.90 3.40 Fair value of plan assets as at the end of the period (Surplus Account) 26.42 20.97 16.58 Net Interest (Income/Expense) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Interest (Income)/Expense – Obligation 1.77 1.12 Interest (Income)/Expense – Plan assets (1.64) (1.49) Net Interest (Income)/Expense for the period 0.13 (0.37) Actuarial gain/loss recognised In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Actuarial (Gain)/Loss for the period – Obligation 31.64 4.82 Actuarial (Gain)/Loss for the period – Plan assets (3.81) (2.90) Total (Gain)/Loss for the period 27.83 1.92 Actuarial (Gain)/Loss recognised in the period 27.83 1.92
|209| Chap. 10 – Ind AS 19 — Employee Benefits The amounts to be recognised in the balance sheet In ` Million As at March 31, 2017 As at March 31, 2016 As at April 1, 2015 Present value of expected interest rate shortfall as at the end of the period 58.53 22.64 14.40 Fair value of the plan assets as at the end of the period (Surplus Account) 26.42 20.97 16.58 Surplus/(Deficit) (32.11) (1.67) 2.18 Net asset/(liability) recognised in the balance sheet (32.11) (1.67) 2.18 Amount recognised in Statement of Other comprehensive Income (OCI) In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Opening amount recognised in OCI outside profit and loss account - Remeasurement for the period-Obligation (Gain)/Loss 31.64 4.82 Remeasurement for the period-Plan assets (Gain)/Loss (3.81) (2.90) Total remeasurement cost/(credit) for the period recognised in OCI 27.83 1.92 Expense recognised in the statement of profit and loss In ` Million Year ended March 31, 2017 Year ended March 31, 2016 Current service cost 2.48 2.30 Net Interest (Income)/Expense 0.13 (0.37) Net periodic benefit cost recognised in the statement of profit and loss 2.61 1.93 4. TATA COMMUNICATIONS LIMITED ACCOUNTING POLICY Employee benefits Employee benefits include contributions to provident fund, employee state insurance scheme, gratuity fund, compensated absences, pension and post-employment medical benefits. i. Short term employee benefits The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives payable within twelve months. ii. Post-employment benefits Contributions to defined contribution retirement benefit schemes are recognised as expenses when employees have rendered services entitling them to the contributions. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date which recognises each period
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |210| of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if applicable), excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognised in the Statement of Profit and Loss in the period of plan amendment. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises changes in service costs comprising of current service costs, past-service costs, gains and losses on curtailments and non-routine settlements under employee benefit expenses in the Statement of Profit and Loss. The net interest expense or income is recognised as part of finance cost in the Statement of Profit and Loss. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme. iii. Other long-term employee benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation at the balance sheet date. Disclosure 32. Employee Benefits i. Defined contribution Plan Provident Fund The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees’ Provident Fund Trust and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits. The rules of the Company’s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees’ Provident Fund by the Government under the applicable law for the reason that the return on investment is lower or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund. Provident fund contributions amounting to ` 25.03 crores (2016: ` 24.28 crores) have been charged to the Statement of Profit and Loss, under Contributions to provident, gratuity and other funds in note 24 “Employee benefits”. ii. Defined Benefit Plan a. Gratuity The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to employees whose right to receive gratuity had vested at the time of resignation, retirement, death
|211| Chap. 10 – Ind AS 19 — Employee Benefits while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service except in case of death. b. Medical Benefit The Company reimburses domiciliary and hospitalisation expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee’s Medical Reimbursement Scheme. c. Pension Plan The Company’s pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service (“OCS”) an erstwhile department of Ministry of Commerce, Government of India. The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year, the Company has incurred a charge of ` Nil (2016: ` 34.15 crores) to meet the additional pension obligation on account of increase in Pension and Dearness Allowance and has been included under Staff welfare expenses in note 24 “Employee benefits”. These plans typically expose the Company to actuarial risk such as investment risk, interest rate risk, salary risk and demographic risk: Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. Currently, the plan has a relatively balanced mix of investments in government securities, high quality corporate bonds, equity and other debt instruments. Interest rate risk The defined benefit obligation is calculated using a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase. Salary risk Higher than expected increases in salary will increase the defined benefit obligation Demographic risk This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee. No other post-retirement benefits are provided to these employees. The most recent actuarial valuation of the plan assets and defined benefit obligation were carried out as at 31 March 2017 by an independent actuary. The details in respect of the status of funding and the amounts recognised in the Company’s financial statements for the year ended 31 March 2017, 31 March 2016 and 1 April 2015 for these defined benefit schemes are as under: (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 I Principal actuarial assumptions: Discount rate 7.20% 7.90% 7.80% 7.20% 7.90% 7.80% 7.20% 7.90% -
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |212| (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 Increase in compensation cost 6% to 10% 6% to 10% - - - Health care cost increase rate - - - 7.00% 7.00% 6.00% - - - Attrition rate 3% to 15% 3% to 15% Post retirement mortality Annuitants mort 96-98 Increase in dearness allowance - - - - - - - 5.00% 5.00% The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations. The estimates of future compensation cost considered in the actuarial valuation take account of inflation, seniority, promotion and other relevant factors. (` in crores) Gratuity (Funded) Year ended March Medical Benefits (Unfunded) Year ended March Pension (Unfunded) Year ended March 2017 2016 2017 2016 2017 2016 II Components of defined benefit costs recognised in the Statement of Profit and loss Current service cost 5.62 5.12 0.62 0.52 - 27.78 Interest cost 0.27 0.39 7.54 6.76 1.69 2.04 Components of defined benefit costs recognised in the Statement of Profit and loss (Refer note 24 and 27) 5.89 5.51 8.16 7.28 1.69 29.82 (` in crores) Gratuity (Funded) Year ended March Medical Benefits (Unfunded) Year ended March Pension (Unfunded) Year ended March 2017 2016 2017 2016 2017 2016 III Components of defined benefit costs Recognised in the other comprehensive income Actuarial (gain)/loss due to defined benefit obligation experience (0.12) (1.11) 7.79 5.66 13.73 - Actuarial (gain)/loss due to defined benefit obligation assumptions changes 3.59 1.67 8.18 6.17 2.53 - Actuarial (gain)/loss arising during the year 3.47 0.56 15.97 11.83 16.26 - Return on plan assets (2.55) 1.33 - - - - Components of defined benefit costs recognised in other comprehensive income 0.92 1.89 15.97 11.83 16.26 -
|213| Chap. 10 – Ind AS 19 — Employee Benefits (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 IV Amount recognised in the balance sheet Obligation at the end of the year 74.65 71.27 66.36 113.72 101.17 91.28 31.59 29.11 0.68 Fair value of plan assets at the end of the year (68.20) (64.27) (56.05) - - - - - - Net liability arising from defined benefit obligation non-current provision (Refer note 19A) 6.45 7.00 10.31 113.72 101.17 91.28 31.59 29.11 0.68 (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March 2017 As at 31 March 2016 As at 31 March 2017 As at 31 March 2016 As at 31 March 2017 As at 31 March 2016 V Change in the defined benefit obligation Opening defined benefit obligation 71.27 66.36 101.17 91.28 29.11 - Current service cost 5.62 5.12 0.62 0.52 - 27.78 Interest cost 5.21 4.96 7.54 6.76 1.69 2.04 Obligation transferred to other companies (0.23) (0.07) - - - - Actuarial (gain)/loss on experience adjustments (0.12) (1.11) 7.79 5.66 13.73 4.67 Actuarial (gain)/loss on change in financial assumption 3.59 1.67 8.18 6.17 2.53 (0.34) Benefits paid (10.69) (5.66) (11.58) (9.22) (15.47) (5.04) closing defined benefit obligation 74.65 71.27 113.72 101.17 31.59 29.11 (` in crores) Particulars Gratuity (Funded) As at 31 March 2017 As at 31 March 2016 VI Change in Fair Value of assets Opening fair value of plan assets 64.27 56.05 Expected return on plan assets 4.94 4.58 Employer’s contribution 7.36 10.70 Transfer to other companies (0.23) (0.07) Actuarial (loss)/gain 2.55 (1.33) Benefits paid (10.69) (5.66) closing fair value of plan assets 68.20 64.27
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |214| (` in crores) Particulars Gratuity (Funded) As at 31 March 2017 As at 31 March 2016 VII Categories of plan assets as a percentage of total plan assets Cash and bank 6.97% 5.00% Government securities 31.03% 42.65% Corporate bonds 41.10% 34.61% Equity 20.90% 17.74% Total 100% 100% The fair values of the above equity and debt instruments are determined based on quoted market prices in active markets. This policy has been implemented during the current and prior years. The Company’s policy and objective for plan assets management is to maximise return on plan assets to meet future benefit payment requirements while at the same time accepting a low level of risk. The asset allocation for plan assets is determined based on the investment criteria approved under the Income Tax Act, 1961 and is also subject to other exposure limitations. VIII A quantitative sensitivity analysis for significant assumption as at 31 march 2017 and 31 march 2016 is as shown below: (as per actuarial valuation report). the sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March As at 31 March As at 31 March 2017 2016 2017 2016 2017 2016 Discount rate 2017 2016 2017 2016 2017 2016 Increase (1%) (5.03) (4.55) (11.37) (9.71) (3.54) (3.15) Decrease (1%) Future salary increases 5.74 5.18 13.85 11.76 4.09 3.64 Increase (1%) 2.31 2.82 - - - - Decrease (1%) Withdrawal rate (2.37) (2.16) - - - - Increase (5%) 2.15 3.02 (5.02) (4.34) - - Decrease (5%) Health care cost increase rate (2.97) (4.23) 4.40 3.83 - - Increase (1%) - - 10.00 8.55 - - Decrease (1%) Post retirement mortality - - (8.28) (7.11) - - Increase (3 years) - - (10.82) (9.09) (6.01) (5.12) Decrease (3 years) Increase in dearness allowance - - 11.08 9.20 6.71 5.65 Increase (1%) - - - - 9.52 8.55 Decrease (1%) - - - - (8.59) (7.71) The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
|215| Chap. 10 – Ind AS 19 — Employee Benefits There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years. (` in crores) Particulars Gratuity (Funded) Medical Benefits (Unfunded) Pension (Unfunded) As at 31 March 2017 As at 31 March 2017 As at 31 March 2017 IX Maturity profile of defined benefit plan 31 March 2018 7.72 7.65 13.13 31 March 2019 7.81 7.83 13.79 31 March 2020 9.39 8.07 14.48 31 March 2021 8.60 8.22 15.20 31 March 2022 9.63 8.41 15.96 31 March 2023 to 31 March 2027 48.08 44.27 92.60 Total expected payments 91.23 84.45 165.16 iii. Leave Plan and Compensated Absences For executives Leave unavailed of by eligible employees may be carried forward/encashed by them/their nominees in the event of death or permanent disablement or resignation, subject to a maximum leave of 120 days in addition to accumulated leave balance available in accumulated quota. For non-executives Leave unavailed of by eligible employees may be carried forward/encashed by them/their nominees in the event of death or permanent disablement or resignation, subject to a maximum leave of 300 days. The liability for compensated absences as at the year end is ` 74.04 crores (2016: ` 71.71 crores; 2015: ` 65.79 crores) as shown under non-current provisions ` 67.46 crores (2016: ` 64.40 crores; 2015: ` 59.63 crores) and current provisions ` 6.58 crores (2016: ` 7.31 crores; 2015: ` 6.16 crores). The amount charged to the Statement of Profit and Loss under Salaries and related costs in note 24 “Employee benefits” is ` 9.93 crores (2016: ` 8.35 crores). Refer Table I above for actuarial assumptions on compensated absences. ll
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |216| Chapter 11 Ind AS 20 — Accounting for Government Grants and Disclosure of Government Assistance 1. APOLLO TYRES LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Government grants and subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants/subsidy will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Revenue grant is recognised as an income in the period in which related obligation is met. Export Incentives earned in the year of exports are treated as income and netted off from cost of raw material imported. Disclosures (a) Investment promotion subsidy from Government of Tamil Nadu The Company has established radial tyre manufacturing facility in SIPCOT industrial park, Oragadam near Chennai and availed incentives from the state Government of Tamil Nadu for establishing such project. The construction of first phase of the new green field radial tyre plant was completed as per project schedule, which commenced operations from March 11, 2010. The truck/bus radial segment has commenced operations from May 11, 2010. Pursuant to the Memorandum of Understanding (MoU) dated August 7, 2006 read along with a supplementary MoU dated January 11, 2011, executed between the Government of Tamil Nadu (GoTN) and the Company, GoTN sanctioned a Structured Package of Assistance to the Company in terms of the New Industrial Policy, Corporate Overview Statutory Reports Financial Statements 2007. As per this Structured Package of Assistance, the Company is entitled, inter alia, for refund of an amount equal to net output VAT + CST paid by the Company to GoTN in the form of investment promotion subsidy for a period of 14 years (which can be extended by another 4 years), from the date of commencement of commercial production or till the cumulative availment of the said subsidy reaches 50% of the investment made in eligible fixed assets during the approved investment period as defined by the MoU, whichever is earlier. This eligibility is subject to fulfilment of certain obligations by the Company. As the Company has fulfilled the relevant obligations, the Company has recognized subsidy income of ` 464.50 million (` 536.21 million) as other operating income, being the eligible amount of refund of net output VAT + CST paid by the Company to GoTN. (b) Export promotion capital goods The Company had imported property, plant and equipment under the export promotion capital goods (EPCG) scheme wherein the Company is allowed to import capital goods including spares without customs duty, subject to certain export obligations which should be fulfilled within specified time period. Since the Company has recomputed cost as per Ind AS 16, it has made the following adjustments to meet the requirements of Ind AS 16 - Property, Plant & Equipment and Ind AS 20 - Accounting for Government Grants and disclosure of Government assistance:
|217| Chap. 11 – Ind AS 20 — Accounting for Government Grants and Disclosure of Government Assistance a) The custom duty benefit received as deferred revenue included in other non-current liabilities with a corresponding increase in the value of property, plant and equipment and capital workin-progress is ` 2,466.55 million (` 397.97 million as at March 31, 2016 and ` 2,946.58 million as at April 1, 2015) b) The grant of ` 2,445.51 million for which the extent the export obligations were met by April 01, 2015 was recognized in the opening reserve and the grant of ` 329.87 million (` 234.40 million) was recognized in Statement of Profit and Loss as other operating income. The portion of grant for which the export obligation has not been met is retained in deferred revenue under other non Current liabilities. c) The additional depreciation of ` 809.52 million on the increase in the value of property, plant and equipment till the transition date was recognized in the opening reserve and ` 184.68 million (` 132.73 million) was charged to the Statement of Profit and Loss. 2. ASIAN PAINTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Recognition and Measurement The Company is entitled to subsidies from Government in respect of manufacturing units located in specified regions. Such subsidies are measured at amounts receivable from the Government which are non-refundable and are recognised as income when there is a reasonable assurance that the Company will comply with all necessary conditions attached to them. Income from subsidies is recognised on a systematic basis over the periods in which the related costs that are intended to be compensated by such subsidies are recognised. The Company has received refundable Government loans at below-market rate of interest which are accounted in accordance with the recognition and measurement principles of Ind AS 109, ‘Financial Instruments’. The benefit of below-market rate of interest is measured as the difference between the initial carrying value of loan determined in accordance with Ind AS 109 and the proceeds received. It is recognized as income when there is a reasonable assurance that the Company will comply with all necessary conditions attached to the loans. Income from such benefit is recognised on a systematic basis over the period of the loan during which the Company recognises interest expense corresponding to such loans. Presentation Income from subsidies are presented on gross basis under Revenue from Operations. Income arising from below-market rate of interest loans are presented on gross basis under Other Income. Notes to Accounts – Notes below notes to accounts • The Company had partnered with National Skill Development Corporation (NSDC) for undertaking a painter skill development project. Under the arrangement, the Company was granted a financial assistance of ` 0.31 crore from NSDC disbursable in five tranches. The assistance was secured by a bank guarantee provided by the Company to NSDC on the outstanding amount. The assistance carried an interest @ 6% p.a. and was repayable over a period of nine years including a moratorium of three years on the principal amount, starting from the date of first disbursement. During the year 2014- 15, the Company received ` 0.06 crore as per the schedule of disbursement and no amounts were repayable during the next one year. During the year 2016-17, the loan was repaid on 26th September, 2016. • # Interest free loan from The Pradeshiya Industrial Corporation of U.P. Limited (PICUP) under Sales Tax Deferment Scheme of Government of Uttar Pradesh was secured by a first charge on the Company’s immovable properties of the paint plant at Kasna and by way of hypothecation of all
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |218| movable properties at the above location. This interest free loan had a deferment period of 10 years and was repayable in 9 yearly installments starting from May, 2007 as per repayment schedule. Out of the total loan of ` 30.60 crore, the Company had already repaid ` 27.36 crore till 31st March, 2015 and the balance amount of ` 3.24 crore was paid during the previous year by 31st May, 2015. Pursuant to the repayment of loan, the charge on Company’s immovable properties was released. • ## The Company is eligible to avail interest free loan in respect of 50% of VAT paid within Haryana on the sale of goods produced at Rohtak plant for a period of 7 financial years beginning from April, 2010. For the year ended 31st March, 2011, 31st March, 2012 and 31st March, 2013, the Company has already received the interest free loan of ` 3.41 crore, ` 5.90 crores and ` 7.89 crores respectively. Loan of ` 7.89 crore received during the current year and ` 5.90 crore received during the last year (after the date of transition to Ind AS) are recognised at fair value using prevailing market interest rates for an equivalent loan. The fair value of loans received in 2016-17 and 2015-16 is estimated at ` 4.84 crore and ` 3.62 crore, respectively, on initial recognition. The difference between the gross proceeds and fair value of the loan is the benefit derived from the interest free loan and is recognised as deferred income (Refer Note 19(b)). Loan as at 1st April, 2015 (date of transition to Ind AS) is carried at historical cost (Refer point 5 under Exemptions availed under Note 31). This loan is secured by way of a bank guarantee issued by the Company and is repayable after a period of 5 years from the date of receipt of interest free loan. For the year ended 31st March, 2014, 31st March, 2015 and 31st March, 2016, the Company had made the necessary application to the Haryana Government for the issue of eligibility certificate and for the year ended 31st March, 2017, the Company is in the process of making the necessary application. • ### Sales tax deferment scheme- State of Andhra Pradesh represents Sales Tax Deferment availed under the Sales Tax Deferment Scheme of the Government of Andhra Pradesh. It had a deferment period of 14 years and was repayable over 9 years. Out of the total loan of ` 40.70 crore, the Company had already repaid ` 12.08 crore till 31st March, 2016. The balance amount was settled during the current year by early repayment of ` 25.08 crore resulting in a gain of ` 3.54 crore accounted as other income. • Overdraft in current account carries interest rate @ 8.90% p.a. (as at 31st March, 2016 and 1st April, 2015 it was 12.50% p.a.) • *Default in terms of repayment of principal and interest - NIL. 3. ATUL LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies a) Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. b) Government grants relating to the purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to profit or loss in proportion to depreciation over the expected lives of the related assets and presented within other income. c) Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
|219| Chap. 11 – Ind AS 20 — Accounting for Government Grants and Disclosure of Government Assistance 4. BAJAJ AUTO LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income. Notes to Accounts 15 Sales tax deferral (` Iin Crore) Particulars Non-current Current As at As at 31st March 2017 31st March 2016 1st April 2015 31st March 2017 31st March 2016 1st April 2015 Unsecured Sales tax deferral liability/loan, an incentive under Packagen Scheme of Incentives 1983 and 1993 — interest free, partially prepaid 119.90 117.86 111.77 – – 0.58 119.90 117.86 111.77 – – 0.58 Amount disclosed under the head ‘other financial liabilities’ [See note 19] – – – – – (0.58) 119.90 117.86 111.77 – – – The exemption of interest on the sales tax liability deferred for payment is considered as a Government grant and measured at internal rate of return available for pre-payment of the liability as per the Sales Tax rules 5. ITC LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies The Company may receive Government grants that require compliance with certain conditions related to the Company’s operating activities or are provided to the Company by way of financial assistance on the basis of certain qualifying criteria. Government grants are recognised when there is reasonable assurance that the grant will be received, and the Company will comply with the conditions attached to the grant. Accordingly, Government grants: (a) Related to or used for assets are included in the Balance Sheet as deferred income and recognised as income over the useful life of the assets. (b) related to incurring specific expenditures are taken to the Statement of Profit and Loss on the same basis and in the same periods as the expenditures incurred. (c) by way of financial assistance on the basis of certain qualifying criteria are recognised as they become receivable. In the unlikely event that a grant previously recognised is ultimately not received, it is treated as a change in estimate and the amount cumulatively recognised is expensed in the Statement of Profit and Loss.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |220| 6. RAYMOND LIMITED Consolidated financial statements Significant Accounting Policies Grants from the Government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to Profit and Loss on a straight — line basis over the expected lives of related assets and presented within other income. Disclosures Capital Subsidy: The Company is entitled to subsidy, on its investment in the property, plant and equipment, on fulfilment of the conditions stated in those Scheme. The subsidy being Government Grant is accounted as stated in the Accounting policy on Government Grant (Refer Note 1). Export Promotion Capital Goods (EPCG): Scheme allows import of certain capital goods including spares at zero duty subject to an export obligation for the duty saved on capital goods imported under EPCG scheme. The duty saved on capital goods imported under EPCG scheme being Government Grant, is accounted as stated in the Accounting policy on Government Grant (Refer note 1). The Government Grant shown above represents unamortised amount of the subsidy referred to above, with the corresponding adjustment to the carrying amount of property, plant and equipment (Refer Notes 17(i) and 17(ii)). 7. THE GREAT EASTERN SHIPPING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Government grants are not recognised until there is a reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received. Government grants are recognised in the Statement of Profit and Loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants used to acquire non-current asset are recognized as deferred revenue in the Balance Sheet and transferred to the Statement of Profit and Loss on a systematic basis over the useful lives of the related assets. The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from 1st April, 2016, with a transition date of 1st April, 2015. The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for the year ended 31st March, 2017, together with the comparative information as at and for the year ended 31st March, 2016 and the opening Ind AS Balance Sheet as at 1st April, 2015, the date of transition to Ind AS. In preparing these Ind AS financial statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and Previous GAAP have been recognised directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its financial statements prepared under previous GAAP, including the Balance Sheet as at 1st April, 2015 and the financial statements as at and for the year ended 31st March, 2016.
|221| Chap. 11 – Ind AS 20 — Accounting for Government Grants and Disclosure of Government Assistance Disclosures Note 36 : Government Grants The Company receives government assistance in the form of SFIS/DFCEC Licences, which are issued to eligible Indian service providers having free foreign exchange earnings. It can be utilised for duty-free imports of office & professional equipment, spares, furniture and consumables or any other items notified by the Government from time to time. Following are the balances of SFIS/DFCEC Licences held by the Company : (` in crore) Current year Previous year Opening Balance 11.98 - Add : Licences received during the year - 18.19 Less : Amount utilised during the year (4.92) (6.21) Less : Amount lapsed during the year (7.06) - Closing Balance - 11.98 8. VEDANTA LIMITED CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policies Grants and subsidies from the Government are recognised when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received. When the grant or subsidy relates to revenue, it is recognised as income on a systematic basis in profit or loss over the periods necessary to match them with the related costs, which they are intended to compensate Where the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset and presented within other income. When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset. When loans or similar assistance are provided by Governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a Government grant. The loan or assistance is initially recognised and measured at fair value and the Government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities. ll
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |222| Chapter 12 Ind AS 21 — The Effects of Changes in Foreign Exchange Rates 1. ADANI PORT LIMITED ACCOUNTING POLICY a. Foreign Currency Transactions The Group’s consolidated financial statements are presented in INR, which is also the parent company’s functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of transaction. The Group uses the direct method of consolidation and on disposal of a foreign operation the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method. Transactions and Balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in profit or loss with the exception stated under Note 47.1(d), for which the treatment is as below: i. Exchange differences, arising on long-term foreign currency monetary items related to acquisition of a property, plant and equipment (including funds used for projects work in progress) recognised in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. March 31, 2016 are capitalised/decapitalised to cost of fixed assets and depreciated over the remaining useful life of the asset. ii. Exchange differences arising on other outstanding long-term foreign currency monetary items recognised in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e., March 31, 2016 are accumulated in the “Foreign Currency Monetary Item Translation Difference Account” (FCMITDA) and amortized over the remaining life of the concerned monetary item. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Group companies On consolidation, the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons, the group uses an average rate to translate income and expense items, if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss.
|223| Chap. 12 – Ind AS 21 — The Effects of Changes in Foreign Exchange Rates 2. ALL CARGO LOGISTICS LIMITED ACCOUNTING POLICY a. Foreign currencies The Group’s consolidated financial statements are presented in INR, which is also the parent company’s functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method. Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the group uses an average rate if the average approximates the actual rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss. Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following: a) Exchange differences arising on monetary items that forms part of a reporting entity’s net investment in a foreign operation are recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate. In the financial statements that include the foreign operation and the reporting entity (e.g., consolidated financial statements when the foreign operation is a subsidiary), such exchange differences are recognised initially in OCI. These exchange differences are reclassified from equity to profit or loss on disposal of the net investment. b) Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively) Exchange differences arising on translation/settlement of foreign currency monetary items are recognised as income or expenses in the period in which they arise. Group Companies On consolidation, the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons, the group uses an average rate to translate income and expense items, if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss. Any goodwill arising in the acquisition/business combination of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Cumulative currency translation differences for all foreign operations are deemed to be zero at the date of transition, viz., April 1, 2015. Gain or loss on a subsequent disposal of any foreign operation excludes translation differences that arose before the date of transition but includes only translation differences arising after the transition date.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |224| 3. APOLLO TYRES LIMITED ACCOUNTING POLICY a. Foreign Currency Transactions and Translations Foreign currency transactions are recorded at rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the rate of exchange prevailing at the year-End. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for: • Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; • Exchange differences on transactions entered into in order to hedge certain foreign currency risks; and • Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation) are translated into Indian Rupees using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising on translation, if any, are recognised in other comprehensive income and accumulated in equity. On the disposal of a foreign operation (i.e., a disposal of the Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss. In addition, in relation to a partial disposal of subsidiary that includes a foreign operation that does not result in the group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to the non controlling interests and are not recognised in the profit or loss. For all other partial disposals (i.e partial disposals of associates or joint arrangements that do not result in the group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments to the identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income. b. Foreign Exchange gains and losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. • For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in profit or loss except for those which are designated as hedging instruments in hedging relationship.
|225| Chap. 12 – Ind AS 21 — The Effects of Changes in Foreign Exchange Rates 4. ASIAN PAINTS LIMITED ACCOUNTING POLICY a. Foreign Currency Translation Initial Recognition On initial recognition, transactions in foreign currencies entered into by the group are recorded in the functional currency (i.e., Indian Rupees), by applying to the foreign currency amount, the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Consolidated Statement of Profit and Loss. Measurement of Foreign Currency items at Reporting Date Foreign currency monetary items of the group are translated at the closing exchange rates. Non-monetary items that are measured at historical cost in a foreign currency, are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency, are translated using the exchange rates at the date when the fair value is measured. Exchange differences arising out of these translations are recognized in the Consolidated Statement of Profit and Loss. Translation of Financial Statements of Foreign Entities On consolidation, the assets and liabilities of foreign operations are translated into ` (Indian Rupees) at the exchange rate prevailing at the reporting date and their statements of profit and loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons, the group uses an average rate to translate income and expense items, if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in Consolidated Statement of OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to Consolidated Statement of Profit and Loss. Any goodwill arising in the acquisition/business combination of a foreign operation on or after adoption of Ind AS 103 — Business Combination, and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Any goodwill or fair value adjustments arising in business combinations/acquisitions, which occurred before the date of adoption of Ind AS 103 – Business Combination, are treated as assets and liabilities of the entity rather than as assets and liabilities of the foreign operation. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur. b. Foreign currency translation reserve Exchange differences relating to the translation of the results and net assets of the group’s foreign operations from their functional currencies to the group’s presentation currency (i.e.,) are recognised directly in the other comprehensive income and accumulated in foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal of the foreign operation. 5. BHARAT FORGE LIMITED ACCOUNTING POLICY a. Foreign Currencies The Group’s consolidated financial statements are presented in INR, which is also the parent’s functional currency. For each entity the Group determines the functional currency and items included in the financial
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |226| statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation the gain or loss that is reclassified to the statement of profit and loss reflects the amount that arises from using this method. Transactions and Balance Transactions in foreign currencies are initially recorded by the Group in its functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange difference that arise on settlement of monetary items or on reporting at each balance sheet date of the Company’s monetary items at the closing rate are recognized as income or expenses in the period in which they arise except for differences pertaining to Long Term Foreign Currency Monetary Items as mentioned subsequently. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or the statement of profit and loss are also recognised in OCI or the statement of profit and loss, respectively). b. Exchange Differences The Group has availed the option available under Ind AS 101 Para D13 AA and is continuing the policy adopted for accounting for exchange difference arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending March 31, 2016, pertaining to long-term foreign currency translation difference account (FCMITDA). Hence, such exchange differences are accounted as below: i) Exchange differences arising on long-term foreign currency monetary items related to acquisition of property, plant and equipment are capitalized and depreciated over the remaining useful life of the asset. ii) Exchange differences arising on other long-term foreign currency monetary items are accumulated in the FCMITDA through Other Comprehensive Income (OCI). The amortisation of the balance of FCMITDA is transferred to the statement of profit and loss over the remaining life of the respective monetary item iii) All other exchange differences are recognized as income or as expenses in the period in which they arise. For the purpose of (a) and (b) above, the Group treats a foreign monetary item as “long-term foreign currency monetary item”, if it has a term of 12 months or more at the date of its origination. Further, the Group does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. Group Companies On consolidation, the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit and loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons, the Group uses an average rate to translate income and expense items, if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in the statement of profit and loss.
|227| Chap. 12 – Ind AS 21 — The Effects of Changes in Foreign Exchange Rates Any goodwill arising in the acquisition/business combination of a foreign operation on or after April 1, 2015 and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Any goodwill or fair value adjustments arising in business combinations/acquisitions, which occurred before the date of transition to Ind AS (April 1, 2015), are treated as assets and liabilities of the entity rather than as assets and liabilities of the foreign operation. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur. Cumulative currency translation differences for all foreign operations are deemed to be zero at the date of transition, viz., April 1, 2015. Gain or loss on a subsequent disposal of any foreign operation excludes translation differences that arose before the date of transition but includes only translation differences arising after the transition date. 6. CIPLA LIMITED ACCOUNTING POLICY a. Foreign Currency Transactions and Balances Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the Remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in Statement of Profit and Loss. Non-monetary items are not retranslated at year end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates prevailing on the date when fair value was determined. b. Foreign Currency Translation Functional and Presentation Currency Items included in the Consolidated Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements are presented in Indian Rupee (INR), which is Company’s functional and presentation currency. Transactions and Balances Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in Statement of Profit and Loss. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs. All other foreign exchange gains and losses are presented in the Statement of Profit and Loss on a net basis within other gains/(losses). Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates prevailing on the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equity instruments held at fair value through profit or loss are recognised in Statement of Profit and Loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equity investments classified as Fair Value through Other Comprehensive Income (FVOCI) are recognised in other comprehensive income.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |228| Group Companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities are translated at the closing rate at the date of that balance sheet. • Income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and • All resulting exchange differences are recognised in Other Comprehensive Income. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 7. EIH LIMITED (OBEROI HOTELS) ACCOUNTING POLICY A. Foreign Currency Translation Presentation Currency These financial statements are presented in INR which is the Functional Currency of the Company. Transactions and balances Sales made in foreign currency are converted at the prevailing applicable exchange rate. Gain/Loss arising out of fluctuations in exchange rate is accounted for on realization or translation at the year end. Payments made in foreign currency including for acquiring investments are converted at the applicable rate prevailing on the date of remittance. Liability on account of foreign currency is converted at the exchange rate prevailing at the end of the year. Monetary items denominated in foreign currency are converted at the exchange rate prevailing at the end of the year. Revenue expenditure of all the overseas sales offices are converted at the average exchange rate for the year. Assets and liabilities other than Fixed Assets are converted at the exchange rate prevailing at the close of the accounting year and Fixed Assets are converted at the month-end exchange rate of the month of acquisition. Foreign currency loans covered by forward contracts are realigned at the forward contract rates, while those not covered by forward contracts are realigned at the rates ruling at the year end. The differences on realignment is accounted for in the Statement of Profit and Loss. Group Companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: – Assets and liabilities are translated at the closing rate at the date of that balance sheet – Income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and – All resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
|229| Chap. 12 – Ind AS 21 — The Effects of Changes in Foreign Exchange Rates Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 8. HINDUSTAN CONSTRUCTION COMPANY LIMITED ACCOUNTING POLICY a) Foreign Exchange Translation of Foreign Projects and Accounting of Foreign Exchange Transaction Initial Recognition Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. However, for practical reasons, the Group uses a monthly average rate if the average rate approximate is the actual rate at the date of the transactions. Conversion Monetary assets and liabilities denominated in foreign currencies are reported using the closing rate at the reporting date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. Treatment of Exchange Difference Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Group are recognised as income or expense in the Statement of Profit and Loss. On transition to Ind AS, the Group has opted to continue with the accounting for exchange differences arising on long-term foreign currency monetary items, outstanding as on the transition date, as per previous GAAP. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalised and depreciated over the remaining useful life of the asset and exchange differences arising on other long-term foreign currency monetary items are accumulated in the “Foreign Currency Monetary Translation Account” and amortised over the remaining life of the concerned monetary item. Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: 1. Assets and liabilities are translated at the closing rate at the date of the balance sheet 2. Income, expenses and cash flow items are translated at average exchange rates for the respective periods, and 3. All resulting exchange differences are recognised in OCI. When a subsidiary is disposed off, in full, the relevant amount is transferred to the Statement of Profit and Loss. However, when change in the parent’s ownership does not result in loss of control of a subsidiary, such changes are recorded through equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and borrowings and other financial instrument designated as hedges of such investment, are recognised in OCI. When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing exchange rate.