Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |280| Sr. No. Name of the related party Nature of relationship Transaction entered during the year (Yes/No) 89 Tamco Switchgear (Malaysia) SDN. BHD Wholly owned subsidiary of Larsen & Toubro International FZE Yes 90 Henikwon Corporation SDN. BHD Wholly owned subsidiary of Tamco Switchgear (Malaysia) SDN. BHD Yes 91 Larsen & Toubro Consultoria E Projeto Ltda @ Subsidiary of Larsen & Toubro International FZE No 92 Larsen & Toubro (Qingdao) Rubber Machinery Company Limited @@ Wholly owned subsidiary of Larsen & Toubro International FZE Yes 93 Tamco Electrical Industries Australia Pty Ltd. Wholly owned subsidiary of Larsen & Toubro International FZE No 94 PT Tamco Indonesia Subsidiary of Larsen & Toubro International FZE Yes 95 Larsen & Toubro Heavy Engineering LLC Subsidiary of Larsen & Toubro International FZE Yes 96 L&T Electrical & Automation FZE Wholly owned subsidiary of Larsen & Toubro International FZE Yes 97 Kana Controls General Trading & Contracting Company WLL Subsidiary of L&T Electrical & Automation FZE No 98 Larsen & Toubro T&D SA (Proprietary) Limited Subsidiary of Larsen & Toubro International FZE Yes 99 L&T Technology Services LLC Wholly owned subsidiary of L&T Technology Services Limited Yes 100 L&T Infotech Austria GmbH Wholly owned subsidiary of Larsen & Toubro Infotech Limited No 101 L&T Global Holdings Limited Wholly owned subsidiary Yes 102 L&T Information Technology Spain SL Wholly owned subsidiary of Larsen & Toubro Infotech Limited No 103 L&T Natural Resource Limited %%%% Wholly owned subsidiary of L&T Capital Company Limited Yes 104 L&T Solar Limited %%%% Wholly owned subsidiary of L&T Capital Company Limited Yes 105 L&T Powergen Limited %%%% Wholly owned subsidiary of L&T Capital Company Limited Yes * The Company through its subsidiary has sold its stake on November 16, 2015 ** The Company through its subsidiary has sold its stake on March 31, 2016 *** The Company has sold its stake on September 9, 2016 @ The Company is dissolved on November 6, 2015 @@ The Company is dissolved on June 9, 2015 @@@ The Company is merged with Larsen & Toubro Infotech Limited w.e.f. April 1, 2016 ~ The Company is merged with Family Credit Limited (subsequently renamed as L&T Finance Limited) w.e.f. April 1, 2016 ^ The Company is incorporated on July 14, 2016 ^^ The Company is incorporated on September 2, 2016 ^^^ The Company is incorporated on October 23, 2016 # The Fund is incorporated on August 22, 2013 ## The Company through its subsidiary acquired stake on November 30, 2016 ### The Company is incorporated on March 17, 2017 % The Company through its subsidiary has sold its stake on March 20, 2017 %% The Company is merged with L&T Hydrocarbon Engineering Limited w.e.f. April 1, 2016 %%% The Company is merged with L&T Housing Finance Limited w.e.f. April 1, 2015 %%%% Companies merged with L&T Capital Company Limited with effect from April 1, 2015
|281| Chap. 14 – Ind AS 24 — Related Party Disclosures (b)(i) Names of associates with whom transactions were carried out during the year Sr. no. Associate companies 1 L&T-Chiyoda Limited 2 Feedback Infra Private Limited 3 Salzer Electronics Limited* 4 JSK Electricals Private Limited # 5 Magtorq Private Limited * The Company has sold its stake in July and August, 2015 # The Company has sold its stake on March 29, 2016 (ii) Names of joint ventures with whom transactions were carried out during the year Sr. no. Joint ventures 1. Larsen & Toubro Electromech LLC 2. L&T-Sargent & Lundy Limited 3. L&T IDPL Trustee Manager Pte. Ltd. 4. L&T Chennai–Tada Tollway Limited 5. L&T BPP Tollway Limited 6. L&T Rajkot-Vadinar Tollway Limited 7. L&T Deccan Tollways Limited 8. L&T Samakhiali Gandhidham Tollway Limited 9. Kudgi Transmission Limited 10. L&T Sambalpur-Rourkela Tollway limited 11. L&T Infrastructure Development Projects Limited 12. Panipat Elevated Corridor Limited (formerly known as L&T Panipat Elevated Corridor Limited) 13. Krishnagiri Thopur Toll Road Limited (formerly known as L&T Krishnagiri Thopur Toll Road Limited) 14. Western Andhra Tollways Limited (formerly known as L&T Western Andhra Tollways Limited) 15. Vadodara Bharuch Tollway Limited (formerly known as L&T Vadodara Bharuch Tollway Limited) 16. L&T Transportation Infrastructure Limited 17. L&T Western India Tollbridge Limited 18. L&T Port Kachchigarh Limited 19. Ahmedabad-Maliya Tollway Limited (formerly known as L&T Ahmedabad-Maliya Tollway Limited) 20. L&T Halol-Shamlaji Tollway Limited 21. L&T Krishnagiri Walajahpet Tollway Limited 22. Devihalli Hassan Tollway Limited (formerly known as L&T Devihalli Hassan Tollway Limited) 23. L&T Howden Private Limited 24. L&T Sapura Shipping Private Limited 25. L&T Sapura Offshore Private Limited 26. L&T-Gulf Private Limited 27. L&T-MHPS Boilers Private Limited 28. L&T-MHPS Turbine Generators Private Limited 29. Raykal Aluminium Company Private Limited 30. L&T Special Steels and Heavy Forgings Private Limited 31. PNG Tollway Limited 32. L&T Kobelco Machinery Private Limited (iii) Name of post-employment benefit plans with whom transactions were carried out during the year Sr. no. Provident Fund Trust 1. The Larsen & Toubro Officers & Supervisory Staff Provident Fund 2. The Larsen & Toubro Limited Provident Fund of 1952
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |282| 3. The Larsen & Toubro Limited Provident Fund 4. L&T Kansbahal Officers & Supervisory Provident Fund 5. L&T Kansbahal Staff & Workmen Provident Fund Sr. no. Gratuity Trust 1. Larsen & Toubro Officers & Supervisors Gratuity Fund 2. Larsen & Toubro Gratuity Fund (iv) Name of key management personnel and their relatives with whom transactions were carried out during the year Sr. no. Executive Director 1. Mr. A. M. Naik (Group Executive Chairman) 2. Mr. K. Venkataramanan (CEO & Managing Director) * Mrs. Jyothi Venkataramanan (wife) 3. Mr. M. V. Kotwal (Whole-time Director)** 4. Mr. S. N. Subrahmanyan (Whole-time Director) 5. Mr. R. Shankar Raman (CFO & Whole-time Director) 6. Mr. Shailendra Roy (Whole-time Director) 7. Mr. D. K. Sen (Whole-time Director) # 8. Mr. M. V. Satish (Whole-time Director) ## (v) Name of key management personnel and their relatives with whom transactions were carried out during the year Sr. no. Independent/Non-executive Director 1. Mr. Subodh Bhargava 2. Mr. Vikram Singh Mehta 3. Mr. Sushobhan Sarker 4. Mr. M. M. Chitale 5. Mr. M. Damodaran 6. Mr. Thomas Mathew T. ### 7. Ms. Naina Lal Kidwai $$$ 8. Mr. Akhilesh Krishna Gupta 9. Ms. Sunita Sharma *** 10. Mr. Bahram Vakil @@@ 11. Mr. Ajay Shankar $ 12. Mr. Subramanian Sarma $$ 13. Mr. Sanjeev Aga @ 14. Mr. Narayanan Kumar @@ 15. Mr. Adil Zainulbhai 16. Mr. Swapan Dasgupta ~ *Retired on September 30, 2015 **Retired on August 26, 2015 # Appointed w.e.f. October 1, 2015 ## Appointed w.e.f. January 29, 2016 *** Appointed w.e.f. April 1, 2015 ### Appointed w.e.f. April 3, 2015 $ Appointed w.e.f. May 30, 2015 $$ Appointed w.e.f. August 19, 2015 $$$ Appointed w.e.f. March 1, 2016 @ Appointed w.e.f. May 25, 2016 @@ Appointed w.e.f. May 27, 2016 @@@ Separated w.e.f. August 1, 2016
|283| Chap. 14 – Ind AS 24 — Related Party Disclosures (c) Disclosure of related party transactions ` in crore Sr. no. Nature of transaction/relationship/major parties 2016-17 2015-16 Amount Amounts for major parties Amount Amounts for major parties i. Purchase of goods & services (including commission paid) Subsidiaries, including: 1121.13 850.31 L&T Shipbuilding Limited 428.06 249.71 Hi-Tech Rock Products and Aggregates Limited 169.61 142.12 L&T Geostructure LLP 172.14 Larsen & Toubro Readymix and Asphalt Concrete Industries LLC 96.07 Joint ventures, including: 2323.92 1910.69 L&T-MHPS Boilers Private Limited 1675.16 1256.68 L&T-MHPS Turbine Generators Private Limited 530.79 536.02 Associates, including: 7.01 74.54 JSK Electricals Private Limited – 27.99 Salzer Electronics Limited – 37.33 Feedback Infra Private Limited 2.58 L&T-Chiyoda Limited 1.10 Magtorq Private Limited 3.33 Total 3452.06 2835.54 ii. Sale of goods/contract revenue & services Subsidiaries, including: 2359.81 3452.08 L&T Metro Rail (Hyderabad) Limited 1231.51 1395.17 Larsen and Toubro (Saudi Arabia) LLC 623.78 L&T Seawoods Limited 281.62 477.52 L&T Parel Project LLP 380.75 Nabha Power Limited 364.41 Joint ventures, including: 1070.75 1314.49 L&T Infrastructure Development Projects Limited 544.27 653.99 L&T Deccan Tollways Limited 394.35 533.50 L&T-MHPS Boilers Private Limited 124.02 Associate: 0.14 – L&T-Chiyoda Limited 0.14 – Total 3430.70 4766.57 iii. Purchase/lease of property, plant and equipment Subsidiaries, including: 26.45 15.45 Larsen and Toubro Infotech Limited 12.49 L&T Construction Equipment Limited 9.38 L&T Hydrocarbon Engineering Limited 11.42 Joint venture: 0.02 0.04 L&T Infrastructure Development Projects Limited 0.02 0.04 Total 26.47 15.49 iv. Sale of property, plant and equipment Subsidiaries, including: 58.68 1.51 Larsen and Toubro (Oman) LLC 1.07 L&T Electrical and Automation FZE – 0.16 L&T Valves Limited 45.01 L&T Shipbuilding Limited 6.56 – Joint ventures: – 0.50 L&T-MHPS Turbine Generators Private Limited – 0.26 L&T Special Steels and Heavy Forgings Private Limited – 0.19
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |284| ` in crore Sr. no. Nature of transaction/relationship/major parties 2016-17 2015-16 Amount Amounts for major parties Amount Amounts for major parties L&T Howden Private Limited – 0.05 Key management personnel: – 9.29 Mr. K Venkataramanan* – 8.85 Mr. M. V. Kotwal** – 0.44 Total 58.68 11.30 v. Sale of Receivables Subsidiary: 297.01 44.83 L&T Finance Limited 297.01 44.83 Total 297.01 44.83 vi. Investments including subscription to equity and preference shares (including application money paid) Subsidiaries, including: 1262.84# 3073.00 L&T Power Development Limited 383.40 L&T Technology Services Limited 750.00 – L&T Shipbuilding Limited 276.24 943.84 L&T Realty Limited – 648.30 L&T Uttaranchal Hydropower Ltd 604.75 Joint ventures: (0.25) 1.09 L&T-MHPS Boilers Private Limited (0.03) – L&T-MHPS Turbine Generators Private Limited (0.22) 1.09 Total 1262.59 3074.09 vii. Purchase of investments from Subsidiaries, including: 388.00 4234.01 L&T Capital Company Limited – 4233.64 L&T Shipbuilding Limited 388.00## – Joint venture: 2041.57 – L&T Infrastructure Development Projects Limited 2041.57 – Total 2429.57 4234.01 viii. Sale of investments to Subsidiaries, including: 11.08 5520.73 L&T Capital Company Limited – 4232.03 L&T Global Holdings Limited – 1147.40 L&T Hydrocarbon Engineering Limited 11.08 Joint venture: – 21.54 L&T Infrastructure Development Projects Limited – 21.54 Total 11.08 5542.27 ix. Capital Reduction by Subsidiary: – 21.95 L&T Capital Company Limited – 21.95 Total – 21.95 x. Charges paid for miscellaneous services Subsidiaries, including: 139.13 145.26 Larsen & Toubro Infotech Limited 101.42 84.93 L&T Aviation Services Private Limited 23.74 23.91 L&T Technology Services Limited 16.49 Joint ventures, including: 3.64 7.23 L&T-Sargent & Lundy Limited 3.62 7.07 Associates, including: 0.19 0.59 Feedback Infra Private Limited 0.17 –
|285| Chap. 14 – Ind AS 24 — Related Party Disclosures ` in crore Sr. no. Nature of transaction/relationship/major parties 2016-17 2015-16 Amount Amounts for major parties Amount Amounts for major parties L&T-Chiyoda Limited 0.59 Total 142.96 153.08 xi. Rent paid, including lease rentals under leasing/hire purchase arrangements Subsidiaries, including: 1.37 1.66 L&T Electrical & Automation FZE 0.79 0.86 L&T Infocity Limited – 0.37 PT Tamco Indonesia 0.31 0.23 Joint venture: – 0.01 L&T Infrastructure Development Projects Limited – 0.01 Key management personnel: – 0.01 Mr. K. Venkataramanan* and Mrs. Jyothi Venkataramanan – 0.01 Total 1.37 1.68 xii. (a) Charges incurred for deputation of employees from related parties Subsidiaries, including: 12.65 13.70 L&T Hydrocarbon Engineering Limited 2.18 L&T Electricals and Automation Saudi Arabia Company Limited LLC 1.38 2.18 L&T Electrical and Automation FZE 6.16 4.43 Larsen and Toubro Infotech Limited 2.59 PT Tamco Indonesia 1.55 Total 12.65 13.70 xii. (b) Charges recovered for deputation of employees to related parties Subsidiaries, including: 84.47 77.04 L&T Parel Project LLP 22.39 25.35 L&T Electrical and Automation FZE 8.54 L&T Construction Equipment Limited 8.96 Joint ventures, including: 3.99 2.46 L&T-MHPS Boilers Private Limited 0.64 0.58 L&T Special Steels and Heavy Forgings Private Limited 1.21 1.87 L&T Infrastructure Development Projects Limited 2.14 – Associate: 18.01 18.72 L&T-Chiyoda Limited 18.01 18.72 Total 106.47 98.22 xiii. Dividend received Subsidiaries, including: 405.47 994.16 Larsen & Toubro Infotech Limited 149.48 526.48 L&T Technology Services Limited 99.05 302.00 L&T Finance Holdings Limited 93.58 100.39 Joint venture: – 13.75 L&T-Sargent & Lundy Limited – 13.75 Associate: 0.38 Salzer Electronics Limited 0.38 Total 405.47 1008.29 xiv. Commission received, including those under agency arrangements Subsidiary: 5.82 4.84 L&T Construction Equipment Limited 5.82 4.84
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |286| ` in crore Sr. no. Nature of transaction/relationship/major parties 2016-17 2015-16 Amount Amounts for major parties Amount Amounts for major parties Joint venture: 0.65 2.64 L&T Kobelco Machinery Private Limited 0.65 2.64 Total 6.47 7.48 xv. Rent received, overheads recovered and miscellaneous income Subsidiaries, including: 423.18 538.26 Larsen & Toubro Infotech Limited 67.78 77.23 L&T Technology Services Limited 49.04 69.89 L&T Hydrocarbon Engineering Limited 90.99 96.83 L&T Geostructure LLP 77.44 L&T Capital Company Limited 72.65 Joint ventures, including: 90.00 81.48 L&T-MHPS Boilers Private Limited 35.50 23.42 L&T-Sargent & Lundy Limited 17.70 17.64 L&T-MHPS Turbine Generators Private Limited 9.64 10.31 L&T Special Steels and Heavy Forgings Private Limited 10.00 Associate: 2.77 1.06 L&T-Chiyoda Limited 2.77 1.06 Key management personnel: 0.07 – Mr. D. K. Sen$ 0.07 – Total 516.02 620.80 xvi. Guarantee charges recovered from Subsidiaries, including: 30.98 22.58 Nabha Power Limited 9.45 9.90 L&T Shipbuilding Limited 3.45 L&T Hydrocarbon Engineering Limited 6.40 6.02 Larsen & Toubro (Saudi Arabia) LLC 4.64 Larsen Toubro Arabia LLC 5.53 – Total 30.98 22.58 xvii. Interest received from Subsidiaries, including: 248.30 212.60 L&T Realty Limited 69.94 L&T Shipbuilding Limited 71.21 90.62 Nabha Power Limited 62.41 31.50 Marine Infrastructure Developer Private Limited 69.64 – Joint ventures, including: 79.54 57.86 L&T Special Steels and Heavy Forgings Private Limited 78.98 52.58 Total 327.84 270.46 xviii. Interest paid to Subsidiaries, including: 45.38 13.88 L&T Hydrocarbon Engineering Limited 40.04 6.31 Nabha Power Limited 4.70 L&T Construction Equipment Limited – 1.98 Joint venture: – 3.89 L&T Infrastructure Development Projects Limited – 3.89 Total 45.38 17.77 xix. Contribution to post-employment benefit plan (a) Transaction with trust managed provident fund (i) Towards Employer’s contribution: 59.68 60.26 The Larsen & Toubro Officers & Supervisory Staff Provident Fund 51.52 52.05 The Larsen & Toubro Limited Provident Fund of 1952 6.64 6.65 Total 59.68 60.26 (ii) Towards advance contribution: – 0.43 The Larsen & Toubro Limited Provident Fund – 0.43
|287| Chap. 14 – Ind AS 24 — Related Party Disclosures ` in crore Sr. no. Nature of transaction/relationship/major parties 2016-17 2015-16 Amount Amounts for major parties Amount Amounts for major parties Total – 0.43 (iii) Subscription or purchase by the fund of the debt securities issued by the company: – 25.00 The Larsen & Toubro Officers & Supervisory Staff Provident Fund – 25.00 Total – 25.00 (b) Transaction with approved gratuity fund (i) Towards Employer’s contribution: 29.85 59.73 Larsen & Toubro Officers & Supervisors Gratuity Fund 23.59 47.73 Larsen & Toubro Gratuity Fund 6.26 12.00 Total 29.85 59.73 (ii) Towards advance contribution: – 60.00 Larsen & Toubro Officers & Supervisors Gratuity Fund – 48.15 Larsen & Toubro Gratuity Fund – 11.85 Total – 60.00 “Major parties” denote entities account for 10% or more of the aggregate for that category of transaction during respective period. # The scheme of arrangement between L&T Valves Limited and L&T Electrical & Automation Limited was approved by National Company Law Tribunal on April 27, 2017 with appointed date as November 1, 2016. Pursuant to the scheme L&T Electrical & Automation Limited issued 73,88,796 shares to Larsen & Toubro Limited as a consideration towards transfer of certain assets by L&T Valves Limited. The value of shares issued is derived based on fair value of assets transferred to the total value of assets of L&T Valves Limited as at appointed date. Accordingly the value of investment in L&T Electrical and Automation Limited was increased by v 40.31 crore and reduced in L&T Valves Limited by v 40.31 crore during the year 2016-17. ## Pursuant to the scheme of demerger approved by National Company Law Tribunal (NCLT), the existing share capital of Marine Infrastructure Developer Limited held by L&T Shipbuilding Limited stands cancelled. The Company has now acquired 38,80,00,000 equity shares of Marine Infrastructure Developer limited for a consideration of v 388 crore from L&T Shipbuilding Limited. The acquisition has been completed on March 31, 2017. Further, 38,80,00,000 equity shares of L&T Shipbuilding Limited held by the Company have been extinguished and 38,80,00,000 9% non-cumulative, optionally convertible and redeemable preference shares of v 10 each have been issued to the Company in lieu of the same on March 29, 2017. xx. Compensation paid to key management personnel ` in crore Key Management Personnel 2016-17 2015-16 Short term employee benefits Post-employment benefits Other long term benefits Total Short term employee benefits Post-employment benefits Other long term benefits sharebased payments Total Mr. A. M. Naik 21.86 5.83 32.21 *** 59.90 21.57 5.76 – – 27.33 Mr. K. Venkataramanan* – – – – 4.74 22.43 13.53 – 40.70 Mr. M. V. Kotwal** – – – – 3.35 15.35 7.89 – 26.59 Mr. S. N. Subrahmanyan 13.26 3.51 – 16.77 11.53 3.06 – – 14.59 Mr. R. Shankar Raman 9.00 2.38 – 11.38 8.28 2.19 – – 10.47 Mr. Shailendra Roy 8.13 1.93 – 10.06 6.43 1.47 – – 7.90 Mr. D. K. Sen $ 6.20 1.57 – 7.77 2.60 0.69 – – 3.29 Mr. M. V. Satish $$ 5.96 1.44 – 7.40 0.93 0.24 – – 1.17 Mr. Subramanian Sarma (Non-executive director) – – – – – – – 10.35^ 10.35 Other non-executive directors 4.37 – – 4.37 4.06 – – – 4.06 Total 68.78 16.66 32.21 117.65 63.49 51.19 21.42 10.35 146.45 * Retired on September 30, 2015 ** Retired on August 26, 2015 *** Represents encashment of past service accumulated leave $ Appointed w.e.f. October 1, 2015 $$ Appointed w.e.f. January 29, 2016 ^ Represents fair value of employee stock options granted during 2015-16 to be vested over a period of time. The fair value of the stock options is being recovered from L&T Hydrocarbon Engineering Limited over the period of vesting.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |288| (d) Amount due to/from related parties ` in crore Sr. no. Nature of transaction/relationship/major parties As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 Amount Amounts for major parties Amount Amounts for major parties Amount Amounts for major parties i. Accounts receivable Subsidiaries, including: 535.22 926.92 1007.57 L&T Metro Rail (Hyderabad) Limited 212.29 297.99 115.04 Larsen and Toubro (Saudi Arabia) LLC 202.25 253.41 Nabha Power Limited 256.39 Joint ventures, including: 396.97 535.68 435.67 L&T-MHPS Boilers Private Limited 65.55 102.69 77.32 L&T Infrastructure Development Projects Limited 78.42 129.61 111.56 L&T Samakhiali Gandhidham Tollway Limited 43.30 58.20 89.13 L&T Deccan Tollways Limited 125.63 139.21 90.97 L&T Krishnagiri Walajahpet Tollway Limited 44.68 – – Total 932.19 1462.60 1443.24 ii. Accounts payables, including other payables Subsidiaries, including: 635.25 601.89 379.38 Larsen and Toubro Infotech Limited 77.60 Hi-Tech Rock Products and Aggregates Limited 103.27 Larsen and Toubro (Oman) LLC 118.89 94.99 97.38 L&T Geostructure LLP 108.78 Tamco Switchgear (Malaysia) SDN BHD 75.54 Joint ventures, including: 1843.77 1676.32 1414.86 L&T-MHPS Boilers Private Limited 1171.07 1042.25 830.70 L&T-MHPS Turbine Generators Private Limited 605.53 555.34 547.20 Assosiates, including: 1.99 5.35 22.81 Feedback Infra Private Limited 1.27 0.98 Magtorq Private Limited 0.57 3.18 L&T-Chiyoda Limited 1.19 Salzer Electronics Limited – – 18.54 Total 2481.01 2283.56 1817.05 iii. Investments in debt securities Subsidiaries, including: 627.85 464.43 68.64 L&T Shipbuilding Limited 605.10 441.95 45.65 L&T Finance Limited 23.00 Total 627.85 464.43 68.64 iv. Loans and advances recoverable Subsidiaries, including: 3197.90 4738.83 1357.61 L&T Shipbuilding Limited 932.58 2275.52 412.50 L&T Hydrocarbon Engineering Limited 582.43 199.32 Nabha Power Limited 1587.64 918.16 L&T Realty Limited 710.90 Joint ventures, including: 1667.61 1631.55 1682.91 L&T Special Steels and Heavy Forgings Private Limited 1184.98 877.59 564.15 L&T-MHPS Boilers Private Limited 215.18 431.85 606.23 L&T-MHPS Turbine Generators Private Limited 210.22 282.66 421.59 Associates, including: 4.36 5.83 3.16 L&T-Chiyoda Limited 3.96 5.83 3.16 Key management personnel: – – 0.01
|289| Chap. 14 – Ind AS 24 — Related Party Disclosures ` in crore Sr. no. Nature of transaction/relationship/major parties As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 Amount Amounts for major parties Amount Amounts for major parties Amount Amounts for major parties Mr. K Venkataramanan* and Mrs Jyothi Venkataramanan – – 0.01 Total 4869.87 6376.21 3043.69 v. Advances against equity contribution Subsidiaries, including: 6.35 5.25 1986.84 L&T Uttaranchal Hydropower Limited – 5.25 523.00 L&T Power Development Limited – – 379.40 L&T Realty Limited – – 648.29 L&T Shipbuilding Limited – – 421.86 L&T Metro Rail (Hyderabad) Limited 6.35 – – Total 6.35 5.25 1986.84 vi. Unsecured loans (including lease finance) Subsidiaries: 5.52 9.25 57.25 L&T Hydrocarbon Engineering Ltd 5.52 – – L&T Cutting Tools Limited – 9.25 12.25 L&T Construction Equipment Limited – – 45.00 Total 5.52 9.25 57.25 vii. Advances received in the capacity of supplier of goods/ services classified as “advances from customers” in the Balance Sheet Subsidiaries, including: 90.12 147.48 357.26 L&T Metro Rail (Hyderabad) Limited 73.15 129.40 223.24 L&T Seawoods Limited 82.95 Joint ventures, including: 23.21 119.26 228.85 L&T Infrastructure Development Projects Limited 68.84 122.24 L&T Deccan Tollways Limited 36.97 96.03 L&T-MHPS Boilers Private Limited 21.54 13.46 Total 113.33 266.74 586.11 viii. Due to whole-time directors #: (Key management personnel) 55.58 51.30 53.83 Mr. A. M. Naik 18.24 17.96 18.19 Mr. K. Venkataramanan* – 3.77 7.39 Mr. S. N. Subrahmanyan 11.29 9.90 8.73 Mr. R. Shankar Raman 7.41 6.90 6.91 Mr. Shailendra Roy 5.84 4.40 4.48 Mr. M. V. Kotwal** – 2.04 4.91 Mr. D. K. Sen 4.93 2.13 – Mr. M. V. Satish 4.32 0.73 – Total 55.58 51.30 53.83 ix.(a) Capital commitments given Subsidiaries, including: 8.93 1.51 1.77 L&T Construction Equipment Limited 5.30 1.51 0.24 Larsen and Toubro (Oman) LLC – – 1.31 L&T Technology Services Limited 1.60 – – L&T Hydrocarbon Engineering Limited 1.99 – – Total 8.93 1.51 1.77 ix.(b) Revenue commitments given Subsidiaries, including: 1660.62 1775.11 324.79 Henikwon Corporation SDN. BHD 35.81
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |290| ` in crore Sr. no. Nature of transaction/relationship/major parties As at 31-3-2017 As at 31-3-2016 As at 1-4-2015 Amount Amounts for major parties Amount Amounts for major parties Amount Amounts for major parties L&T Shipbuilding Limited 1260.35 1655.69 209.32 Larsen & Toubro Readymix and Asphalt Concrete Industries LLC – 42.50 L&T Geostructure LLP 290.20 – Joint ventures, including: 3386.85 3385.37 517.08 L&T-MHPS Boilers Private Limited 2232.20 2254.94 300.05 L&T-MHPS Turbine Generators Private Limited 1086.15 1066.91 177.16 Associates, including: 3.89 3.53 5.82 Feedback Infra Private Limited 0.80 1.59 L&T-Chiyoda Limited 0.96 1.29 0.78 Magtorq Private Limited 2.13 0.65 JSK Electricals Private Limited – – 3.10 Salzer Electronics Limited – – 1.67 Total 5051.36 5164.01 847.69 x. Commitment to Fund Subsidiaries, including: 1063.20 876.00 1294.59 L&T Seawoods Limited – 413.00 734.40 L&T Uttaranchal Hydropower Limited 442.75 459.00 546.00 L&T Metro Rail (Hyderabad) Limited 620.45 Joint venture: – 405.00 1443.41 L&T Infrastructure Development Projects Limited – 405.00 1443.41 Total 1063.20 1281.00 2738.00 xi. Revenue commitments received Subsidiaries, including: 2261.68 3550.18 5651.12 L&T Metro Rail (Hyderabad) Limited 1396.43 2650.68 3299.75 L&T Parel Project LLP 397.04 665.80 L&T Asian Realty Project LLP 237.62 Larsen and Toubro (Saudi Arabia) LLC 621.93 L&T Seawoods Limited 775.01 Joint ventures, including: 138.67 1000.60 2225.39 L&T Deccan Tollways Limited 25.95 350.30 883.80 L&T Infrastructure Development Projects Limited 60.00 593.65 1236.11 L&T Krishnagiri Walajahpet Tollway Limited 13.65 – – L&T BPP Tollway Limited 26.27 Total 2400.35 4550.78 7876.51 xii. Capital commitments received Subsidiary: 0.77 – – L&T Shipbuilding Ltd 0.77 – – Total 0.77 – – “Major parties” denote entities account for 10% or more of the aggregate for that category of transaction during respective period. # Includes commission due to non-executive directors ` 3.55 crore (As at 31-3-2016: ` 3.47 crore; as at 1-4-2015: ` 3.22 crore) * Retired on September 30, 2015 ** Retired on August 26, 2015 $ Appointed w.e.f. October 1, 2015
|291| Chap. 14 – Ind AS 24 — Related Party Disclosures 7. POWER GRID CORPORATION OF INDIA LIMITED 60. RELATED PARTY TRANSACTIONS (a) Subsidiaries Name of entity Place of business/ country of incorporation Proportion of Ownership Interest 31st March, 2017 31st March, 2016 1st April, 2015 Powergrid Vizag Transmission Limited India 100% 100% 100% Powergrid NM Transmission Limited India 100% 100% 100% Powergrid Unchahar Transmission Limited India 100% 100% 100% Powergrid Kala Amb Transmission Limited India 100% 100% 100% Powergrid Jabalpur Transmission Limited India 100% 100% 100% Powergrid Warora Transmission Limited India 100% 100% NA Powergrid Parli Transmission Limited India 100% 100% NA Powergrid Southern Interconnector Transmission Limited India 100% 100% NA Powergrid Vemagiri Transmission Limited India 100% 100% 100% Power System Operation Corporation Limited ** India NA 100% 100% Grid Conductors Limited India 100% 100% 100% Medinipur Jeerat Transmission Limited ## India 100% NA NA ** ceased to be a subsidiary w.e.f. 2nd January, 2017 ## 100% equity in Medinipur Jeerat Transmission Limited acquired from PFC Consulting Limited on 28th March, 2017 (b) Joint Ventures Name of entity Place of business/ country of incorporation Proportion of Ownership Interest 31st March, 2017 31st March, 2016 1st April, 2015 Powerlinks Transmission Limited India 49% 49% 49% Torrent Power Grid Limited India 26% 26% 26% Jaypee Powergrid Limited India 26% 26% 26% Parbati Koldam Transmission Company Limited India 26% 26% 26% Teestavalley Power Transmission Limited India 26% 26% 26% North East Transmission Company Limited India 26% 26% 26% National High Power Test Laboratory Private Limited India 20% 21.64% 20% Energy Efficiency Services Limited* India 4.87% 13.63% 25% Bihar Grid Company Limited India 50% 50% 50% Kalinga Vidyut Prasaran Nigam Private Limited India 50% 50% 50% Cross Border Power Transmission Company Limited India 26% 26% 26% RINL Powergrid TLT Private Limited India 50% 50% 0% Power Transmission Company Nepal Ltd Nepal 26% 26% 26% * ceased to be Joint Venture w.e.f. 25th April, 2016 (c) Key Managerial Personnel Name Designation Shri I. S. Jha Chairman and Managing Director Shri R. T. Agarwal Director (Finance) – retired on 31st Aug, 2016 Shri K. Sreekant Director (Finance) - w.e.f. 1st Sep, 2016
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |292| Name Designation Shri Ravi P. Singh Director (Personnel) Shri R. P. Sasmal Director (Operations) Sh. Prabhakar Singh Director (Projects) -w.e.f. 8th Feb, 2017 Dr. Pradeep Kumar Government Nominee Smt. Jyoti Arora Government Nominee Shri Jagdish Ishwar Bhai Patel Independent Director Shri Tse Ten Dorji Independent Director Ms. Jyotika Kalra Independent Director Smt. Divya Tandon Company Secretary (d) List of Other Related Parties Name of Entity Place of business/ country of incorporation Nature of Relationship Powergrid Employees P. F. Trust India Post-employment benefit plan of Powergrid Powergrid Self Contributory Superannuation Benefit (Pension) Fund Trust India Post-employment benefit plan of Powergrid Powergrid Employees Gratuity Fund Trust India Post-employment benefit plan of Powergrid (e) Government Related Entities The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 57.90% of equity shares capital issued and paid up (previous year 57.90%). The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on armslength basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items. The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively. (f) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: (` in crore) Particulars 31st March, 2017 31st March, 2016 1st April, 2015 Trade payables (purchases of goods and services) Subsidiaries Power System Operation Corporation Limited** - - 3.61 Joint Ventures Parbati Koldam Transmission Company Limited - 0.09 0.09 National High Power Test Laboratory Private Limited - 5.36 - Powerlinks Transmission Limited - 2.78 2.78 Bihar Grid Company Limited - - 3.28 Cross Border Power Transmission Company Limited 9.53 7.58 1.70 Teestavalley Power Transmission Limited 30.78 40.44 40.38 Total payables to related parties 40.31 56.25 51.84
|293| Chap. 14 – Ind AS 24 — Related Party Disclosures (` in crore) Particulars 31st March, 2017 31st March, 2016 1st April, 2015 Trade receivables ( sale of goods and services) Subsidiaries Power System Operation Corporation Limited** - 57.15 47.12 Powergrid Vemagiri Transmission Limited 19.39 19.37 19.37 Powergrid NM Transmission Limited 31.67 4.30 23.26 Powergrid Vizag Transmission Limited 16.31 4.47 50.19 Powergrid Unchahar Transmission Limited 3.52 0.42 2.95 Powergrid Kala Amb Transmission Limited 9.37 0.04 4.08 Powergrid Jabalpur Transmission Limited 10.69 18.71 18.34 Powergrid Warora Transmission Limited 15.99 18.57 - Powergrid Parli Transmission Limited 11.76 18.87 - Powergrid Southern Interconnector Transmission System Ltd. 15.18 19.18 - Grid Conductors Limited - 0.08 - Medinipur Jeerat Transmission Limited 19.23 - - Joint Ventures Parbati Koldam Transmission Company Limited 0.36 - 0.01 North East Transmission Company Limited 5.22 21.50 22.21 National High Power Test Laboratory Private Limited 4.67 - 4.19 Energy Efficiency Services Limited - 0.13 0.25 Bihar Grid Company Limited 4.92 9.19 7.08 Kalinga Vidyut Prasaran Nigam Private Limited 0.85 0.85 0.84 Cross Border Power Transmission Company Limited - - 0.30 Power Transmission Company Nepal Limited - 0.03 - RINL Powergrid TLT Pvt. Ltd 0.08 0.08 - Powerlinks Transmission Limited 0.97 0.06 0.10 Total receivables to related parties 170.18 193.00 200.29 ** ceased to be a subsidiary w.e.f. 2nd January, 2017 Loans to Key Managerial Personnel (` in crore) Particulars 31st March, 2017 31st March, 2016 1st April, 2015 Loans 0.15 0.18 0.16 Loans to related parties (` in crore) Loans to Subsidiaries 31st March, 2017 31st March, 2016 1st April, 2015 Powergrid NM Transmission Limited 839.25 535.50 91.34 Powergrid Vizag Transmission Limited 720.33 532.36 138.36 Powergrid Unchahar Transmission Limited 54.44 26.12 - Powergrid Kala Amb Transmission Limited 204.59 30.31 - Powergrid Jabalpur Transmission Limited 204.06 2.34 - Powergrid Warora Transmission Limited 675.43 12.17 - Powergrid Parli Transmission Limited 445.39 5.28 - Powergrid Southern Interconnector Transmission Limited 342.56 15.64 - Total 3486.05 1159.72 229.70
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |294| Interest accrued on Loan (` in crore) Particulars 31st March, 2017 31st March, 2016 1st April, 2015 Subsidiaries Powergrid NM Transmission Limited 33.88 14.29 1.17 Powergrid Vizag Transmission Limited 23.75 9.08 2.24 Powergrid Unchahar Transmission Limited 2.54 0.64 - Powergrid Kala Amb Transmission Limited 4.72 1.44 - Powergrid Jabalpur Transmission Limited 5.05 - - Powergrid Warora Transmission Limited 16.15 - - Powergrid Parli Transmission Limited 9.99 - - Powergrid Southern Interconnector Transmission Limited 8.76 - - Total 104.84 25.45 3.41 Other Related Parties (` in crore) Particulars 31st March, 2017 31st March, 2016 1st April, 2015 Outstanding balances with Employees Benefit Trust Powergrid Employees P.F. Trust - 4.79 (3.89) Powergrid Self Contributory Superannuation Benefit (Pension) Fund Trust - (10.41) (7.91) Powergrid Employees Gratuity Fund Trust 56.67 29.21 (1.78) Total 56.67 23.59 (13.58) (g) Transactions with related parties The following transactions occurred with related parties: (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Services received by the Company Subsidiaries Power System Operation Corporation Limited** 9.22 11.13 Joint Ventures National High Power Test Laboratory Private Limited - 1.81 Energy Efficiency Services Limited 0.49 - Total 9.71 12.94 Services provided by the Company Subsidiaries Power System Operation Corporation Limited** 5.91 7.30 Powergrid Jabalpur Transmission Limited 11.39 - Powergrid Parli Transmission Limited 0.10 - Powergrid Vemagiri Transmission Limited 0.05 - Joint Ventures National High Power Test Laboratory Private Limited 0.13 29.42 Powerlinks Transmission Limited 0.28 0.08 Energy Efficiency Services Limited - 0.15 Power Transmission Company Nepal Limited 3.10 2.41 Jaypee Powergrid Limited 0.28 - Cross Border Power Transmission Company Limited 2.96 3.94 Bihar Grid Company Limited 0.12 30.38 Parbati Koldam Transmission Company Limited 0.37 -
|295| Chap. 14 – Ind AS 24 — Related Party Disclosures (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Teestavalley Power Transmission Limited 0.58 16.93 North East Transmission Company Limited 8.12 12.18 Torrent Powergrid Ltd 1.29 - Total 34.68 102.79 ** ceased to be a subsidiary w.e.f. 2nd January, 2017 Other Related Parties (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Contribution made during the year Powergrid Employees P.F. Trust 89.47 84.57 Powergrid Self Contributory Superannuation Benefit (Pension) Fund Trust 109.83 102.19 Powergrid Employees Gratuity Fund Trust 26.85 28.66 Total 226.15 215.42 Investments made during the year (Equity) (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Subsidiaries Powergrid NM Transmission Limited 138.00* - Powergrid Vizag Transmission Limited 155.00 - Powergrid Kala Amb Transmission Limited 1.00 - Powergrid Jabalpur Transmission Limited 0.10 - Powergrid Warora Transmission Limited 25.05 0.05 Powergrid Parli Transmission Limited 0.05 0.05 Powergrid Southern Interconnector Transmission System Ltd. - 0.05 Powergrid Unchahar Transmission Limited 12.91 - Medinipur Jeerat Transmission Limited 0.01 - Grid Conductors Limited 0.05 - Joint Ventures Teestavalley Power Transmission Limited 27.17 26.10 Parbati Koldam Transmission Company Limited - - National High Power Test Laboratory Private Limited 6.50 - Bihar Grid Company Limited 108.19 30.29 Cross Border Power Transmission Company Limited 2.30 5.38 RINL Powergrid TLT Pvt. Ltd 3.30 0.10 Power Transmission Company Nepal Limited - 3.90 Total 479.63 65.92 *includes share application amounting to ` 28 crore allotted on 10th April 2017. Consultancy Income (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Subsidiaries Powergrid Unchahar Transmission Limited 2.70 0.12 Powergrid Kala Amb Transmission Limited 8.11 0.26 Powergrid Jabalpur Transmission Limited 11.39 2.03
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |296| Powergrid Warora Transmission Limited 29.92 7.48 Powergrid Parli Transmission Limited 22.68 4.52 Powergrid Southern Interconnector Transmission Limited 11.92 14.86 Powergrid NM Transmission Limited 33.95 - Powergrid Vizag Transmission Limited 27.74 - Total 148.41 29.27 Interest on Loan (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Subsidiaries Powergrid NM Transmission Limited 62.32 24.09 Powergrid Vizag Transmission Limited 56.79 22.83 Powergrid Unchahar Transmission Limited 3.94 0.70 Powergrid Kala Amb Transmission Limited 5.93 1.60 Powergrid Jabalpur Transmission Limited 5.75 - Powergrid Warora Transmission Limited 18.68 - Powergrid Parli Transmission Limited 11.42 - Powergrid Southern Interconnector Transmission Limited 10.67 0.01 Total 175.50 49.23 Dividend received (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Subsidiaries Power System Operation Corporation Limited ** 3.56 20.07 Joint Ventures Powerlinks Transmission Limited 38.99 44.72 Jaypee Powergrid Limited 13.26 4.68 Torrent Power Grid Limited 1.64 1.29 North East Transmission Company Limited - 10.69 Energy Efficiency Services Limited - 0.68 Parbati Koldam Transmission Company Limited 1.77 - Total 59.22 82.13 ** ceased to be a subsidiary w.e.f. 2nd January, 2017. Recovery for Deputation of Employees (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Joint Ventures Jaypee Powergrid Limited 0.11 - Cross Border Power Transmission Company Limited - 0.35 Total 0.11 0.35 Terms and Conditions The loans to key management personnel are on the same terms and conditions as applicable to all other employees. All other transactions were made on normal commercial terms and conditions and at market rates. All outstanding balances are unsecured and are repayable in cash.
|297| Chap. 14 – Ind AS 24 — Related Party Disclosures Transaction in the capacity of Central Transmission Utility (CTU) with the related parties (` in crore) Particulars For the year ended 31st March, 2017 For the year ended 31st March, 2016 Subsidiaries Powergrid Vizag Transmission Limited 48.26 1.18 Joint Ventures Parbati Koldam Transmission Company Limited 162.46 163.13 Torrent Power Grid Limited 52.71 57.62 Powerlinks Transmission Limited 262.14 260.98 Jaypee Powergrid Limited 195.56 170.69 North East Transmission Company Limited 321.43 401.29 Total 1042.56 1054.89 Remuneration to Key Managerial Personnel is ` 3.61 crore (previous year ` 3.07 crore) and amount of dues outstanding to the company as on 31st March, 2017 are ` 0.15 crore (` 0.18 crore as on 31st March, 2016) (` 0.16 crore as on 1st April, 2015) ll
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |298| Chapter 15 Ind AS 28 — Investments in Associates and Joint Ventures 1. ADANI PORT LIMITED INVESTMENT IN ASSOCIATES AND JOINTLY CONTROLLED ENTITIES An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A jointly controlled entity is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investments in its associate and jointly controlled entities are accounted for using the equity method. Under the equity method, the investment in an associate or a jointly controlled entities is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. The statement of profit and loss reflects the Group’s share of the results of operations of the jointly controlled entities. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the jointly controlled entities, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the jointly controlled entities are eliminated to the extent of the interest in the jointly controlled entities. If an entity’s share of losses of a joint venture equals or exceeds its interest in the associate or joint venture (which includes any long term interest that, in substance, form part of the Group’s net investment in the associate or joint venture), the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Group’s share of profit or loss of a jointly controlled entities is shown on the face of the statement of profit and loss. The financial statements of the jointly controlled entities are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its jointly controlled entities. At each reporting date, the Group determines whether there is objective evidence that the investment in the jointly controlled entities are impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the jointly controlled entities and its carrying value, and then recognises the loss as ‘Share of profit of a jointly controlled entities’ in the statement of profit or loss.
|299| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures Upon loss of significant influence over the joint control over the jointly controlled entities, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the jointly controlled entities upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 2. ALL CARGO LOGISTICS LIMITED INVESTMENT IN ASSOCIATES AND JOINT VENTURE An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit and loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. If an entity’s share of losses of an associate or a joint venture equals or exceeds its interest in the associate or joint venture (which includes any long term interest that, in substance, form part of the Group’s net investment in the associate or joint venture), the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit and loss. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |300| amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 3. APOLLO TYRES LIMITED INVESTMENTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with Ind AS 105 Noncurrent Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the Group’s share of the profit and loss of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised directly in equity as capital reserve in the period in which the investment is acquired. After application of the equity method of accounting, the Group determines whether there is any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment in an associate or a joint venture and that event (or events) has an impact on the estimated future cash flows from the net investment that can be reliably estimated. If there exists such an objective evidence of impairment, then it is necessary to recognize impairment loss with respect to the Groups investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with Ind AS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with Ind AS 36 Impairment of Assets to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with Ind AS 109 Financial Instruments. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture
|301| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. 4. ASIAN PAINTS LIMITED INVESTMENT IN ASSOCIATE An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investments in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually. The Statement of Profit and Loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. If Group’s share of losses of an associate exceeds its interest in that associate (which includes any long-term interest that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognized. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |302| associate and its carrying value, and then recognises the loss as Share of profit of an associate in the consolidated statement of profit or loss. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 5. BLUE STAR LIMITED INVESTMENT IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit and loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. If an entity’s share of losses of an associate or a joint venture equals or exceeds its interest in the associate or joint venture (which includes any long term interest that, in substance, form part of the Group’s net investment in the associate or joint venture), the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit and loss. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the statement of profit or loss.
|303| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 6. EIH LIMITED (OBEROI HOTELS) INVESTMENT IN JOINT VENTURES AND ASSOCIATES A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The investment in joint ventures and associates are carried at cost. The cost comprises price paid to acquire investment and directly attributable cost. Transition to Ind AS On transition to Ind AS, the company has elected to continue with the carrying value of all of its Investment in joint ventures and associates recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the Investment in joint ventures and associates. 7. HAVELLS INDIA LIMITED INVESTMENT IN SUBSIDIARY, ASSOCIATES, JOINT VENTURE An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not in control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The investment in subsidiary, associate and Joint venture are carried at cost as per IND AS 27. Investment accounted for at cost is accounted for in accordance with IND AS 105 when they are classified as held for sale and Investment carried at cost is tested for impairment as per IND AS 36. An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. 8. HINDUSTAN UNILEVER LIMITED INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURE: Investments in subsidiaries and joint venture are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and joint venture,
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |304| the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss. Upon first-time adoption of Ind AS, the Company has elected to measure its investments in subsidiaries and joint ventures at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e., 1st April, 2015. 9. IDEA CELLULAR INDIA LIMITED Non-current Investments in subsidiaries and associates: Non-Current Investments in subsidiaries and associates are stated at cost less provision for diminution in value other than temporary, if any. 10. IL&FS TRANSPORTATION NETWORKS LIMITED (ITNL) INVESTMENTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The results of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with Ind AS 105. Under the equity method, an investment in an associate or a joint venture is initially recognized in the balance sheet at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is tested for impairment along with investment. Distributions received from an associate or a joint venture reduces the carrying amount of the investment. When the Group’s share of losses of an associate or a joint venture equals or exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associates or joint ventures subsequently reports profits, the entity resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized directly in equity as capital reserve in the period in which the investment is acquired. If there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment in an associate or a joint venture (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows from the net investment that can be reliably
|305| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures estimated, then it is necessary to recognize impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with Ind AS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognized is reduced from the carrying amount of the investment and recognized in the profit or loss. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases but the increase is restricted to the amounts that would arise had no impairment loss been recognized in previous years. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 11. JSW ENERGY LIMITED INVESTMENTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influences but not control or joint control. This is generally the case where the Group holds between 20% to 50% of the voting rights or the Group has power to participate in the financial and operating policy decision of the investee. Investments in associate are accounted for using equity method accounting. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with Ind AS 105 – Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised directly in equity as capital reserve in the period in which the investment is acquired.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |306| After application of the equity method of accounting, the Group determines whether there is any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment in an associate or a joint venture and that event (or events) has an impact on the estimated future cash flows from the net investment that can be reliably estimated. If there exists such an objective evidence of impairment, then it is necessary to recognise impairment loss with respect to the Group’s investment in an associate or a joint venture. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. Distributions received from an associate or a joint venture reduce the carrying amount of the investment. Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group’s interest in these entities. Unrealised losses are also eliminated unless the transactions provides evidence of an impairment of the assets transferred. 12. LARSEN & TOUBRO LIMITED INVESTMENTS IN JOINT VENTURE AND ASSOCIATES When the Group has with other parties joint control of the arrangement and rights to the net assets of the joint arrangement, it recognises its interest as joint venture. Joint control exists when the decisions about the relevant activities require unanimous consent of the parties sharing the control. When the Group has significant influence over the other entity, it recognises such interests as associates. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control over the entity. The results, assets and liabilities of joint venture and associates are incorporated in the consolidated financial statements using equity method of accounting after making necessary adjustments to achieve uniformity in application of accounting policies, wherever applicable. An investment in associate or joint venture is initially recognised at cost and adjusted thereafter to recognise the Group’s share of profit or loss and other comprehensive income of the joint venture or associate. Gain or loss in respect of changes in other equity of joint ventures or associates resulting in dilution of stake in the joint ventures and associates is recognised in the Statement of Profit and Loss. On acquisition of investment in a joint venture or associate, any excess of cost of investment over the fair value of the assets and liabilities of the joint venture, is recognised as goodwill and is included in the carrying value of the investment in the joint venture and associate. The excess of fair value of assets and liabilities over the investment is recognised directly in equity as capital reserve. The unrealised profits/losses on transactions with joint ventures are eliminated by reducing the carrying amount of investment. The carrying amount of investment in joint ventures and associates is reduced to recognise impairment, if any, when there is objective evidence of impairment. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. 13. ONGC LIMITED An Associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A Joint Venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Joint control is the contractually agreed sharing of control of
|307| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results, assets and liabilities of associates or joint ventures are incorporated in the Consolidated Financial Statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with Ind AS 105 ‘Noncurrent Assets Held for Sale and Discontinued Operations’. Under the equity method, an investment in an associate or a joint venture is initially recognised in the Consolidated Balance Sheet at cost and adjusted thereafter to recognize the Group’s share of profit or loss and other comprehensive income of the associate or joint venture. Distributions received from an associate or a joint venture reduces the carrying amount of investment. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has legal or constructive obligations or made payments on behalf of the associate or joint venture. Loans advanced to Joint Venture and Associate, that have the characteristics of financing through equity are also included in the investment of the Group’s consolidated balance sheet. The Group’s share of amounts recognized directly in equity by Joint Venture and Associate is recognized in the Group’s consolidated statement of changes in equity. Unrealized gains on transactions between the group and its Joint venture and Associates are eliminated to the extent of the Group’s interest in Joint venture and Associates. Unrealized losses are also eliminated to the extent of Group’s interest unless the transaction provides evidence of an impairment of the asset transferred. If an associate or a joint venture uses accounting policies other than those of the Group accounting policies for like transactions and events in similar circumstances, adjustments are made to make the associate’s or joint venture’s financial statemetns confirm to the Group’s accounting policies before applying the equity method, unless, in case of an associate where it is impracticable do so. An investment in an Associate or a Joint Venture is accounted for using the equity method from the date on which the investee becomes an Associate or a Joint Venture. On acquisition of the investment in an Associate or a Joint Venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised directly in equity as capital reserve in the period in which the investment is acquired. After application of the equity method of accounting, the Group determines whether there is any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment in an associate or a joint venture and that event (or events) has an impact on the estimated future cash flows from the net investment that can be reliably estimated. If there exists such an objective evidence of impairment, then Group recognise impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with Ind AS 36 ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with Ind AS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with Ind AS 109 ‘Financial Instruments’. The difference between the
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |308| carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to the consolidated statement of profit and loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to the consolidated statement of profit and loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to the consolidated statement of profit and loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to the consolidated statement of profit and loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. 14. SHOPPERS STOP LIMITED INVESTMENTS IN JOINT VENTURES The Company’s investment in a joint venture is accounted for by the Equity Method. On initial recognition the investment is recorded at cost, and the carrying amount is increased or decreased to recognize the Company’s share of profit or loss and other comprehensive income of the joint venture after the date of acquisition. Distributions received from the joint venture reduce the carrying amount of the investment. The carrying amount of the investment is tested for impairment at each reporting date. Initial investment on transition to Ind AS When changing from proportionate consolidation under previous GAAP to the equity method, the Group has elected to measure its investment in joint ventures at transition date as the net aggregate of the carrying amounts of assets and liabilities previously proportionately consolidated. Subsidiaries and Joint Ventures a) The subsidiaries (which along with SSL Limited, the parent, constitute the Group) considered in the preparation of these Consolidated Financial Statements are: Name of subsidiary Principal activity Place of incorporate and operation Proportion of ownership interest and voting power held by the Group 31 March 2017 31 March 2016 1 April 2015 HyperCity Retail (India) Limited Retailing a variety of household and consumer products (including food, groceries, fashion and other general merchandise) through departmental stores India 51.08% 51.04% 51.00%
|309| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures Name of subsidiary Principal activity Place of incorporate and operation Proportion of ownership interest and voting power held by the Group 31 March 2017 31 March 2016 1 April 2015 Crossword Book Stores Limited Retailing in books and other allied items through departmental stores operated by self or by franchisees India 100% 100% 100% Upasna Trading Limited Supervising distribution and logistics operations India 100% 100% 100% Shopper’s Stop Services (India) Limited Services India 100% 100% 100% Shopper’s Stop. Com (India) Limited Services India 100% 100% 100% Gateway Multichannel Retail (India) Limited Catalogue retailing India 100% 100% 100% b) Investment in Joint Ventures The Group’s investment in a joint venture is accounted for by the Equity Method. On initial recognition the investment is recorded at cost, and the carrying amount is increased or decreased to recognize the Group’s share of profit or loss and other comprehensive income of the joint venture after the date of acquisition. Distributions received from the joint venture reduce the carrying amount of the investment. (i) Details and financial information of material Joint ventures Details of the Group’s Material joint ventures at the end of the reporting period is as follows: Name of the Joint Venture Principal Activity Place of Incorporation and Principle place of business Proportion of ownership interest and voting rights held by the group 31 March 2017 31 March 2016 1 April 2015 Nuance Group (India) Private Limited Airport Retailing India 50% 50% 50% Timezone Entertainment Private Limited Entertainment India 48.42% 48.42% 48.42% (ii) Summarised financial information in respect of Group’s material joint venture is set out below. The summarised financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance with the Ind-AS s adjusted by the group equity accounting purposes Particulars As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 Nuance Group (India) Private Limited Timezone Entertainment Private Limited Nuance Group (India) Private Limited Timezone Entertainment Private Limited Nuance Group (India) Private Limited Timezone Entertainment Private Limited Non-Current Assets 5,552.05 4,377.54 5,421.71 4,695.11 3,411.08 4,899.34 Current Assets 3,698.24 537.98 5,568.26 290.64 4,798.70 396.31 Non-current Liabilities 2,000.00 806.08 2,666.67 848.47 - 1,045.29 Current Liabilities 3,524.87 2,079.24 3,909.11 1,523.11 4,483.44 1,450.38 The above amounts of assets and liabilities include the following: Cash and cash equivalents 152.93 101.09 244.85 131.16 250.97 206.19 Current financial liabilities (excluding trade payables and provisions) 1,743.15 1,724.39 2,420.51 1,192.37 1,151.51 1,163.66
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |310| Particulars As at 31 March 2017 As at 31 March 2016 As at 1 April 2015 Nuance Group (India) Private Limited Timezone Entertainment Private Limited Nuance Group (India) Private Limited Timezone Entertainment Private Limited Nuance Group (India) Private Limited Timezone Entertainment Private Limited Non-current financial liabilities (excluding trade payables and provisions) 2,000.00 512.60 2,666.67 587.90 - 871.29 Reconciliation of summarised financial information to the carrying amount of interest in joint ventures Net Assets of joint ventures 3,725.43 2,030.20 4,414.19 2,614.18 3,726.34 2,799.97 Proportion of Group’s ownership interest in the joint ventures 50.00% 48.42% 50.00% 48.42% 50.00% 48.42% Goodwill - 421.18 - 421.18 - 421.18 Other adjustments (please specify) Less : Impairment in value 1,282.71 - - - - - Carrying amount of the Group’s interest in the joint ventures 580.00 1,404.20 2,207.09 1,686.97 1,863.17 1,776.93 Particulars Year ended 31 March 2017 Year ended 31 March 2016 Nuance Group (India) Private Limited Timezone Entertainment Private Limited Nuance Group (India) Private Limited Timezone Entertainment Private Limited Revenue 15,776.00 5,931.51 13,149.68 5,907.14 Profit / (loss) from continuing operations (682.97) (580.11) 687.86 (168.43) Profit / (loss) for the year (682.97) (580.11) 687.86 (168.43) Other comprehensive income for the year (5.80) (2.81) (4.13) (13.94) Total comprehensive income for the year (688.77) (582.92) 683.73 (182.37) Dividends received from the joint venture during the year - - - - The above profit / (loss) for the year include the following: Depreciation and amortisation 389.27 1,018.67 366.10 1,039.63 Interest income 304.56 49.83 181.22 0.49 Interest expense 370.60 125.59 310.48 130.52 Income tax expense / (income) - 6.28 - - 15. STERLITE TECHNOLOGIES LIMITED INVESTMENT IN JOINT VENTURES A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investment in its joint venture is accounted for using the equity method. Under the equity method, the investment in joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not tested for impairment individually.
|311| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures The statement of profit and loss reflects the Group’s share of the results of operations of the joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. If an entity’s share of losses of a joint venture equals or exceeds its interest in the joint venture (which includes any long term interest that, in substance, form part of the Group’s net investment in the joint venture), the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit and loss. The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognises the loss as ‘Share of profit of joint venture’ in the statement of profit or loss. Upon loss of joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 16. SUZLON ENERGY LIMITED An associate is an entity over which the Suzlon Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement where by the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Group’s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually. The statement of profit and loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |312| If an entity’s share of losses of an associate or a joint venture equals or exceeds its interest in the associate or joint venture (which includes any long term interest that, in substance, form part of the Group’s net investment in the associate or joint venture), the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit and loss. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the statement of profit and loss. Accounting for interest in Suzlon Energy (Tianjin) Limited The Group holds 25% interest in Suzlon Energy (Tianjin) Limited (‘SETL’) and classified it as a joint venture under Indian GAAP and has proportionately consolidated its interest in the consolidated financial statements. On transition to Ind AS the Group had assessed and determined that SETL is its associate under Ind AS 28 - Investments in Associates and Joint Ventures. Therefore interest in SETL has been accounted for using the equity method as against proportionate consolidation. For the application of equity method, the initial investment is measured as the aggregate of Ind AS amount of assets and liabilities that the Group had previously proportionately consolidated. On application of equity method the investment stands increased by ` 28.61 Crore on April 1, 2015 and decreased by ` 11.00 Crore on March 31, 2016. De-recognition of proportionately consolidated SETL has resulted in change in balance sheet, statement of profit and loss and cash flow statement for both above mentioned periods. Accounting for interest in Suzlon Generators Limited (‘SGL’) In case of SGL, the Company has a joint venture arrangement with two parties and the Company used to hold 75% stake in SGL. As per the requirements of Indian GAAP, if an entity establishes joint controls over a subsidiary through contractual arrangement it will be consolidated as a subsidiary under Accounting Standard 21 – Consolidated Financial Statements. Accordingly, the Group had accounted for interest in SGL as a subsidiary and disclosed 25% stake held by other parties as non-controlling interest. Under Ind AS, the Group has evaluated the terms of the joint venture agreement and based on the contractual terms classified interest in SGL as joint venture and hence it has been accounted using the equity method of accounting. Accordingly, all the assets, liabilities, income and expenses included in the Indian GAAP financial statements have been adjusted and also the amount of long term investment in SGL has been adjusted to incorporate effect of equity method. 17. VEDANTA LIMITED INVESTMENTS IN ASSOCIATES Investments in associates are accounted for using the equity method (see (iv) below). An associate is an entity over which the Group is in a position to exercise significant influence over operating and financial policies. Goodwill arising on the acquisition of associates is included in the carrying value of investments in associate.
|313| Chap. 15 – Ind AS 28 — Investments in Associates and Joint Ventures Equity method of accounting Under the equity method of accounting applicable for investments in associates and joint ventures investments are initially recorded at the cost to the Group and then, in subsequent periods, the carrying value is adjusted to reflect the Group’s share of the postacquisition profits or losses of the investee in profit or loss, and the Group’s share of other comprehensive income of the investee in other comprehensive income. Dividend received or receivable from associates and joint-ventures are recognised as a reduction in carrying amount of the investment. The consolidated statement of profit and loss include the Group’s share of associate’s results, except where the associate is generating losses, share of such losses in excess of the Group’s interest in that associate are not recognized. Losses recognised under the equity method in excess of the Group’s investment in ordinary shares are applied to the other components of the Group’s interest that forms part of Group’s net investment in the associate in the reverse order of their seniority (i.e. priority in liquidation). Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the assets transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. If the Group’s share of losses in an associate or a joint venture equals or exceeds its interests in the associate or joint venture, the Group discontinues recognition of further losses. Additional losses are provided for, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate/joint venture. The carrying amount of equity accounted investments are tested for impairment in accordance with the policy described in note 3(j) below. ll
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |314| Chapter 16 Ind AS 32 — Financial Instruments : Presentation Ind AS 107 — Financial Instruments : Disclosures Ind AS 109 — Financial Instruments Ind AS 113 — Fair Value Measurement 1. ADANI POWER LIMITED STANDALONE FINANCIAL STATEMENTS c) Commodity price risk The Company is affected by the price volatility of certain commodities. Its operating activities require the on-going purchase or continuous supply of coal. Therefore, the Company monitors its purchases closely to optimise the price. Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is having majority of receivables from State Electricity Boards which are Government undertakings and hence they are secured from credit losses in the future. 2. ASIAN PAINTS LIMITED STANDALONE FINANCIAL STATEMENTS ACCOUNTING POLICIES 1. Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. 2) Credit Risk Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investment in mutual funds, derivative financial instruments, other balances with banks, loans and other receivables. The Company’s exposure to credit risk is disclosed in Note 4 (except equity shares and bonds), 5, 6, 10 and 11B. The Company has adopted a policy of only dealing with counterparties that have sufficiently high credit rating. The Company’s exposure and credit ratings of its counterparties are continuously monitored and the aggregate value of transactions is reasonably spread amongst the counterparties. Credit risk arising from investment in mutual funds, derivative financial instruments and other balances with banks is limited and there is no collateral held against these because the counterparties are banks and recognised financial institutions with high credit ratings assigned by the international credit rating agencies. The average credit period on sales of products is less than 30 days. Credit risk arising from trade receivables is managed in accordance with the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on a detailed study of
|315| Chap. 16 – Ind AS 32-107-109-113 credit worthiness and accordingly individual credit limits are defined/modified. The concentration of credit risk is limited due to the fact that the customer base is large. There is no customer representing more than 5% of the total balance of trade receivables. For trade receivables, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. The provision matrix at the end of the reporting period is as follows: Net Outstanding > 365 days % Collection to gross outstanding in current year Credit loss allowance Yes < 25% Yes, to the extent of lifetime expected credit losses outstanding as at reporting date. Yes > 25% Yes, to the extent of lifetime expected credit losses pertaining to balances outstanding for more than one year. (` in crore) Movement in expected credit loss allowance on trade receivables 31.03.2017 31.03.2016 01.04.2015 Balance at the beginning of the year 10.12 6.78 5.19 Loss allowance measured at lifetime expected credit losses 2.51 3.34 1.59 Balance at the end of the year 12.63 10.12 6.78 Note 37: Details of Hedged and Unhedged Exposure In Foreign Currency Denominated Monetary Items a) Exposure in foreign currency - Hedged The Company enters into forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes. The forward exchange contracts used for hedging foreign currency exposure and outstanding as at reporting date are as under: Currency Number of Contracts Buy Amount (USD in mn.) Indian Rupee Equivalent (` in Crore) Forward contract to buy USD - As at 31.03.2017 39.00 21.13 139.88 Forward contract to buy USD - As at 31.03.2016 67.00 4.36 28.89 Forward contract to buy USD - As at 01.04.2015 - - - b) Exposure in foreign currency - Unhedged The foreign currency exposure not hedged as at 31st March, 2017 are as under: Currency Payable (In millions FC) Receivable (In millions FC) 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 USD 40.52 40.98 41.63 18.56 16.26 11.11 EUR 4.41 5.30 1.97 2.67 0.15 0.08 SGD 0.02 0.01 0.17 0.07 0.01 - GBP 0.39 0.91 0.02 0.07 0.06 - SEK 1.65 2.80 0.02 - - - JPY 0.34 15.99 - - - - Others 0.07 0.02 0.03 0.13 0.08 -
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |316| Currency Payable (` In Crores) Receivable (` In Crores) 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 USD 262.80 271.52 260.16 120.38 107.70 69.46 EUR 30.54 39.94 13.22 18.53 1.10 0.57 SGD 0.10 0.05 0.79 0.34 0.04 - GBP 3.13 8.69 0.21 0.54 0.60 - SEK 1.20 2.29 0.02 - - - JPY 0.02 0.94 - - - - Others 0.46 0.14 0.17 0.75 0.35 - TOTAL 298.25 323.57 274.57 140.54 109.79 70.03 3. ATUL LIMITED STANDALONE FINANCIAL STATEMENTS ACCOUNTING POLICIES There were no transfers between any levels during the year. Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual fund units that have a quoted price. The fair value of all equity instruments which are traded on the Stock Exchanges is valued using the closing price as at the reporting period. The mutual fund units are valued using the closing net assets value (NAV). Level 2: The fair value of financial instruments that are not traded in an active market (for example overthe-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Financial assets valued using Level 3 valuation techniques comprise of unquoted Preference shares in subsidiary company with a fair value amount of Rs 2.40 cr as on April 01, 2015. These Preference shares have been redeemed in the financial year ended March 31, 2016. These investments are collectively not material and hence disclosures regarding significant unobservable inputs used in Level 3 fair values have not been made. b) Valuation technique used to determine fair value Specific valuation techniques used to value financial instruments include: i) the use of quoted market prices or dealer quotes for similar instruments ii) the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves iii) the fair value of forward foreign exchange contracts are determined using forward exchange rates at the Balance Sheet date iv) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model v) the fair value of the remaining financial instruments is determined using discounted cash flow analysis. All of the resulting fair value estimates are included in level 1 and 2. c) Valuation processes The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values.
|317| Chap. 16 – Ind AS 32-107-109-113 b) Management of market risk The size and operations of the Company result in it being exposed to the following market risks that arise from its use of financial instruments: i) price risk ii) interest rate risk iii) foreign exchange risk The above risks may affect income and expenses, or the value of its financial instruments of the Company. The objective of the Management of the Company for market risk is to maintain this risk within acceptable parameters, while optimising returns. The Company exposure to, and the Management of, these risks is explained below: Potential impact of risk Management policy Sensitivity to risk i) Price risk The Company is mainly exposed to the price risk due to its investments in equity instruments. The price risk arises due to uncertainties about the future market values of these investments. Equity price risk is related to the change in market reference price of the investments in equity securities. In order to manage its price risk arising from investments in equity instruments, the Company maintains its portfolio in accordance with the framework set by the Risk Management policies. Any new investment or divestment must be approved by the Board of Directors, Chief Financial Officer and Risk Management Committee. As an estimation of the approximate impact of price risk, with respect to investments in equity instruments, the Company has calculated the impact as follows. For equity instruments, a 9.14% increase in Nifty 50 prices would have led to approximately an additional ` 33.95 cr gain in Other Comprehensive Income (2015-16: In general, these securities are not held for trading purposes. These investments are subject to changes in the market price of securities. The fair value of quoted equity instruments classified as fair value through Other Comprehensive Income as at March 31, 2017 is ` 414.27 cr (March 31, 2016: ` 337.70 cr and April 01, 2015: ` 376.12 cr). ` 23.68 cr). A 9.14% decrease in Nifty 50 prices would have led to an equal but opposite effect. ii) Interest rate risk a) Financial Liabilities: The Company is mainly exposed to interest rate risk due to its variable interest rate borrowings. The interest rate risk arises due to uncertainties about the future market interest rate of these borrowings. As at March 31, 2017, the exposure to interest rate risk due to variable interest rate borrowings amounted to ` 51.87 cr (March 31, 2016: ` 106.30 cr and April 01, 2015: ` 80.08 cr) In order to manage its interest rate risk arising from variable interest rate borrowings, the Company uses Interest rate swaps to hedge its exposure to future market interest rates whenever appropriate. The hedging activity is undertaken in accordance with the framework set by the Risk Management Committee and supported by the Treasury department. The Risk Management Committee and the Treasury department maintain a list of approved instruments which can be used for the purpose of such interest rate hedging. As an estimation of the approximate impact of the interest rate risk, with respect to financial instruments, the Company has calculated the impact of a 25 bps change in interest rates. A 25 bps increase in interest rates would have led to approximately an additional ` 0.13 cr (2015-16: ` 0.27 cr) gain in Other Comprehensive Income. A 25 bps decrease in interest rates would have led to an equal but opposite effect.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |318| Potential impact of risk Management policy Sensitivity to risk b) Financial Assets: The Company holds variable interest rate financial assets and fixed interest rate financial assets. However, it does not designate fixed interest rate financial assets at fair value through profit and loss. Therefore, changes in interest rates of fixed rate instruments would not affect profit or loss equity. As at March 31, 2017, the exposure to interest rate risk due to variable interest rate loans amounted to ` 4.30 cr (March 31, 2016 and April 01, 2015: ` 4.30 cr) In order to manage its interest rate risk on variable interest rate financial assets, any new loan is as per the policy of the Company. The Company has calculated the impact of a 25 bps change in interest rates. A 25 bps increase in interest rates would have led to approximately an additional ` 0.01 cr (2015-16: ` 0.01 cr) gain in Other Comprehensive Income. A 25 bps decrease in interest rates would have led to an equal but opposite effect. ii) Foreign exchange risk The Company has international operations and is exposed to foreign exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised Financial assets and liabilities denominated in a currency that is not the functional currency (INR `) of the Company. The risk also includes highly probable foreign currency cash flows. The objective of the cash flow hedges is to minimise The Company has exposure arising out of export, import, loans and other transactions other than functional risks. The Company hedges its foreign exchange risk using foreign exchange forward contracts and currency options after considering the natural hedge. The same is within the guidelines laid down by Risk Management policy of the Company. As an estimation of the approximate impact of the foreign exchange rate risk, with respect to Financial Statements, the Company has calculated the follows: For derivative and non-derivative financial instruments, a 2% increase in the spot price as on the reporting date would have led to an increase in additional ` 3.76 cr gain in Other Comprehensive Income (2015-16: gain of ` 2.25 cr). A 2% decrease would the volatility of the cash flows of highly probable forecast transactions. have led to an increase in additional ` 2.36 cr loss in Other Comprehensive Income (2015-16: loss of ` 0.91 cr). Foreign currency risk exposure: The exposure to foreign currency risk of the Company at the end of the reporting period expressed in ` cr, are as follows: Particulars As at March 31, 2017 As at March 31, 2016 As at April 01, 2015 USD EUR GBP USD EUR GBP USD EUR GBP Financial assets Trade receivables 244.26 16.80 0.77 202.95 8.58 1.52 186.33 15.93 1.03 Dividend receivable – – 5.25 – – – – – – Less: Hedged through derivatives (Includes hedges for highly probable transactions up to next 12 months) Foreign exchange forward contracts – – – – – – 4.38 – – Currency range options 49.60 – – 83.25 – – 162.74 – – Currency vanilla options – – – 44.00 – – – – Net exposure to foreign currency risk (assets) 194.66 16.80 6.02 75.70 8.58 1.52 19.21 15.93 1.03
|319| Chap. 16 – Ind AS 32-107-109-113 Particulars As at March 31, 2017 As at March 31, 2016 As at April 01, 2015 USD EUR GBP USD EUR GBP USD EUR GBP Financial liabilities Borrowings 69.15 – – 95.21 – – 97.93 – – Trade payables 52.33 1.52 0.04 35.51 0.78 0.82 38.15 0.40 0.13 Less: Hedged through derivatives (Includes hedges for highly probable transactions up to next 12 months) Foreign exchange forward contracts 58.35 – – 59.98 – – 12.52 – – Interest rate swaps – – – 2.07 – – 12.39 – – Currency swaps 10.80 – – 33.17 – – 52.16 – – Net exposure to foreign currency risk (liabilities) 52.33 1.52 0.04 35.50 0.78 0.82 59.01 0.40 0.13 iii) Management of credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Trade receivables Concentrations of credit risk with respect to trade receivables are limited, due to the customer base being large, diverse and across sectors and countries. All trade receivables are reviewed and assessed for default on a quarterly basis. Historical experience of collecting receivables of the Company is supported by low level of past default and hence the credit risk is perceived to be low. Reconciliation of loss allowance provision – Trade receivables (` in Crore) Particulars As at March 31, 2017 Loss allowance on April 01, 2015 2.73 Changes in loss allowance 1.07 Loss allowance on March 31, 2016 3.80 Changes in loss allowance (0.64) Loss allowance on March 31, 2017 3.16 Other financial assets The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in Government securities, Preference shares and loans to subsidiary companies. The Company has a diversified portfolio of investment with various number of counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the treasury department of the Company.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |320| Impact of hedging activities a) Disclosure of effects of hedge accounting on financial position: As at March 31, 2017 (` in Crore) Type of hedge and risks Notional value Carrying amount of hedging instrument Maturity Weighted average strike price interest rate Changes in fair value of hedging instrument Change in the value of hedged item used as the basis for recognising hedge effectiveness Assets Liabilities Assets Liabilities Cash flow hedge ` : US$ Foreign exchange risk Foreign exchange forward contracts – 58.35 – (2.43) 1-12 months 68.06 (2.43) (2.43) Currency range options 49.60 – 1.70 – 1-12 months 67.98-73.20 1.70 1.70 As at March 31, 2016 (` in Crore) Type of hedge and risks Notional value Carrying amount of hedging instrument Maturity Weighted average strike price interest rate Changes in fair value of hedging instrument Change in the value of hedged item used as the basis for recognising hedge effectiveness Assets Liabilities Assets Liabilities Cash flow hedge ` : US$ Foreign exchange risk Foreign exchange forward contracts – 53.07 – (1.33) 1-12 months 68.69 (1.33) (1.33) Currency range options 83.25 – 0.14 – 1-12 months 65.96-73.86 0.14 0.14 Currency vanilla options 44.00 – 0.30 – 1-12 months 66.41 0.30 0.30 Interest rate risk Interest rate swaps – 2.07 – (0.01) 1-15 months 3.70 (0.01) (0.01) As at April 01, 2015 (` in Crore) Type of hedge and risks Notional value Carrying amount of hedging instrument Maturity Weighted average strike price interest rate Changes in fair value of hedging instrument Change in the value of hedged item used as the basis for recognising hedge effectiveness Assets Liabilities Assets Liabilities Cash flow hedge ` : US$ Foreign exchange risk Foreign exchange forward contracts 4.38 12.55 0.01 (0.45) 1-12 months 65.02 (0.44) (0.44) Currency range options 162.74 – 0.27 – 1-12 months 63.26-68.47 0.27 0.27 Interest rate risk Interest rate swaps – 15.62 – (0.11) 1-15 months 3.91 (0.11) (0.11)
|321| Chap. 16 – Ind AS 32-107-109-113 b) Disclosure of effects of hedge accounting on financial performance As at March 31, 2017 (` in Crore) Type of hedge Change in the value of the hedging instrument recognised in Other Comprehensive Income Hedge ineffectiveness recognised in profit or loss Amount reclassified from cash flow hedging reserve to profit or loss Financial Statement line item affected Cash flow hedge i) Foreign exchange risk (0.73) – (0.89) Revenue and inventories ii) Interest rate risk – – – finance cost As at March 31, 2016 (` in Crore) Type of hedge Change in the value of the hedging instrument recognised in Other Comprehensive Income Hedge ineffectiveness recognised in profit or loss Amount reclassified from cash flow hedging reserve to profit or loss Financial Statement line item affected Cash flow hedge i) Foreign exchange risk (0.89) – (0.17) Revenue and inventories ii) Interest rate risk (0.01) – (0.11) finance cost Movements in cash flow hedging reserve Risk category Foreign currency risk Derivative instruments As at March 31, 2017 As at March 31, 2016 Balance at the beginning of the period (0.59) (0.28) Gain (Loss) recognised in Other Comprehensive Income during the year (0.73) (0.90) Amount reclassified to revenue during the year 0.59 0.28 Tax impact on above 0.25 0.31 Balance at the end of the period (0.48) (0.59) 4. DR. REDDY’S LABORATORIES LIMITED STANDALONE FINANCIAL STATEMENTS Derivative financial instruments The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in US dollars, UK pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in US dollars, Russian roubles and Euros. The Company uses foreign exchange forward contracts, option contracts and swap contracts (derivative financial instruments) to mitigate its risk of changes in foreign currency exchange rates. The Company also uses non derivative financial instruments as part of its foreign currency exposure risk mitigation strategy. Hedges of highly probable forecasted transactions The Company classifies its derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the Company’s hedging reserve as a component of equity and re-classified to the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is recorded in the statement of profit and loss as finance costs immediately.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |322| The Company also designates certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, the Company applies cash flow hedge accounting to such relationships. Remeasurement gain/loss on such non derivative financial liabilities is recorded in the Company’s hedging reserve as a component of equity and reclassified to the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income, remains there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in the statement of profit and loss. Hedges of recognised assets and liabilities Changes in the fair value of derivative contracts that economically hedge monetary assets and liabilities in foreign currencies, and for which no hedge accounting is applied, are recognised in the statement of profit and loss. The changes in fair value of such derivative contracts, as well as the foreign exchange gains and losses relating to the monetary items, are recognised in the statement of profit and loss. Hedges of changes in the interest rates Consistent with its risk management policy, the Company uses interest rate swaps to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes. Derivative financial instruments The Company is exposed to exchange rate risk that arises from its foreign exchange revenues and expenses, primarily in US dollars, UK pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in US dollars, Russian roubles and Euros. The Company uses forward contracts, option contracts and currency swap contracts (collectively, “derivatives”) to mitigate its risk of changes in foreign currency exchange rates. The counterparty for these contracts is generally a bank or a financial institution. The Company had a derivative financial asset and derivative financial liability of ` 220 and ` 6, respectively, as at 31st March 2017 as compared to derivative financial asset and derivative financial liability of ` 175 and ` 52, respectively, as at 31 March 2016 towards these derivative financial instruments. Further, in respect of these foreign exchange derivative contracts, the Company has recorded, as part of foreign exchange gain and losses, a net gain of ` 945, and a net gain of ` 275 for the years ended 31st March 2017 and 31st March 2016 respectively. Hedges of highly probable forecasted transactions The Company classifies its derivative contracts that hedge foreign exchange risk associated with its highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded as a component of equity within the Company’s “hedging reserve”, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is immediately recorded in the statement of profit and loss as a foreign exchange gain and losses. The Company also designates certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign exchange risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non-derivative financial liabilities is recorded as a component of equity within the Company’s “hedging reserve”, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. In respect of the aforesaid hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net gain of ` 145, and a net loss of ` 65 for the years ended 31st March 2017 and 31st March 2016 respectively.
|323| Chap. 16 – Ind AS 32-107-109-113 The Company also recorded, as a component of revenue, a net gain of ` 136 and ` 299 during the years ended 31st March 2017 and 31st March 2016, respectively. The net carrying amount of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact was a gain of ` 129 as at 31st March 2017, as compared to a loss of ` 19 as at 31st March 2016. The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31st March 2017: Amounts in million Category Instrument Currency Cross Currency Amount Buy/Sell Hedges of recognised assets and liabilities Forward contract US$ INR US$ 193.5 Sell Option contract US$ INR US$ 80.0 Sell Hedges of highly probable forecasted transactions Forward contract RUB INR RUB 150.0 Sell Option contract US$ INR US$ 180.0 Sell The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31st March 2016 Amounts in million Category Instrument Currency Cross Currency Amount Buy/Sell Hedges of recognised assets and liabilities Forward contract US$ INR US$ 97.0 Sell Forward contract EUR US$ EUR 3.0 Sell Option contract US$ INR US$ 100.0 Sell Hedges of highly probable forecasted transactions Forward contract RUB INR RUB 600.0 Sell Option contract EUR INR EUR 6.0 Sell Option contract US$ INR US$ 235.0 Sell “INR” means Indian Rupees, and “RUB” means Russian roubles, US$ means US dollars, EUR means Euros. The table below summarises the periods when the cash flows associated with highly probable forecasted transactions that are classified as cash flow hedges are expected to occur: Particulars As At 31 March 2017 As At 31 March 2016 Cash flows in US Dollars Not later than one month 973 994 Later than one month and not later than three months 1,945 5,300 Later than three months and not later than six months 2,918 5,300 Later than six months and not later than one year 5,837 3,976 11,673 15,570 Cash flows in Russian Roubles Not later than one month 57 123 Later than one month and not later than three months 115 246 Later than three months and not later than six months - 222 Later than six months and not later than one year - - 172 591 Cash flows in Euros Not later than one month - 38
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |324| Particulars As At 31 March 2017 As At 31 March 2016 Later than one month and not later than three months - 75 Later than three months and not later than six months - 113 Later than six months and not later than one year - 226 - 452 Hedges of changes in the interest rates Consistent with its risk management policy, the Company uses interest rate swaps (including cross currency interest rate swaps) to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes. The changes in fair value of such interest rate swaps (including cross currency interest rate swaps) are recognised as part of finance cost. As at 31st March 2017 and 31st March 2016, the Company had no outstanding interest rate swap arrangements. Note 2.35 Financial Risk Management The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes. a. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments. Trade and other receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. Investments The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from nonperformance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks. Financial assets that are neither past due nor impaired None of the Company’s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past due or impaired as at 31st March 2017. Of the total trade receivables, ` 31,071 as at 31 March 2017 and ` 25,826 as at 31 March 2016 consisted of customer balances that were neither past due nor impaired.
|325| Chap. 16 – Ind AS 32-107-109-113 Financial assets that are past due but not impaired The Company’s credit period for customers generally ranges from 20 - 180 days. The ageing of trade receivables that are past due but not impaired is given below: Period (In Days) As At 31 March 2017 As At 31 March 2016 1-90 9,604 8,770 90-180 805 1,568 More than 180 2,780 2,731 Total 13,189 13,069 Reconciliation of the allowances for credit losses The details of changes in allowances for credit losses during the year ended 31 March 2017 and 31 March 2016 are as follows: Particulars For The Year Ended 31 March 2017 For The Year Ended 31 March 2016 Balance as at 1 April 3,957 345 Provision made during the year 159 3,704 Trade receivables written off during the year (54) (6) Provision reversed during the year (49) (86) Effect of changes in the foreign exchange rates (75) - Balance as at 31 March 3,938 3,957 On account of adoption of Ind AS 109, the Company uses Expected Credit Loss (ECL) model for assessing the impairment loss. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers. Loans and advances Loans and advances are predominantly given to subsidiaries for the purpose of working capital and other business requirements. The details of changes in provision for doubtful loans and advances during the year ended 31 March 2017 and 31 March 2016 are as follows: Particulars For The Year Ended 31 March 2017 For The Year Ended 31 March 2016 Balance as at 1 April 430 1,067 Provision made during the year - - Loans and advances written off during the year - - Provision reversed during the year (10) (660) Effect of changes in the foreign exchange rates (8) 23 Balance as at 31 March 412 430 b. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation. As at 31 March 2017 and 31 March 2016, the Company had unutilised credit limits from banks of ` 12,437 and ` 12,304 respectively.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |326| As at 31 March 2017, the Company had working capital (current assets less current liabilities) of ` 43,358, including cash and cash equivalents of ` 668, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of ` 2,110 and investments in FVTPL financial assets of ` 10,881. As at 31 March 2016, the Company had working capital of ` 58,224, including cash and cash equivalents of ` 2,021, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of ` 10,660 and investments in FVTPL financial assets of ` 22,320. The table below provides details regarding the contractual maturities of significant financial liabilities (other than obligations under finance leases, which have been disclosed in note 2.33 to these financial statements) as at 31 March 2017: Particulars 2018 2019 2020 2021 Thereafter Total Trade payables 7,787 - - - - 7,787 Long term borrowings - - 1,610 3,242 - 4,852 Bank overdraft, short-term loans and borrowings 18,699 - - - - 18,699 Other liabilities 11,550 - - - - 11,550 Derivative financial instruments – liabilities 6 - - - - 6 The table below provides details regarding the contractual maturities of significant financial liabilities (other than obligations under finance leases, which have been disclosed in note 2.33 to these financial statements) as at 31 March 2016: Particulars 2017 2018 2019 2020 Thereafter Total Trade payables 7,192 - - - - 7,192 Long term borrowings - 1,987 7,951 - - 9,938 Bank overdraft, short-term loans and borrowings 20,896 - - - - 20,896 Other liabilities 12,156 - - - - 12,156 Derivative financial instruments – liabilities 52 - - - - 52 c. Market risk Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies. Foreign exchange risk The Company’s foreign exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in US dollars, Russian roubles, UK pounds sterling, and Euros) and foreign currency borrowings (in US dollars and Russian roubles,). A significant portion of the Company’s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company’s revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses both derivative and non-derivative financial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency financial
|327| Chap. 16 – Ind AS 32-107-109-113 liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognised assets and liabilities. The details in respect of the outstanding foreign exchange forward and option contracts are given in note 2.34 above. In respect of the Company’s forward contracts, option contracts and currency swap contracts, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in: • a ` 1,154/(710) increase/(decrease) in the Company’s hedging reserve and a ` 1,707/(1,854) increase/ (decrease) in the Company’s net profit from such contracts, as at 31 March 2017; • a ` 1,511/(424) increase/(decrease) in the Company’s hedging reserve and a ` 1,193/(1,588) increase/ (decrease) in the Company’s net profit from such contracts, as at 31 March 2016. The carrying value of the Company’s foreign currency borrowings designated in a cash flow hedge as of 31 March 2017 was Nil. In respect of these borrowings, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such borrowings would have resulted in a ` 182 increase/decrease in the Company’s hedging reserve as at 31 March 2016. The following table analyzes foreign currency risk from non-derivative financial instruments as at 31 March 2017: (All figures in equivalent Indian Rupees millions) Particulars Us Dollars Euro Russian Roubles Others (1) Total Assets Cash and cash equivalents 66 16 9 139 230 Trade receivables 32,837 875 6,158 2,363 42,233 Other assets 823 21 3 1,604 2,451 Total 33,726 912 6,170 4,106 44,914 Liabilities Trade payables 773 285 - 255 1,313 Long-term borrowings 4,852 - - - 4,852 Short-term borrowings 12,970 - 2,528 - 15,498 Other liabilities 2,236 263 2,005 91 4,595 Total 20,831 548 4,533 346 26,258 The following table analyzes foreign currency risk from non-derivative financial instruments as at 31 March 2016: (All figures in equivalent Indian Rupees millions) Particulars Us Dollars Euro Russian Roubles Others (1) Total Assets Cash and cash equivalents 103 7 20 11 141 Trade receivables 27,220 925 4,324 1,362 33,831 Other assets 2,392 16 2 97 2,507 Total 29,715 948 4,346 1,470 36,479 Liabilities Trade payables 1,223 465 - 337 2,025 Long-term borrowings 9,947 - - - 9,947 Short-term borrowings 12,024 5,768 3,104 - 20,896 Other liabilities 4,645 391 595 220 5,851 Total 27,839 6,624 3,699 557 38,719 1. Others include currencies such as UK pounds sterling, Swiss francs and Venezuelan bolivars.
Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts |328| For the years ended 31 March 2017 and 31 March 2016, every 10% depreciation/appreciation in the exchange rate between the Indian rupee and the respective currencies for the above mentioned financial assets/liabilities would affect the Company’s net profit by approximately ` 1,866 and ` 224, respectively. Interest rate risk As of 31 March 2017 and 31 March 2016, the Company had ` 18,061 of loans carrying a floating interest rate of LIBOR minus 30 bps to LIBOR plus 82.7 bps and ` 27,730 of foreign currency loans carrying a floating interest rate of LIBOR minus 5 to LIBOR plus 125 bps, respectively. These loans expose the Company to risk of changes in interest rates. The Company’s treasury department monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary. For details of the Company’s short-term and long-term loans and borrowings, including interest rate profiles, refer to Notes 2.8A and 2.8B of these financial statements. For the years ended 31 March 2017 and 31 March 2016, every 10% increase or decrease in the floating interest rate component (i.e., LIBOR) applicable to its loans and borrowings would affect the Company’s net profit by approximately ` 23 and Rs 11, respectively. The Company’s investments in term deposits (i.e., certificates of deposit) with banks and short-term liquid mutual funds are for short durations, and therefore do not expose the Company to significant interest rates risk. Commodity rate risk Exposure to market risk with respect to commodity prices primarily arises from the Company’s purchases and sales of active pharmaceutical ingredients, including the raw material components for such active pharmaceutical ingredients. These are commodity products, whose prices may fluctuate significantly over short periods of time. The prices of the Company’s raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in the Company’s active pharmaceutical ingredients business are generally more volatile. Cost of raw materials forms the largest portion of the Company’s operating expenses. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of 31 March 2017, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices. 5. GRASIM INDUSTRIES LIMITED CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING POLICIES 1.18 Derivative Financial Instruments and Hedge Accounting The Company enters into forward contracts to hedge the foreign currency risk of firm commitments and highly probable forecast transactions. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the Statement of Profit and Loss immediately, unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged item. The Company enters into derivative financial instruments, viz., foreign exchange forward contracts, interest rate swaps and cross currency swaps to manage its exposure to interest rate, foreign exchange rate risks and commodity prices. The Company does not hold derivative financial instruments for speculative purposes.
|329| Chap. 16 – Ind AS 32-107-109-113 Hedge Accounting The Company designates certain hedging instruments in respect of foreign currency risk, interest rate risk and commodity price risk as cash flow hedges. At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. The effective portion of changes in the fair value of the designated portion of derivatives that qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss, relating to the ineffective portion, is recognised immediately in the Statement of Profit and Loss. Amounts previously recognised in other comprehensive income and accumulated in equity relating to (effective portion as described above) are reclassified to the Statement of Profit and Loss in the periods when the hedged item affects profit or loss. However, when the hedged forecast transaction results in the recognition of a nonfinancial asset or a non-financial liability, such gains and losses are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in Statement of Profit and Loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in Statement of Profit and Loss. CONSOLIDATED FINANCIAL STATEMENTS Disclosures 4.11 Financial Risk Management Objectives (Ind AS 107) The Group’s principal financial liabilities, other than derivatives, comprise of borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets, other than derivatives, include trade and other receivables, investments and cash and cash equivalents that arises directly from its operations. The Group’s activities expose it to market risk, liquidity risk and credit risk. Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments, including investments and deposits, foreign currency receivables, payables and borrowings. The Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments, such as foreign exchange forward contracts, foreign currency option contracts, principal only swaps that are entered to hedge foreign currency risk exposure, interest rate swaps to hedge variable interest rate exposure and commodity fixed price swaps to hedge commodity price risks. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.