annual-report-FY2020

292 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS 1. Impairment assessment of tangible assets, goodwill and development expenditure capitalised and currently under development (contd.) The key audit matter How the matter was addressed in our audit The recoverable amount is determined as higher of value in use (VIU) or fair value less cost to sell of the asset or the cash generating unit (CGU) to which the asset belongs. Refer note 2(h) – significant accounting policy for impairment of assets. • Evaluated past performances where relevant, and assessed historical accuracy of the forecast used in VIU calculations; • Evaluated the stage of development of the intangible assets, judgments used for expected probable economic benefits and associated expenditures, and their assessment of feasibility of the projects; and • Assessed the adequacy of disclosures in the financial statements on key judgements, assumptions and quantitative data with respect to impairment losses. 2. Taxes including provision for current tax, valuation of uncertain tax positions and recognition of deferred taxes The key audit matter How the matter was addressed in our audit The Group has recorded Rs. 1,976 crores of tax expense for the year ended 31 March 2020. The Group operates in tax jurisdictions across the world, which are subject to periodic tax challenges by local tax authorities leading to protracted litigations. As such, accounting for taxes involves judgment in developing estimates of tax exposures and contingencies in order to assess the adequacy of tax provision. Further, during the year, the Holding Company and certain entities in the Group elected to apply the concessional tax regime which resulted in such entities foregoing certain specified tax deductions including Minimum Alternate Tax (MAT) credit offset by reversal of deferred tax liabilities on account of change in tax rates. In addition, regulatory changes relating to the dividend distribution tax resulted in reversals of certain deferred tax liabilities. The Group has unused tax losses across multiple entities and jurisdictions on which it assesses recognition of deferred tax assets. This involves significant judgment, including assessment of future taxable profits. Refer note 2(p) – significant accounting policy for income tax. Our audit procedures include: • Assessed the design, implementation and operating effectiveness of key controls in respect of the Group’s process of recognition of tax expense, including uncertain tax positions and deferred taxes; • Assessed the Group’s process of alignment of accounting policies across entities in the Group and tested the deferred taxes recognised on the consolidation adjustments; • Inquired and assessed the completeness of uncertain tax positions in conjunction with our tax specialists by considering changes to business and tax legislation through inquiries with the Group and reading of correspondence with authorities, relevant recent judicial pronouncements and judgments in similar matters and outcome of past litigations; • Inquired and challenged the Group in relation to the significant tax provisions and deferred tax adjustments by the entities in Group; • Challenged the Group’s judgements on the recognition and recoverability of the deferred tax assets including the deferred taxes arising on unused tax losses; and • Assessed the adequacy of the disclosures in the financial statements relating to income taxes and deferred taxes. 3. Evaluation of the consolidation process The key audit matter How the matter was addressed in our audit The Group’s consolidation process is complex on account of its presence in various geographies and multiple businesses through different ownership structures. The consolidation process includes evaluation of the degree of control/ significant influence, application of consistent accounting policies and elimination of intercompany balances. The resultant tax adjustments require a high level of judgement. Refer note 2(c) – significant accounting policy for basis of consolidation. Our audit procedures include: • Assessed the design, implementation and operating effectiveness of key controls of Group’s consolidation process and alignment of group accounting policies, consolidation adjustments, elimination of inter- company balances and the resultant tax impact; • Read the underlying agreements and minutes of Board committees to assess the Group’s evaluation of degree of control/ significant influence; • Tested the relevant general IT and applications controls over the consolidation process to test the inter-company elimination process; • Tested significant consolidation adjustments related to manual journal entries and inspected the underlying documents; and • Evaluated the Group’s process of evaluating tax effect on account of consolidation related adjustments.