annual-report-FY2020

314 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS 2. Significant Accounting Policies (contd.) Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. (q) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When provision is measured using the cash flow estimated to settle the present obligation, its carrying amount is the present value of these cash flows (when the effect of the time value of money is material). Provisions for the expected cost of warranty obligations are recognised at the time of sale of the relevant products, at the best estimate of the expenditure required to settle the Group’s obligation. Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of the subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with Ind AS 37 - Provisions, Contingent Assets and Contingent Liabilities and the amount initially recognised less cumulative amortisation recognised in accordance with Ind AS 115 - Revenue from contracts with customers. (r) Leases Transition to Ind AS 116 The Group has adopted Ind AS 116 “Leases” using the modified retrospective approach with effect from initially applying this standard from 1 st April, 2019. Accordingly, the information presented for previous year ended 31 st March, 2019 is reported as per Ind AS 17. The Group has adopted modified retrospective approach where lease liability is measured at a present value of remaining lease payment discounted at the incremental borrowing rate at the date of initial application. The Group has adopted a policy of measuring the Right- of-use Asset at an amount equal to lease liability. However, in cases of few subsidiaries, the right-of-use asset is measured at present value of lease payment using incremental borrowing rate on the date of initial application as if the standard is applicable from commencement date of the lease. The difference between the right-of-use asset and lease liability is recognised in retained earnings. The Group has leases that were previously classified as finance leases applying Ind AS 17. For such leases, the carrying amount of the right-of-use asset and the lease liability at the date of initial application of Ind AS 116 is the carrying amount of the finance lease asset and finance lease liability as per Ind AS 17. From the date of initial application Ind AS 116, the classification of expenses has changed from lease rent (included in other expenses) in previous year to amortisation expense of right-of-use asset, and finance cost for interest unwound on lease liability. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: - the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the lessor has a substantive substitution right, then the asset is not identified. - the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and - the Group as a lessee has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either: o the Group as a lessee has the right to operate the asset; or o the Group as a lessee designed the asset in a way that predetermines how and for what purpose it will be used. For effect of applying Ind AS 116 - Leases on transition period refer Note 42.