i) Provisions & Contingent Liabilities
Provisions are recognised when the Company has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current
pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting
is used the increase in the provision due to the passage of time is recognised as a finance cost.
Disclosure of contingent liability is made when there is a possible obligation arising from past
events, the existence of which will be confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the Company or a present
obligation that arises from past events where it is either not probable that an outflow of
resources embodying economic benefits will be required to settle or a reliable estimate of
amount cannot be made.
j) Inventories
Inventories of Raw Materials (Ships) are stated at Cost. Cost comprises all cost of purchase,
cost of conversion and other cost incurred in bringing the inventories to their present location
and condition.
Costs are determined on FIFO basis.
In ship recycling units, the weight of the ship purchased is accounted in terms of LDT/MT of
the ship at the time of its construction. Ascertaining of weight of ship at the time of purchase
is not possible due to its nature and size. There is loss of weight on account of corrosion and
other factors during the usage of the ship and its voyage for long period of the years. Inventory
at the close of the year is ascertained by reducing the weight of the scrap sold together with
the estimated wastage of the material.
Consumable stores and spares are written off at the time of purchase itself.
k) Employee Benefit Expense
• Defined contribution plans
Contributions under defined contribution plans are recognised as expense for the period in
which the employee has rendered service. If the contribution payable to the scheme for service
received before the balance sheet date exceeds the contribution already paid, the deficit
payable to the scheme is recognized as a liability after deducting the contribution already
paid. If the contribution already paid exceeds the contribution due for services received before
the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment
will lead to, for example, a reduction in future payment or a cash refund.
• Defined benefit plans
For defined benefit retirement schemes, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuation being carried out at each year-end
balance sheet date. Remeasurement gains and losses of the net defined benefit liability/(asset)
are recognised immediately in other comprehensive income. The service cost and net interest
on the net defined benefit liability/(asset) are recognised as an expense within employee costs.
Past service cost is recognised as an expense when the plan amendment or curtailment occurs
or when any related restructuring costs or termination benefits are recognised, whichever is
earlier.
The retirement benefit obligations recognised in the balance sheet represents the present value
of the defined benefit obligations as reduced by the fair value of plan assets. Compensated
absences which are not expected to occur within twelve months after the end of the period in
which the employee renders the related service are recognized based on actuarial valuation
at the present value of the obligation as on the reporting date.
i) Taxes
The tax expenses for the period comprises of current tax and deferred income tax.
Current Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at the reporting date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying value of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences. In contrast, deferred tax assets are only recognised to the extent that it is probable
that future taxable profits will be available against which the temporary differences can be
utilised. The carrying value of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised based on the tax rates and tax laws that have been
enacted or substantially enacted by the end of the reporting period. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the end of the reporting period, to recover or settle
the carrying value of its assets and liabilities.
Deferred tax assets and liabilities are offset to the extent that they relate to taxes levied by the
same tax authority and there are legally enforceable rights to set off current tax assets and
current tax liabilities within that jurisdiction.
Current and deferred tax are recognised as an expense or income in the statement of profit
and loss, except when they relate to items credited or debited either in other comprehensive
income or directly in equity, in which case the tax is also recognised in other comprehensive
income or directly in equity.
m) Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are carried at cost/deemed cost
applied on transition to Ind AS, less accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of investment is assessed and an
impairment provision is recognised, if required immediately to its recoverable amount. On
disposal of such investments, difference between the net disposal proceeds and carrying
amount is recognised in the statement of profit and loss.
n) Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to
the contractual provisions of the instruments.
Financial Assets
• Initial recognition and measurement
All financial assets, except investment in subsidiaries and associate, are recognised initially at
fair value. Transaction costs that are attributable to the acquisition or issue of financial asset ,
which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial
recognition. Purchase and sale of Financial Assets are recognised using trade date accounting.
• Subsequent measurement
For purposes of subsequent measurement, financial assets are primarily classified in three
categories:
a) Financial Assets measured at Amortised Cost
A Financial Asset is measured at Amortised Cost if it is held within a business model whose
objective is to hold the asset in order to collect contractual cash flows and the contractual terms
of the Financial Asset give rise to cash flows on specified dates that represent solely payments
of principal and interest on the principal amount outstanding.
b) Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling Financial Assets and the
contractual terms of the Financial Asset give rise on specified dates to cash flows that
represents solely payments of principal and interest on the principal amount outstanding.
c) Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL.
Financial assets are reclassified subsequent to their recognition, if the Company changes its
business model for managing those financial assets. Changes in business model are made and
applied prospectively from the reclassification date which is the first day of immediately next
reporting period following the changes in business model in accordance with principles laid
down under Ind AS 109 - Financial Instruments.
• Other Equity Investments
All other equity investments are measured at fair value, with value changes recognized in
Statement of Profit and Loss. Dividend on such equity investments are recognised in
Statement of Profit and loss when the Company's right to receive payment is established.
However, investment in partnership firms are carried at cost/ deemed cost applied on
transition to Ind AS, less accumulated impairment losses, if any.
• Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for
evaluating impairment of Financial Assets other than those measured at Fair Value Through
Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
• The 12-months expected credit losses (expected credit losses that result from those default
events on the financial instrument that are possible within 12 months after the reporting date);
or
• Full lifetime expected credit losses (expected credit losses that result from all possible
default events over the life of the financial instrument).
For Trade Receivables the Company applies 'simplified approach' which requires expected
lifetime losses to be recognized from initial recognition of the receivables. The Company uses
historical default rates to determine impairment loss on the portfolio of trade receivables. At
every reporting date these historical default rates are reviewed and changes in the forward
looking estimates are analysed. For other assets, the Company uses 12 month ECL to provide
for impairment loss where there is no significant increase in credit risk. If there is significant
increase in credit risk full lifetime ECL is used.
Financial Liabilities
• Initial recognition and measurement
All Financial Liabilities are recognized at fair value and in case of borrowings, net of directly
attributable cost. Fees of recurring nature are directly recognized in the Statement of Profit
and Loss as finance cost.
• Subsequent measurement
Financial Liabilities are carried at amortised cost using the effective interest method. For trade
and other payables maturing within one year from the balance sheet date, the carrying
amounts approximate fair value due to the short maturity of these instruments.
Derecognition of Financial Instruments
The Company derecognises a Financial Asset when the contractual rights to the cash flows
from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for
derecognition under Ind AS 109. A Financial liability (or a part of a Financial liability) is
derecognized from the Company's Balance Sheet when the obligation specified in the contract
is discharged or cancelled or expires.
Offsetting
Financial Assets and Financial Liabilities are offset and the net amount is presented in the
balance sheet when, and only when, the Company has a legally enforceable right to set off the
amount and it intends, either to settle them on a net basis or to realise the asset and settle the
liability simultaneously.
o) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date.
The financial instruments are categorised into three levels based on the inputs used to arrive
at fair value measurements as described below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than the quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly; and
Level 3: Inputs based on unobservable market data.
When the fair value of financial assets and financial liabilities recorded in the balance sheet
cannot be measured based on quoted prices in active markets, their fair value is measured
using valuation techniques including Discounted Cash Flow Model. The inputs to these
models are taken from observable markets where possible, but where this is not feasible, a
degree of judgement is required in establishing fair values. Judgements include
considerations of inputs such as liquidity risks, credit risks and volatility. Changes in
assumptions about these factors could affect the reported fair value of financial instruments.
Further details are set out in Note 5.7.
p) Revenue recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of when the payment is being
made. Revenue is measured at the fair value of the consideration received or receivable, taking
into account contractually defined terms of payment and excluding taxes or duties collected
on behalf of the government. The Company has concluded that it is the principal in all of its
revenue arrangements since it is the primary obligor in all the revenue arrangements as it has
pricing latitude and is also exposed to inventory and credit risks.
The specific recognition criteria described below must also be met before revenue is
recognised.
Sale of products
Revenue from the sale of products is recognised when the significant risks and rewards of
ownership of the products have passed to the buyer, usually on delivery of the products.
Revenue from the sale of products is measured at the fair value of the consideration received
or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest income
Interest Income from a Financial Assets is recognised using effective interest rate method.
Dividend Income
Dividend Income is recognised when the Company's right to receive the amount has been
established.
q) Finance Costs
Borrowing costs that are directly attributable to the acquisition or construction of qualifying
assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation. All other borrowing costs are charged to the Statement of Profit and Loss for
the period for which they are incurred.
r) Foreign Currencies Transactions
The financial statements of the Company are presented in Indian Rupees ("?"), which is the
functional currency of the Company and the presentation currency for the financial
statements. In preparing the financial statements, transactions in currencies other than the
Company's functional currency are recorded at the rates of exchange prevailing on the date
of the transaction. At the end of each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at the end of the reporting period.
Exchange differences arising on settlement or translation of monetary items are recognised in
Statement of Profit and Loss. In the case of forward contract, if any, difference between the
forward rate and the exchange rate on the transaction date is recognized as income or
expenses over the lives of the related contracts. The differential gain/loss is recognised in
Statement of Profit and Loss.
s) Earnings Per Share
Basic earnings per share is computed by dividing profit or loss for the year attributable to
equity holders by the weighted average number of shares outstanding during the year. Partly
paid up shares are included as fully paid equivalents according to the fraction paid up.
Diluted earnings per share is computed using the weighted average number of shares and
dilutive potential shares except where the result would be anti-dilutive.
?Key Accounting Estimates & Judgements
1 Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each reporting
period. The policy has been detailed in Note 2(i) and its further information are set out in Note
5.1.
2 Defined benefit plan
The cost of the defined benefit plans and other post-employment benefits and the present
value of the obligation are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the future.
These include the determination of the discount rate, future salary increases, mortality rates
and future pension increases. Due to the complexities involved in the valuation and its long-
term nature, a defined benefit obligation is highly sensitive to changes in these assumptions.
All assumptions are reviewed at each reporting date.
The parameter that is subject to change the most is the discount rate. In determining the
appropriate discount rate, the management considers the interest rates of government bonds
in currencies consistent with the currencies of the post-employment benefit obligation and
extrapolated as needed along the yield curve to correspond with the expected term of the
defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend
to change only at intervals in response to demographic changes. Future salary increases are
after considering the expected future inflation rates for the country. Refer to Note 5.2 for
further details.
3 Property, Plant and Equipment
The Company reviews the useful life of property, plant and equipment and intangible assets
at the end of each reporting period. This reassessment may result in change in depreciation
and amortisation expense in future periods. The policy has been detailed in Note 2(C) above.
4 Recoverability of Trade Receivables
Judgements are required in assessing the recoverability of overdue trade receivables and
determining whether a provision against those receivables is required. Estimated
irrecoverable amounts are derived based on a provision matrix, which takes into accounts
various factors such as customer specific risks, geographical region, product type, customer
rating, type of customer, the amount and timing of anticipated future payments and any
possible actions that can be taken to mitigate the risk of non-payment.
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