Page 182 - Tata_Chemicals_yearly-reports-2019-20

the future depreciation charge could be revised and On initial recognition, all foreign currency
may have an impact on the profit of the future years. transactions are recorded at exchange rates
prevailing on the date of the transaction.
2.3.3 Employee benefit obligations Monetary assets and liabilities, denominated in a
Employee benefit obligations are determined foreign currency, are translated at the exchange
using actuarial valuations. An actuarial valuation rate prevailing on the Balance Sheet date and the
involves making various assumptions that may resultant exchange gains or losses are recognised
differ from actual developments. These include in the Standalone Statement of Profit and Loss.
the estimation of the appropriate discount rate,
future salary increases and mortality rates. Due 2.5 Property, plant and equipment
to the complexities involved in the valuation An item of property, plant and equipment (‘PPE’)
and its long-term nature, the employee benefit is recognised as an asset if it is probable that the
obligation is highly sensitive to changes in these future economic benefits associated with the
assumptions. All assumptions are reviewed at each item will flow to the Company and its cost can be
reporting date. measured reliably. These recognition principles are
applied to the costs incurred initially to acquire
2.3.4 Provisions and contingencies an item of PPE, to the pre-operative and trial run
From time to time, the Company is subject to costs incurred (net of sales), if any and also to the
legal proceedings, the ultimate outcome of costs incurred subsequently to add to, replace part
each being subject to uncertainties inherent of, or service it and subsequently carried at cost
in litigations. A provision for litigation is made less accumulated depreciation and accumulated
when it is considered probable that a payment impairment losses, if any.
will be made and the amount can be reasonably
estimated. Significant judgement is required when The cost of PPE includes interest on borrowings
evaluating the provision including, the probability directly attributable to the acquisition, construction
of an unfavorable outcome and the ability to make or production of a qualifying asset. A qualifying asset
a reasonable estimate of the amount of potential is an asset that necessarily takes a substantial period
loss. Provisions for litigations are reviewed at each of time to be made ready for its intended use or
accounting period and revisions made for the sale. Borrowing costs and other directly attributable
changes in facts and circumstances. Contingent cost are added to the cost of those assets until such
liabilities are disclosed in the notes forming part of time as the assets are substantially ready for their
the Standalone Financial Statements. Contingent intended use, which generally coincides with the
assets are not disclosed in the Standalone Financial commissioning date of those assets.
Statements unless an inflow of economic benefits
is probable. The present value of the expected cost for the
decommissioning of an asset after its use is
2.3.5 Impairment of investment in subsidiaries and included in the cost of the respective asset if the
goodwill recognition criteria for a provision is met.
The Company reviews its carrying value of Machinery spares that meet the definition of PPE
investment in subsidiaries and goodwill carried at are capitalised and depreciated over the useful life
cost (net of impairment, if any) annually, or more of the principal item of an asset.
frequently when there is indication for impairment.
If the recoverable amount is less than its carrying All other repair and maintenance costs, including
amount, the impairment loss is accounted for in regular servicing, are recognised in the Standalone
the Standalone Statement of Profit and Loss.
Statement of Profit and Loss as incurred. When
a replacement occurs, the carrying value of the
2.4 Foreign currency translation
replaced part is de-recognised. Where an item of
The functional currency of the Company (i.e. the property, plant and equipment comprises major
currency of the primary economic environment in components having different useful lives, these
which the Company operates) is the Indian Rupee (`). components are accounted for as separate items.

180 I INTEGRATED ANNuAL REPORT 2019-20