Page 186 - Tata_Chemicals_yearly-reports-2019-20

purchase, to be cash equivalents. Cash and cash financial liability and of allocating interest expense
equivalents consist of balances with banks which over the relevant period at effective interest rate.
are unrestricted for withdrawal and usage. The effective interest rate is the rate that exactly
discounts estimated future cash payments
Derecognition of financial assets through the expected life of the financial liability,
A financial asset is derecognised only when the or, where appropriate, a shorter period.
Company Changes to the carrying amount of a financial
• has transferred the rights to receive cash flows liability as a result of renegotiation or modification
from the financial asset; or of terms that do not result in derecognition of the
financial liability, is recognised in the Standalone
• retains the contractual rights to receive the
cash flows of the financial asset, but assumes a Statement of Profit and Loss.
contractual obligation to pay the cash flows to Derecognition of financial liabilities
one or more recipients.
The Company derecognises financial liabilities
when, and only when, its obligations are
Where the Company transfers an asset, it evaluates
whether it has transferred substantially all risks discharged, cancelled or they expire.
and rewards of ownership of the financial asset. Presentation
Where the Company has transferred substantially Borrowings are classified as current liabilities
all risks and rewards of ownership, the financial unless the Company has an unconditional right
asset is derecognised. Where the Company has to defer settlement of the liability for at least 12
not transferred substantially all risks and rewards months after the reporting period.
of ownership of the financial asset, the financial
asset is not derecognised. Where the Company Trade and other payables are presented as current
has neither transferred a financial asset nor liabilities unless payment is not due within 12
retained substantially all risks and rewards of months after the reporting period.
ownership of the financial asset, the financial asset
is derecognised if the Company has not retained 2.11.4 Derivatives and hedging activities
control of the financial asset. Where the Company In the ordinary course of business, the Company
retains control of the financial asset, the asset uses certain derivative financial instruments
is continued to be recognised to the extent of to reduce business risks which arise from its
continuing involvement in the financial asset. exposure to foreign exchange and interest
rate fluctuations associated with borrowings
2.11.2 Debt and equity instruments (cash flow hedges). When the Company opts
Debt and equity instruments are classified as either to undertake hedge accounting, the Company
financial liabilities or as equity in accordance with documents, at the inception of the hedging
the substance of the contractual arrangement. transaction, the economic relationship between
hedging instruments and hedged items including
An equity instrument is any contract that whether the hedging instrument is expected
evidences a residual interest in the assets of an to offset changes in cash flows or fair values of
entity after deducting all of its liabilities. Equity hedged items. The Company documents its
instruments issued by the Company are recorded risk management objective and strategy for
at the proceeds received, net of direct issue costs. undertaking various hedge transactions at the
inception of each hedge relationship.
2.11.3 Financial liabilities
The Company’s financial liabilities comprise Derivatives are initially recognised at fair value on
borrowings, trade payables and other liabilities. the date the derivative contract is entered into and
These are initially measured at fair value, net of are subsequently remeasured to their fair value at
transaction costs, and are subsequently measured the end of each reporting period. The accounting
at amortised cost using the EIR method. The EIR for subsequent changes in fair value depends on
is a method of calculating the amortised cost of a whether the derivative is designated as a hedging

184 I INTEGRATED ANNuAL REPORT 2019-20