Page 187 - Tata_Chemicals_yearly-reports-2019-20

Integrated report Statutory reportS Financial StatementS
Standalone

instrument, and if so, the nature of the item the remaining maturity of the hedged item
being hedged and the type of hedge relationship exceeds 12 months; it is classified as a current
designated. asset or liability when the remaining maturity of
the hedged item does not exceed 12 months.
Cash flow hedges that qualify for hedge
accounting 2.11.5 Financial guarantee contracts
Financial guarantee contracts are recognised
The effective portion of changes in the fair value as a financial liability at the time of issuance of
of derivatives that are designated and qualify guarantee. The liability is initially measured at fair
as cash flow hedges, is recognised through OCI value and is subsequently measured at the higher
and as cash flow hedging reserve within equity, of the amount of loss allowance determined, or the
limited to the cumulative change in fair value of amount initially recognised less, the cumulative
the hedged item on a present value basis from the amount of income recognised.
inception of the hedge. The gain or loss relating to
the ineffective portion is recognised immediately 2.11.6 Offsetting of financial instruments
in the Standalone Statement of Profit and Loss.
Financial assets and financial liabilities are offset
Amounts accumulated in equity are reclassified when the Company has a legally enforceable right
to the Standalone Statement of Profit and Loss on (not contingent on future events) to off-set the
settlement. When the hedged forecast transaction recognised amounts either to settle on a net basis,
results in the recognition of a non-financial asset, or to realise the assets and settle the liabilities
the amounts accumulated in equity with respect simultaneously.
to gain or loss relating to the effective portion of
the spot component of forward contracts, both 2.11.7 Fair value of financial instruments
the deferred hedging gains and losses and the In determining the fair value of its financial
deferred aligned forward points are included instruments, the Company uses a variety of
within the initial cost of the asset. The deferred methods and assumptions that are based on
amounts are ultimately recognised in the market conditions and risks existing at each
Standalone Statement of Profit and Loss as the reporting date. The methods used to determine
hedged item affects profit or loss. fair value include discounted cash flow analysis,
available quoted market prices and dealer quotes.
When a hedging instrument expires, is sold or All methods of assessing fair value result in general
terminated, or when a hedge no longer meets approximation of value.
the criteria for hedge accounting, then hedge
accounting is discontinued prospectively and 2.12 Impairment
any cumulative deferred gain or loss and deferred
costs of hedging in equity at that time remains in Financial assets (other than at fair value)
equity until the forecast transaction occurs. When The Company assesses on a forward looking basis
the forecast transaction is no longer expected to the expected credit losses associated with its assets
occur, the cumulative gain or loss and deferred carried at amortised cost and debt instruments
costs of hedging that were reported in equity carried at FVTOCI. The impairment methodology
are immediately transferred to the Standalone applied depends on whether there has been a
Statement of Profit and Loss. significant increase in credit risk. In respect of trade
receivables the Company applies the simplified
Derivatives that are not designated as hedges
approach permitted by Ind AS 109 - Financial
When derivative contracts to hedge risks are Instruments, which requires expected lifetime
not designated as hedges, such contracts are losses to be recognised upon initial recognition
accounted through FVTPL. of the receivables. For all other financial assets,
expected credit losses are measured at an amount
As at the year end, there were no designated equal to the 12-months expected credit losses or
accounting hedges.
at an amount equal to the life time expected credit
The entire fair value of a hedging derivative is losses if the credit risk on the financial asset has
classified as a Non-current asset or liability when increased significantly since initial recognition.

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