Page 166 - Tata_Chemicals_yearly-reports-2020-2021

Integrated Annual Report 2020-21

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 in of, or service it and subsequently carried at cost
litigation. A provision for litigation is made when less accumulated depreciation and accumulated
it is considered probable that a payment will impairment losses, if any.
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,
of an unfavorable outcome and the ability to make construction or production of a qualifying asset. A
a reasonable estimate of the amount of potential qualifying asset is an asset that necessarily takes
loss. Litigation provisions are reviewed at each a substantial period of time to be made ready for
accounting period and revisions made for the its intended use or sale. Borrowing costs and other
changes in facts and circumstances. Contingent directly attributable cost are added to the cost
liabilities are disclosed in the notes forming part of of those assets until such time as the assets are
the Standalone Financial Statements. Contingent substantially ready for their intended use, which
assets are not disclosed in the Standalone Financial generally coincides with the commissioning date
Statements unless an inflow of economic benefits of those assets.
is probable. The present value of the expected cost for the
2.3.5 Impairment of investment in subsidiaries and decommissioning of an asset after its use is
goodwill included in the cost of the respective asset if the
recognition criteria for a provision is met.
The Company reviews its carrying value of
investment in subsidiaries and goodwill carried at Machinery spares that meet the definition of PPE
cost (net of impairment, if any) annually, or more are capitalised and depreciated over the useful life
frequently when there is indication for impairment. of the principal item of an asset.
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

2.4 Foreign currency translation a replacement occurs, the carrying value of the
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.
(`).
PPE acquired and put to use for projects are
On initial recognition, all foreign currency capitalised and depreciation thereon is included
transactions are recorded at exchange rates in the project cost till the project is ready for
prevailing on the date of the transaction. commissioning.

164