Page 171 - Tata_Chemicals_yearly-reports-2020-2021

Integrated Report Statutory Reports Financial Statements
1-59 60-146 Standalone

undertaking various hedge transactions at the Derivatives that are not designated as hedges
inception of each hedge relationship. When derivative contracts to hedge risks are
Derivatives are initially recognised at fair value on not designated as hedges, such contracts are
the date the derivative contract is entered into and accounted through FVTPL.
are subsequently remeasured to their fair value at As at the year end, there were no designated
the end of each reporting period. The accounting accounting hedges.
for subsequent changes in fair value depends on
whether the derivative is designated as a hedging The entire fair value of a hedging derivative is
instrument, and if so, the nature of the item classified as a Non-current asset or liability when
being hedged and the type of hedge relationship the remaining maturity of the hedged item
designated. exceeds 12 months; it is classified as a current
asset or liability when the remaining maturity of
Cash flow hedges that qualify for hedge the hedged item does not exceed 12 months.
accounting
2.11.5 Financial guarantee contracts
The effective portion of changes in the fair value Financial guarantee contracts are recognised
of derivatives that are designated and qualify as a financial liability at the time of issuance of
as cash flow hedges, is recognised through OCI guarantee. The liability is initially measured at fair
and as cash flow hedging reserve within equity, value and is subsequently measured at the higher
limited to the cumulative change in fair value of of the amount of loss allowance determined, or the
the hedged item on a present value basis from the amount initially recognised less, the cumulative
inception of the hedge. The gain or loss relating to amount of income recognised.
the ineffective portion is recognised immediately
in the Standalone Statement of Profit and Loss. 2.11.6 Offsetting of financial instruments
Amounts accumulated in equity are reclassified Financial assets and financial liabilities are offset
to the Standalone Statement of Profit and Loss on when the Company has a legally enforceable right
settlement. When the hedged forecast transaction (not contingent on future events) to off-set the
results in the recognition of a non-financial asset, recognised amounts either to settle on a net basis,
the amounts accumulated in equity with respect or to realise the assets and settle the liabilities
to gain or loss relating to the effective portion of simultaneously.
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,
When a hedging instrument expires, is sold or available quoted market prices and dealer quotes.
terminated, or when a hedge no longer meets All methods of assessing fair value result in general
the criteria for hedge accounting, then hedge approximation of value.
accounting is discontinued prospectively and
any cumulative deferred gain or loss and deferred 2.12 Impairment
costs of hedging in equity at that time remains in Investments in subsidiaries and joint ventures
equity until the forecast transaction occurs. When The Company reviews its carrying value of
the forecast transaction is no longer expected to investment in subsidiaries carried at cost (net
occur, the cumulative gain or loss and deferred of impairment, if any) when there is indication
costs of hedging that were reported in equity for impairment. If the recoverable amount is less
are immediately transferred to the Standalone than its carrying amount, the impairment loss
Statement of Profit and Loss. is accounted for in the Standalone Statement of

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