Page 242 - Tata_Chemicals_yearly-reports-2020-2021

Integrated Annual Report 2020-21

results in the recognition of a non-financial asset, 2.15.7 Fair value of financial instruments
the amounts accumulated in equity with respect In determining the fair value of its financial
to gain or loss relating to the effective portion of instruments, the Group uses a variety of methods
the spot component of forward contracts, both and assumptions that are based on market
the deferred hedging gains and losses and the conditions and risks existing at each reporting
deferred aligned forward points are included date. The methods used to determine fair value
within the initial cost of the asset. The deferred include discounted cash flow analysis, available
amounts are ultimately recognised in the quoted market prices and dealer quotes. All
Consolidated Statement of Profit and Loss as the methods of assessing fair value result in general
hedged item affects profit or loss. approximation of value.
When a hedging instrument expires, is sold or 2.16 Impairment
terminated, or when a hedge no longer meets Financial assets (other than at fair value)
the criteria for hedge accounting, then hedge
accounting is discontinued prospectively and The Group assesses on a forward looking basis the
any cumulative deferred gain or loss and deferred expected credit losses associated with its assets
costs of hedging in equity at that time remains in carried at amortised cost and debt instruments
equity until the forecast transaction occurs. When carried at FVTOCI. The impairment methodology
the forecast transaction is no longer expected to applied depends on whether there has been a
occur, the cumulative gain or loss and deferred significant increase in credit risk. In respect of
costs of hedging that were reported in equity trade receivables the Group applies the simplified
are immediately transferred to the Consolidated approach permitted by Ind AS 109 - Financial
Statement of Profit and Loss. Instruments, which requires expected lifetime
losses to be recognised upon initial recognition
Derivatives that are not designated as hedges of the receivables. For all other financial assets,
When derivative contracts to hedge risks are expected credit losses are measured at an amount
not designated as hedges, such contracts are equal to the 12-months expected credit losses or
accounted through FVTPL. at an amount equal to the life time expected credit
losses if the credit risk on the financial asset has
The entire fair value of a hedging derivative is increased significantly since initial recognition.
classified as a non-current asset or liability when
the remaining maturity of the hedged item The gross carrying amount of a financial asset is
exceeds 12 months; it is classified as a current written off (either partially or in full) to the extent
asset or liability when the remaining maturity of that there is no realistic prospect of recovery.
the hedged item does not exceed 12 months. Financial assets that are written off could still
be subject to enforcement activities in order to
2.15.5 Financial guarantee contracts comply with the Group's procedures.
Financial guarantee contracts are recognised PPE, CWIP and intangible assets
as a financial liability at the time of issuance of
guarantee. The liability is initially measured at fair For the purpose of assessing impairment,
value and is subsequently measured at the higher the smallest identifiable group of assets that
of the amount of loss allowance determined, or the generates cash inflows from continuing use that
amount initially recognised less, the cumulative are largely independent of the cash inflows from
amount of income recognised. other assets or groups of assets is considered
as a cash generating unit (“CGU”). The carrying
2.15.6 Offsetting of financial instruments values of assets / CGUs at each Balance Sheet
Financial assets and financial liabilities are offset date are reviewed to determine whether there
when the Group has a legally enforceable right is any indication that an asset may be impaired.
(not contingent on future events) to off-set the If any indication of such impairment exists, the
recognised amounts either to settle on a net basis, recoverable amount of such assets / CGU is
or to realise the assets and settle the liabilities estimated and in case the carrying amount of
simultaneously. these assets exceeds their recoverable amount, an

240