Page 200 - Tata_Chemicals_yearly-reports-2021-22

Integrated Annual Report 2021-22

involves making various assumptions that may foreign currency, are translated at the exchange
differ from actual developments. These include rate prevailing on the balance sheet date and the
the estimation of the appropriate discount rate, resultant exchange gains or losses are recognised
future salary increases and mortality rates. Due in the Standalone Statement of Profit and Loss.
to the complexities involved in the valuation 2.5 Property, plant and equipment
and its long-term nature, the employee benefit
obligation is highly sensitive to changes in these An item of property, plant and equipment (‘PPE’)
assumptions. All assumptions are reviewed at each is recognised as an asset if it is probable that the
reporting date. future economic benefits associated with the
item will flow to the Company and its cost can be
2.3.4 Provisions and contingencies measured reliably. These recognition principles are
applied to the costs incurred initially to acquire
From time to time, the Company is subject to an item of PPE, to the pre-operative and trial run
legal proceedings, the ultimate outcome of costs incurred (net of sales), if any and also to the
each being subject to uncertainties inherent in costs incurred subsequently to add to, replace part
litigation. A provision for litigation is made when of, or service it and subsequently carried at cost
it is considered probable that a payment will less accumulated depreciation and accumulated
be made and the amount can be reasonably impairment losses, if any.
estimated. Significant judgement is required when
evaluating the provision including, the probability The cost of PPE includes interest on borrowings
of an unfavorable outcome and the ability to make directly attributable to the acquisition,
a reasonable estimate of the amount of potential construction or production of a qualifying asset. A
loss. Litigation provisions are reviewed at each qualifying asset is an asset that necessarily takes
accounting period and revisions made for the a substantial period of time to be made ready for
changes in facts and circumstances. Contingent its intended use or sale. Borrowing costs and other
liabilities are disclosed in the notes forming part of directly attributable cost are added to the cost
the Standalone Financial Statements. Contingent of those assets until such time as the assets are
assets are not disclosed in the Standalone Financial substantially ready for their intended use, which
Statements unless an inflow of economic benefits generally coincides with the commissioning date
is probable. of those assets.
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
The Company reviews its carrying value of recognition criteria for a provision is met.
investment in subsidiaries and goodwill carried at
cost (net of impairment, if any) annually, or more Machinery spares that meet the definition of PPE
frequently when there is indication for impairment. are capitalised and depreciated over the useful life
If the recoverable amount is less than its carrying of the principal item of an asset.
amount, the impairment loss is accounted for in All other repair and maintenance costs, including
the Standalone Statement of Profit and Loss. regular servicing, are recognised in the Standalone
Statement of Profit and Loss as incurred. When
2.4 Foreign currency translation a replacement occurs, the carrying value of the
The functional currency of the Company (i.e. the replaced part is de-recognised. Where an item of
currency of the primary economic environment in property, plant and equipment comprises major
which the Company operates) is the Indian Rupee components having different useful lives, these
(`). components are accounted for as separate items.
On initial recognition, all foreign currency PPE acquired and put to use for projects are
transactions are recorded at exchange rates capitalised and depreciation thereon is included
prevailing on the date of the transaction. in the project cost till the project is ready for
Monetary assets and liabilities, denominated in a commissioning.

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