Page 205 - Tata_Chemicals_yearly-reports-2021-22

01 INTEGRATED 73 STATUTORY 178 FINANCIAL
REPORT
STATEMENTS
REPORTS
Standalone

risk management objective and strategy for Derivatives that are not designated as hedges
undertaking various hedge transactions at the When derivative contracts to hedge risks are
inception of each hedge relationship. not designated as hedges, such contracts are

Derivatives are initially recognised at fair value on accounted through FVTPL.
the date the derivative contract is entered into and As at the year end, there were no designated
are subsequently remeasured to their fair value at accounting hedges.
the end of each reporting period. The accounting The entire fair value of a hedging derivative is
for subsequent changes in fair value depends on classified as a Non-current asset or liability when
whether the derivative is designated as a hedging the remaining maturity of the hedged item
instrument, and if so, the nature of the item exceeds 12 months; it is classified as a current
being hedged and the type of hedge relationship asset or liability when the remaining maturity of
designated. the hedged item does not exceed 12 months.
Cash flow hedges that qualify for hedge 2.11.5 Financial guarantee contracts
accounting
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
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 2.12 Impairment
any cumulative deferred gain or loss and deferred
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

203