Page 214 - Tata Chemical Annual Report_2022-2023

Integrated Annual Report 2022-23 01-83 84-192
2.3.3 Employee benefit obligations
Employee benefit obligations are determined
using actuarial valuations. An actuarial valuation
involves making various assumptions that may
differ from actual developments. These include
the estimation of the appropriate discount rate,
future salary increases and mortality rates. Due
to the complexities involved in the valuation
and its long-term nature, the employee benefit
obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at 2.5
each reporting date.
2.3.4 Provisions and contingencies
From time to time, the Company is subject to
legal proceedings, the ultimate outcome of
each being subject to uncertainties inherent
in litigation. A provision for litigation is made
when it is considered probable that a payment
will be made and the amount can be reasonably
estimated. Significant judgement is required
when evaluating the provision including, the
probability of an unfavourable outcome and
the ability to make a reasonable estimate of the
amount of potential loss. Litigation provisions are
reviewed at each accounting period and revisions
made for the changes in facts and circumstances.
Contingent liabilities are disclosed in the notes
forming part of the Standalone Financial
Statements. Contingent assets are not disclosed
in the Standalone Financial Statements unless an
inflow of economic benefits is probable.
2.3.5 Impairment of investment in subsidiaries and
goodwill
The Company reviews its carrying value of
investment in subsidiaries and goodwill carried
at cost (net of impairment, if any) annually, or
more frequently when there is indication for
impairment. If the recoverable amount is less
than its carrying amount, the impairment loss
is accounted for in the Standalone Statement of
Profit and Loss.
2.4 Foreign currency translation
The functional currency of the Company (i.e. the
currency of the primary economic environment
in which the Company operates) is the Indian
Rupee in (`). The financial statements have been
rounded off to the nearest ` crore.
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On initial recognition, all foreign currency
transactions are recorded at exchange rates
prevailing on the date of the transaction.
Monetary assets and liabilities, denominated
in a foreign currency, are translated at the
exchange rate prevailing on the balance sheet
date and the resultant exchange gains or losses
are recognised in the Standalone Statement of
Profit and Loss.
Property, plant and equipment
An item of property, plant and equipment (‘PPE’)
is recognised as an asset if it is probable that the
future economic benefits associated with the
item will flow to the Company and its cost can be
measured reliably. These recognition principles
are applied to the costs incurred initially to
acquire an item of PPE, to the pre-operative and
trial run costs incurred (net of sales), if any and
also to the costs incurred subsequently to add
to, replace part of, or service it and subsequently
carried at cost less accumulated depreciation and
accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings
directly attributable to the acquisition,
construction or production of a qualifying asset.
A qualifying asset is an asset that necessarily
takes a substantial period of time to be made
ready for its intended use or sale. Borrowing
costs and other directly attributable cost are
added to the cost of those assets until such time
as the assets are substantially ready for their
intended use, which generally coincides with the
commissioning date of those assets.
The present value of the expected cost for the
decommissioning of an asset after its use is
included in the cost of the respective asset if the
recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE
are capitalised and depreciated over the useful
life of the principal item of an asset.
All other repair and maintenance costs, including
regular servicing, are recognised in the Standalone
Statement of Profit and Loss as incurred. When
a replacement occurs, the carrying value of the
replaced part is de-recognised. Where an item of
property, plant and equipment comprises major
Statutory Reports Financial Statements
Standalone
components having different useful lives, these
components are accounted for as separate items.
PPE acquired and put to use for projects are
capitalised and depreciation thereon is included
in the project cost till the project is ready
for commissioning.
Depreciation methods, estimated useful lives
and residual value
Depreciation on PPE (except leasehold
improvements) is calculated using the straight-
line method to allocate their cost, net of their
residual values, over their estimated useful
lives. However, leasehold improvements are
depreciated on a straight-line method over the
shorter of their respective useful lives or the
tenure of the lease arrangement. Freehold land
is not depreciated.
Schedule II to the Act prescribes the useful
lives for various class of assets. For certain class
of assets, based on technical evaluation and
assessment, Management believes that the
useful lives adopted by it reflect the periods
over which these assets are expected to be used.
Accordingly for those assets, the useful lives
estimated by the management are different from
those prescribed in the Schedule. Management’s
estimates of the useful lives for various class of
PPE are as given below:
Asset Useful life
Salt Works, Water works, 1-30 years
Reservoirs and Pans
Plant and Machinery 1-60 years
Traction Lines and Railway Sidings 15 years
Factory Buildings 5-60 years
Other Buildings 5-60 years
Furniture and Fittings and Office 1-10 years
Equipment (including Computers
and Data Processing Equipment)
Vehicles 4-10 years
Useful lives and residual values of assets are
reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or
losses arising from disposal/adjustments of PPE
are recognised in the Standalone Statement of
Profit and Loss.
2.6 Intangible assets
Intangible assets comprise software licenses,
product registration fees and rights to use
railway wagon.
Intangible assets are measured on initial
recognition at cost and subsequently are carried
at cost less accumulated amortisation and
accumulated impairment losses, if any.
The intangible assets with a finite useful life
are amortised using straight line method over
their estimated useful lives. The management’s
estimates of the useful lives for various class of
Intangibles are as given below:
Asset Useful life
Computer software 5 years
Other intangible assets 4- 20 years
The estimated useful life is reviewed annually by
the management.
Gains or losses arising from the retirement or
disposal of an intangible asset are determined
as the difference between the net disposal
proceeds and the carrying amount of the asset
and recognised as income or expense in the
Standalone Statement of Profit and Loss.
2.7 Capital work-in-progress (‘CWIP’) and
intangible assets under development
Projects under commissioning and other CWIP/
intangible assets under development are carried
at cost, comprising direct cost, related incidental
expenses and attributable borrowing cost.
Subsequent expenditures relating to property,
plant and equipment are capitalised only when
it is probable that future economic benefit
associated with these will flow to the Company
and the cost of the item can be measured reliably.
Advances given to acquire property, plant and
equipment are recorded as non-current assets
and subsequently transferred to CWIP on
acquisition of related assets.
2.8 Investment property
Investment properties are land and buildings
that are held for long term lease rental yields
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