Page 218 - Tata Chemical Annual Report_2022-2023

Integrated Annual Report 2022-23 01-83 84-192
Standalone Statement of Profit and Loss
in the period in which it arises. Interest
income from these financial assets is
included in other income.
Equity instruments
The Company subsequently measures all equity
investments at fair value, except investment
in subsidiaries and joint ventures which are
measured at cost. Where the Company’s
management has elected to present fair value
gains and losses on equity investments in
OCI, there is no subsequent reclassification of
fair value gains and losses to the Standalone
Statement of Profit and Loss. When the financial
asset is derecognised, the cumulative gain or
loss previously recognised in OCI is reclassified
to equity. Dividends from such investments
are recognised in the Standalone Statement
of Profit and Loss within other income when
the Company’s right to receive payments is
established. Impairment losses (and reversal
of impairment losses) on equity investments
measured at FVTOCI are not reported separately
from other changes in fair value.
Cash and cash equivalents
The Company considers all highly liquid
investments, which are readily convertible into
known amounts of cash, that are subject to
an insignificant risk of change in value with a
maturity within three months or less from the
date of purchase, to be cash equivalents. Cash
and cash equivalents consist of balances with
banks which are unrestricted for withdrawal 2.11.2 Debt and equity instruments
and usage.
Trade Receivables
Trade receivables that do not contain a
significant financing component are measured
at transaction price.
Derecognition of financial assets
A financial asset is derecognised only when
the Company
2.11.3 Financial liabilities
• has transferred the rights to receive cash
flows from the financial asset; or
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Integrated Report
• retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay
the cash flows to one or more recipients.
Where the Company transfers an asset, it evaluates
whether it has transferred substantially all risks
and rewards of ownership of the financial asset.
Where the Company has transferred substantially
all risks and rewards of ownership, the financial
asset is derecognised. Where the Company has
not transferred substantially all risks and rewards
of ownership of the financial asset, the financial
asset is not derecognised. Where the Company
has neither transferred a financial asset nor
retained substantially all risks and rewards of
ownership of the financial asset, the financial
asset is derecognised if the Company has not
retained control of the financial asset. Where
the Company retains control of the financial
asset, the asset is continued to be recognised
to the extent of continuing involvement in the
financial asset.
Effective interest method
The effective interest method is a method of
calculating the amortised cost of a financial
instrument and of allocating interest income or
expense over the relevant period. The effective
interest rate is the rate that exactly discounts
future cash receipts or payments through the
expected life of the financial instrument, or
where appropriate, a shorter period.
Debt and equity instruments are classified as either
financial liabilities or as equity in accordance with
the substance of the contractual arrangement.
An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity
instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
The Company’s financial liabilities comprise
borrowings, lease liabilities, trade payables and
other liabilities. These are initially measured
at fair value, net of transaction costs, and are
subsequently measured at amortised cost using
Statutory Reports Financial Statements
Standalone
the EIR method. The EIR is a method of calculating value at the end of each reporting period. The
the amortised cost of a financial liability and of accounting for subsequent changes in fair value
allocating interest expense over the relevant depends on whether the derivative is designated
period at effective interest rate. The effective as a hedging instrument, and if so, the nature of
interest rate is the rate that exactly discounts the item being hedged and the type of hedge
estimated future cash payments through the relationship designated.
expected life of the financial liability, or, where
appropriate, a shorter period. Cash flow hedges that qualify for hedge
accounting
Changes to the carrying amount of a financial The effective portion of changes in the fair value
liability as a result of renegotiation or modification of derivatives that are designated and qualify
of terms that do not result in derecognition of the as cash flow hedges, is recognised through OCI
financial liability, is recognised in the Standalone and as cash flow hedging reserve within equity,
Statement of Profit and Loss. limited to the cumulative change in fair value of
the hedged item on a present value basis from
Derecognition of financial liabilities the inception of the hedge. The gain or loss
The Company derecognises financial liabilities relating to the ineffective portion is recognised
when, and only when, its obligations are immediately in the Standalone Statement of
discharged, cancelled or they expire. Profit and Loss.
Presentation Amounts accumulated in equity are reclassified
Borrowings are classified as current liabilities to the Standalone Statement of Profit and
unless the Company has an unconditional right Loss on settlement. When the hedged forecast
to defer settlement of the liability for at least 12 transaction results in the recognition of a non-
months after the reporting period. financial asset, the amounts accumulated in
equity with respect to gain or loss relating to
Trade and other payables are presented as the effective portion of the spot component of
current liabilities unless payment is not due forward contracts, both the deferred hedging
gains and losses and the deferred aligned
within 12 months after the reporting period. forward points are included within the initial cost
of the asset. The deferred amounts are ultimately
2.11.4 Derivatives and hedging activities recognised in the Standalone Statement of Profit
In the ordinary course of business, the Company and Loss as the hedged item affects profit or loss.
uses certain derivative financial instruments
to reduce business risks which arise from its When a hedging instrument expires, is sold or
exposure to foreign exchange and interest terminated, or when a hedge no longer meets
rate fluctuations associated with borrowings the criteria for hedge accounting, then hedge
(cash flow hedges). When the Company opts accounting is discontinued prospectively and
to undertake hedge accounting, the Company any cumulative deferred gain or loss and deferred
documents, at the inception of the hedging costs of hedging in equity at that time remains in
transaction, the economic relationship between equity until the forecast transaction occurs. When
hedging instruments and hedged items including the forecast transaction is no longer expected to
whether the hedging instrument is expected occur, the cumulative gain or loss and deferred
to offset changes in cash flows or fair values costs of hedging that were reported in equity
of hedged items. The Company documents its
are immediately transferred to the Standalone
risk management objective and strategy for Statement of Profit and Loss.
undertaking various hedge transactions at the
inception of each hedge relationship. Derivatives that are not designated as
hedges
Derivatives are initially recognised at fair value on When derivative contracts to hedge risks are
the date the derivative contract is entered into not designated as hedges, such contracts are
and are subsequently remeasured to their fair accounted through FVTPL.
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