Page 193 - Annual Report 2019-20

Notes forming part of the consolidated financial statements Notes forming part of the consolidated financial statements 191

2.7.2 Group as Lessee reasonably certain to be exercised, in measuring the lease liability in accordance with Ind AS 116 and
discounting the lease liabilities to the present value under Ind AS 116.
The Group’s lease asset classes primarily consist of leases for land and buildings. The Group assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the The Group has applied the incremental borrowing rate to derive lease liabilities as at 1 April 2019.
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contract conveys the right to control the use of an identified asset for a period of time in exchange for 2.8 Foreign Currencies
consideration. To assess whether a contract conveys the right to control the use of an identified asset, PIDILITE ANNUAL REPORT 2019-20
the Group assesses whether: (i) the contract involves the use of an identified asset (ii) the Group has The functional currency of the Parent and its Indian Subsidiaries is the Indian Rupee, whereas the
substantially all of the economic benefits from use of the asset through the period of the lease and functional currency of Foreign Subsidiaries is the currency of their countries of domicile. In preparing
(iii) the Group has the right to direct the use of the asset. the financial statements of each individual Group entity, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a dates of the transactions. At the end of each reporting period, monetary items (including financial assets
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a and liabilities) denominated in foreign currencies are retranslated at the rates prevailing at that date.
term of twelve months or less (short - term leases) and low value leases. For these short-term and low non-monetary items carried at fair value that are denominated in foreign currencies are retranslated
value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis at the rates prevailing at the date when the fair value was determined. non-monetary items that are
over the term of the lease. measured in terms of historical cost in a foreign currency are not retranslated. Gains or losses arising
Certain lease arrangements includes the options to extend or terminate the lease before the end of the from these translations are recognised in the Consolidated Statement of Profit and Loss. For the purposes
lease term. ROu assets and lease liabilities includes these options when it is reasonably certain that they of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign
will be exercised. operations are translated into Indian Rupees using exchange rates prevailing at the end of each reporting
period. Income and expense items are translated at the average exchange rates for the period.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease plus 2.9 share-based payment transactions of the Group
any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated Equity-settled share-based payments to employees providing similar services are measured at the fair
depreciation and impairment losses. value of the equity instruments at the grant date.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
recoverability whenever events or changes in circumstances indicate that their carrying amounts may eventually vest, with a corresponding increase in equity.
not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the 2.10 Taxation
fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset
does not generate cashflows that are largely independent of those from other assets. In such cases, the Income tax expense represents the sum of the tax currently payable and deferred tax. .
recoverable amount is determined for the Cash Generating unit (CGu) to which the asset belongs. 2.10.1 Current Tax
The lease liability is initially measured at amortized cost at the present value of the future lease The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before
payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily tax’ as reported in the Consolidated Statement of Profit and Loss because of items of income or expense
determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s
liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Group current tax is calculated using applicable tax rates that have been enacted or substantively enacted by
changes its assessment if whether it will exercise an extension or a termination option. the end of the reporting period and the provisions of the Income Tax Act, 1961 and other tax laws, as
Lease liability and ROu asset have been separately presented in the Balance Sheet and lease payments applicable.
have been classified as financing cash flows. 2.10.2 Deferred Tax
Transition Deferred tax is recognised on temporary differences between the carrying amounts of assets and
Effective 1 April 2019, the Group adopted Ind AS 116 “Leases” and applied the standard to all lease liabilities in the consolidated financial statements and the corresponding tax bases used in the
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contracts existing on 1 April 2019 using the modified retrospective method and has taken the cumulative computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
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adjustment to retained earnings, on the date of initial application. Consequently, the Group recorded the differences. Deferred tax assets are generally recognised for all deductible temporary differences to the
lease liability at the present value of the lease payments discounted at the incremental borrowing rate and extent that it is probable that taxable profits will be available against which those deductible temporary
the right of use asset at its carrying amount as if the standard had been applied since the commencement differences can be utilised.
date of the lease, but discounted at the Group’s incremental borrowing rate at the date of initial The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
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application. Comparatives as at and for the year ended 31 March 2019 have not been retrospectively to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
adjusted and therefore will continue to be reported under the accounting policies included as part of our of the asset to be recovered.
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Annual Report for year ended 31 March 2019.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
The Group has used the following practical expedients when applying the modified retrospective which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted
approach to leases previously classified as operating leases applying Ind AS 17: or substantively enacted by the end of the reporting period.
i) Applied single discount rate to a portfolio of leases with reasonably similar characteristics. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle the
ii) Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 2.10.3 Current and Deferred Tax for the year
carrying amount of its assets and liabilities.
12 months of lease term on the date of initial application.
PIDILITE ANNUAL REPORT 2019-20 iv) Applied the practical expedient to grandfather the assessment of which transactions are leases. 2.11 Current and deferred tax are recognised in the Consolidated Statement of Profit and Loss, except when
iii) Excluded initial direct costs for the measurement of the right-of-use asset at the date of initial
application, and
they relate to items that are recognised in Other Comprehensive Income or directly in equity, in which
case, the current and deferred tax are also recognised in Other Comprehensive Income or directly in
Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under
equity respectively.
Ind AS 17.
property, plant and Equipment
v) using hindsight in determining the lease term where the contract contains options to extend or
Property, Plant and Equipment acquired separately
terminate the lease.
2.11.1

The difference between the lease obligation recorded as of 31 March 2019 under Ind AS 17 disclosed
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under annual consolidated financial statements forming part of 2019 Annual Report and the value of the
Buildings, plant and machinery, vehicles, furniture and office equipments are stated at cost less
lease liability as of 1 April 2019 is primarily on account of inclusion of extension and termination options Freehold Land is stated at cost and not depreciated.
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190 accumulated depreciation and accumulated impairment losses.