Page 194 - Annual Report 2019-20

Notes forming part of the consolidated financial statements notes forming part of the consolidated financial statements
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of Property, Plant and Equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in Consolidated
Statement of Profit and Loss.
2.11.2 Capital Work-In-Progress
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying
assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties
are classified and capitalised to the appropriate categories of Property, Plant and Equipment when
completed and ready for intended use. Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended use.
2.11.3 Depreciation
Depreciation is recognised so as to write off the cost of assets (other than Freehold Land and Capital
Work-In-Progress) less their residual values over their useful lives, using the straight-line method as per
the useful life prescribed in Schedule II to the Companies Act, 2013.
For certain items of Property, Plant and Equipment, the Group depreciates over estimated useful life
which are different from the useful lives prescribed under Schedule II to the Companies Act, 2013
which is based upon technical assessment made by technical expert and management estimate. The
management believes that these estimated useful lives are realistic and reflect fair approximation of
the period over which the assets are likely to be used. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
Estimated useful lives of the assets are as follows:
Type of Asset Useful Life
Buildings 20-60 years
Leasehold Improvements 5-20 years
Plant and Machinery 1-25 years
Vehicles 1-10 years
Furniture and Fixtures 3-15 years
Office Equipment 1-20 years
2.12 Intangible Assets
2.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis
over their estimated useful lives. The estimated useful life and amortisation method are reviewed at
the end of each reporting period, with the effect of any changes in estimate being accounted for on a
prospective basis.
Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
2.12.2 Intangible assets acquired in a business combination
Intangible assets other than goodwill acquired in a business combination are initially recognised at their
fair value at the acquisition date (which is regarded as their cost).
PIDILITE ANNUAL REPORT 2019-20 2.12.3 Internally generated Intangible Assets – Research and Development Expenditure
Subsequent to initial recognition, such intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Expenditure on research activities is recognised in Consolidated Statement of Profit and Loss in the
period in which it is incurred.
meets the recognition criteria of intangible assets. The amount initially recognised is the sum total of
expenditure incurred from the date when the intangible asset first meets the recognition criteria. Where
192 An internally generated intangible asset arising from development is recognised if and only if it
193
no intangible asset can be recognised, development expenditure is recognised in Consolidated
Statement of Profit and Loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less
accumulated amortization and accumulated impairment losses, on the same basis as intangible PIDILITE ANNUAL REPORT 2019-20
assets acquired separately.
2.12.4 Useful lives of Intangible Assets
Estimated useful lives of the Intangible Assets are as follows:
Type of Asset Useful Life
Computer Software 5-10 years
Technical Knowhow 10-15 years
non-Compete Fees 10-15 years
Copyrights Indefinite Life
Trademark 10 years-Indefinite Life
2.13 Impairment of Tangible and Intangible Assets other than Goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Intangible assets with indefinite useful lives are tested for impairment annually at the cash-generating
unit level. The assessment of indefinite useful life is reviewed annually to determine whether the indefinite
life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a
prospective basis.
Recoverable amount is the higher of fair value less costs of disposal and value in use.
If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised in Consolidated Statement of Profit and Loss.
2.14 Inventories
Inventories are valued at lower of cost and net realisable value.
Cost of inventories is determined on weighted average. Cost for this purpose includes cost of direct
materials, direct labour and appropriate share of overheads. net realisable value represents the estimated
selling price in the ordinary course of business less all estimated costs of completion and estimated costs
necessary to make the sale.
Obsolete, defective, unserviceable and slow/ non-moving stocks are duly provided for and valued at net
realisable value.
2.15 provisions (other than Employee Benefits)
A provision is recognised when as a result of past event, the Group has a present legal or constructive
obligation that can be reliably estimated, and, it is probable that an outflow of economic benefit will be
required to settle the obligation.
2.16 the obligation. These are reviewed at each Balance Sheet date and adjusted to reflect the current best
Provisions (excluding retirement benefits) are determined based on the best estimate required to settle
the obligation at the balance sheet date, taking into account the risks and uncertainties surrounding
estimates.
Contingent liabilities are not recognised but disclosed in the notes to the consolidated financial
statements.
Financial Instruments
2.16.1
Initial Recognition and Measurement
contractual provisions of the instruments.
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the