Page 195 - Annual Report 2019-20

Notes forming part of the consolidated financial statements notes forming part of the consolidated financial statements 193

An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic no intangible asset can be recognised, development expenditure is recognised in Consolidated
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the Statement of Profit and Loss in the period in which it is incurred.
disposal or retirement of an item of Property, Plant and Equipment is determined as the difference Subsequent to initial recognition, internally generated intangible assets are reported at cost less
between the sales proceeds and the carrying amount of the asset and is recognised in Consolidated
Statement of Profit and Loss. accumulated amortization and accumulated impairment losses, on the same basis as intangible PIDILITE ANNUAL REPORT 2019-20
assets acquired separately.
2.11.2 Capital Work-In-Progress
2.12.4 Useful lives of Intangible Assets
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 Estimated useful lives of the Intangible Assets are as follows:
assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties Type of Asset Useful Life
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 Computer Software 5-10 years
assets, commences when the assets are ready for their intended use. Technical Knowhow 10-15 years
2.11.3 Depreciation non-Compete Fees 10-15 years
Depreciation is recognised so as to write off the cost of assets (other than Freehold Land and Capital Copyrights Indefinite Life
Work-In-Progress) less their residual values over their useful lives, using the straight-line method as per Trademark 10 years-Indefinite Life
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 2.13 Impairment of Tangible and Intangible Assets other than Goodwill
which are different from the useful lives prescribed under Schedule II to the Companies Act, 2013 At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
which is based upon technical assessment made by technical expert and management estimate. The assets to determine whether there is any indication that those assets have suffered an impairment loss.
management believes that these estimated useful lives are realistic and reflect fair approximation of If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
the period over which the assets are likely to be used. The estimated useful lives, residual values and extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an
depreciation method are reviewed at the end of each reporting period, with the effect of any changes in individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
estimate accounted for on a prospective basis. 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
Estimated useful lives of the assets are as follows: group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Type of Asset Useful Life 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.
Buildings 20-60 years 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
Leasehold Improvements 5-20 years life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a
Plant and Machinery 1-25 years prospective basis.
Recoverable amount is the higher of fair value less costs of disposal and value in use.
Vehicles 1-10 years
If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying
Furniture and Fixtures 3-15 years 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.
Office Equipment 1-20 years
2.14 Inventories
2.12 Intangible Assets Inventories are valued at lower of cost and net realisable value.
2.12.1 Intangible assets acquired separately 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
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated selling price in the ordinary course of business less all estimated costs of completion and estimated costs
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis necessary to make the sale.
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 Obsolete, defective, unserviceable and slow/ non-moving stocks are duly provided for and valued at net
prospective basis. realisable value.
Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses. 2.15 provisions (other than Employee Benefits)
2.12.2 Intangible assets acquired in a business combination 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
Intangible assets other than goodwill acquired in a business combination are initially recognised at their required to settle the obligation.
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 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
Subsequent to initial recognition, such intangible assets acquired in a business combination are reported
the obligation at the balance sheet date, taking into account the risks and uncertainties surrounding
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
estimates.
Contingent liabilities are not recognised but disclosed in the notes to the consolidated financial
statements.

Expenditure on research activities is recognised in Consolidated Statement of Profit and Loss in the
Financial Instruments
period in which it is incurred.
2.16.1
Initial Recognition and Measurement
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
contractual provisions of the instruments.
192 An internally generated intangible asset arising from development is recognised if and only if it Financial assets and financial liabilities are recognised when a Group entity becomes a party to the