Page 199 - Annual Report 2019-20

Notes forming part of the consolidated financial statements Notes forming part of the consolidated financial statements 197

2.22 Discontinued operations 3.2.3 Employee related provisions
A discontinued operation is a component of the Group’s business that represents a separate line of The costs of long-term and short-term employee benefits are estimated using assumptions by the
business that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view management. These assumptions include rate of increase in compensation levels, discount rates, PIDILITE ANNUAL REPORT 2019-20
to resale. Classification as a discontinued operation occurs upon the earlier of disposal or when the expected rate of return on assets and attrition rates (disclosed in note 51).
operation meets the criteria to be classified as held for sale.
3.2.4 Income taxes
2.23 Non-current assets and disposal groups held for sale
Significant judgements are involved in estimating budgeted profits for the calculation of advance tax
Assets of disposal groups that is available for immediate sale and where the sale is highly probable of and deferred tax and determining provision for income taxes and uncertain tax positions (disclosed
being completed within one year from the date of classification are considered and classified as assets in note 53).
held for sale. non-current assets and disposal groups held for sale are measured at the lower of carrying
amount and fair value less costs to sell. 3.2.5 Property, Plant and Equipment and Other Intangible Assets
3. Critical Accounting Judgements and key sources of Estimation Uncertainty The useful lives and residual values of Group’s assets are determined by the management at the time
The preparation of the Group’s financial statements requires management to make judgements, the asset is acquired. These estimates are reviewed annually by the management. The lives are based on
estimates and assumptions that affect the application of accounting policies, reported amounts of historical experience with similar assets as well as anticipation of future events, which may impact their
assets, liabilities, income and expenses, and accompanying disclosures, and the disclosure of contingent life, such as changes in technical or commercial obsolescence arising from changes or improvements in
liabilities. The estimates and associated assumptions are based on historical experience and other production or from a change in market demand of the product or service output of the asset.
factors that are considered to be relevant. Actual results may differ from these estimates. 3.2.6 Leases
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting The Group evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and ‘Leases’. Identification of a lease requires significant judgment. The Group uses significant judgement in
future periods. assessing the lease term (including anticipated renewals) and the applicable discount rate.
3.1 Critical Judgments Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted
with any option to extend or terminate the lease, if the use of such option is reasonably certain. The
3.1.1 Classification of Plus Call Technical Services LLC as a Joint Venture
Group makes an assessment on the expected lease term on a lease-by-lease basis and there by assesses
Plus Call Technical Services LLC is a limited liability company whose legal form confers separation whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In
between the parties to the joint arrangement and the LLC itself. Furthermore, there is no contractual evaluating the lease term, the Group considers factors such as any significant leasehold improvements
arrangement or any other facts and circumstances that indicate that the parties to the joint arrangement undertaken over the lease term, costs relating to the termination of the lease and the importance of
have rights to the assets and obligations for the liabilities of the joint arrangement. Accordingly, Plus Call the underlying asset to operations taking into account the location of the underlying asset and the
Technical Services LLC is classified as Joint Venture of the Group.
availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease
3.1.2 Classification of entities as Subsidiaries wherein Group has ownership interest and voting rights of term reflects the current economic circumstances.
50% or less
The discount rate is generally based on the incremental borrowing rate specific to the lease being
Pidilite MEA Chemicals LLC, Bamco Supply and Services Ltd and ICA Pidilite Pvt Ltd are subsidiaries evaluated or for a portfolio of leases with similar characteristics.
of the Group even though the Group has ownership interest and voting rights of 50% or less in the
subsidiaries respectively. however, based on the relevant facts and circumstances, control and
management of these entities lie with the Group. The Group has the power to direct the relevant
activities of these entities and therefore controls these entities.
3.2 Key accounting, judgements, assumptions and estimates
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are described below:
3.2.1 Impairment of Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets (i.e. trademark and copyrights) are tested for impairment on
an annual basis. Recoverable amount of cash-generating units is determined based on higher of
value-in-use and fair value less cost to sell. The impairment test is performed at the level of the cash-
generating unit or groups of cash-generating units which are benefitting from the synergies of the
acquisition and which represents the lowest level at which the intangibles are monitored for internal
management purposes.

Market related information and estimates are used to determine the recoverable amount. Key
PIDILITE ANNUAL REPORT 2019-20 3.2.2 Cash flow projections take into account past experience and represent management’s best estimate
assumptions on which management has based its determination of recoverable amount include
estimated long term growth rates, weighted average cost of capital and estimated operating margins.
about future developments.
Business Combinations and Intangible Assets
Business combinations are accounted for using Ind AS 103, ‘Business Combinations’. Ind AS 103 requires

the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain
the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant
assets. These valuations are conducted by independent valuation experts.
196 estimates are required to be made in determining the value of contingent consideration and intangible