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annual
report
20
16-17
kajaria
ceramics
corporate
overview
management
reports
Financial
statements
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs. The Company’s financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts, and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
• Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using
the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as
through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
• Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified
as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes
derivative financial instruments entered into by the Company that are not designated as hedging instruments in
hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading
unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognized in the statement of profit and loss.
(c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a
currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to
realize the assets and settle the liabilities simultaneously
(d) Derivative financial instruments
The Company uses derivative financial instruments, such as forward currency contracts, interest rate swaps, full currency
swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price
risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit and
loss.
t. Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with.
Notes on the consolidated financial statements
for the year ended 31 March 2017