Page 247 - Index

Mission-Critical Decisions, Made with Confidence.
Estimates and assumptions are required in particular
for:
• Useful life and residual value of property, plant
and equipment (PPE) and intangible assets
Useful lives of PPE and intangible assets are
based on the life prescribed in Schedule II of
the Companies Act, 2013. In cases, where the
useful lives are different from that prescribed
in Schedule II, they are based on technical
advice, taking into account the nature of the
asset, the estimated usage of the asset, the
operating conditions of the asset, past history of
replacement, anticipated technological changes,
manufacturers’ warranties and maintenance
support. Assumptions also need to be made,
when it is assessed, whether an asset may be
capitalised and which components of the cost of
the asset may be capitalised.
• Goodwill impairment
The Company estimates the value in use of the
cash generating unit (CGU) based on the future
cash flows after considering current economic
conditions and trends, estimated future operating
results and anticipated future economic and
regulatory conditions.
Goodwill is tested for impairment, relying on a
number of factors including operating results,
business plans and future cash flows. Calculating
the future net cash flows expected to be generated
to determine if impairment exists and to calculate
the impairment involves significant assumptions,
estimation and judgment. The estimated cash
flows are prepared using internal forecasts.
•
Leases
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 Company makes an assessment on
the expected lease term on a lease-by-lease basis
and thereby assesses whether it is reasonably
certain that any options to extend or terminate
the contract will be exercised. In evaluating
the lease term, the Company considers factors
such as any significant leasehold improvements
undertaken over the lease term, costs relating to
the termination of the lease and the importance of
the underlying asset to the Company’s operations
taking into account the location of the underlying
asset and the availability of suitable alternatives.
The lease term in future periods is reassessed to
ensure that the lease term reflects the current
economic circumstances.
•
Revenue recognition
Revenue from rendering of services is recognised
when the obligation to render services based on
agreements/arrangements with the customers
are satisfied and when there are no longer
any unfulfilled obligations. The performance
obligations in our contracts are fulfilled at the time
of delivery or upon formal customer acceptance
depending on customer terms. Revenue is only
recognised to the extent that it is highly probable
a significant reversal will not occur.
The Company exercises judgement in determining
whether the performance obligation is satisfied
at a point in time or over a period of time. The
Company considers indicators such as how
customer consumes benefits as services are
rendered or who controls the asset as it is being
created or existence of enforceable right to
payment for performance to date and alternate
use of such product or service, transfer of
significant risks and rewards to the customer,
acceptance of delivery by the customer, etc.
Revenue for fixed-price contract is recognised
using percentage-of-completion method. The
Company uses judgement to estimate the future
cost-to-completion of the contracts which is
used to determine the degree of completion of
the performance obligation.
• Recognition and measurement of defined benefit
obligations
The obligation arising from defined benefit plan is
determined on the basis of actuarial assumptions.
As actuarial valuation involves making various
assumptions that may be different from the
actual development in the future, key actuarial
assumptions include discount rate, trends in
salary escalation, attrition and mortality rate.
The discount rate is determined by reference
to market yields at the end of the reporting
period on government bonds. The period to
maturity of the underlying bonds correspond to
the probable maturity of the post-employment
benefit obligations.
Annual Report 2024
245
Financial Statements