Page 131 - FBL AR 2019-20

CORPORATE STATUTORY FINANCIAL
OVERVIEW STATEMENTS STATEMENTS

Notes to the Standalone financial statements for the year ended March 31, 2020

Financial liabilities at amortised cost:
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of
subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are
determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the
‘Finance costs’ line item.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities:
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have
expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment
of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an
existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of
the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in the statement of profit and loss.

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 recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities
simultaneously.
(p) Leasing
The Company has applied Ind AS 116 – Leases which is effective on or after April 1, 2019.
The Company as a lessee:
The Company’s lease asset classes primarily consist of leases for Residential premises, Office Premises, Godown, Industrials land and
Vehicle. The Company assesses whether a contract contains a lease, at inception of a contract.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for
all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value
leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-
line basis over the term of the lease. The right-of-use assets and lease liability is initially measured at the present value of the future
lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the
incremental borrowing rates in the country of domicile of these leases.
The lease payments that are not paid at the commencement date are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-
of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments) payable during the lease term and under reasonably certain extension
options, less any lease incentives;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
As a practical expedient, Ind AS 116 permits a lessee not to separate non-lease components when bifurcation of the payments is
not available between the two components, and instead account for any lease and associated non-lease components as a single
arrangement. The Company has used this practical expedient. Contingent and variable rentals are recognized as expense in the periods
in which they are incurred.

129