Notes to the Standalone Financial Statements as at and for the year ended March 31, 2024
Notes to the Standalone Financial Statements as at and for the year ended March 31, 2024
2.11 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
right -of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight -line method from the commencement date over the lease term. The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the incremental borrowing rate. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment as to whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Standalone Balance Sheet and lease payments have been classified as financing activity in statement of cash flows. Under Ind AS 116, it will result in increase in cash outflows in financing activities and increase in cash inflows in operating activities. The Company does not have any lease contracts wherein it acts as a lessor.
Type of instruments Debt instruments
Rationale for classification
Classification Fair value through profit or loss (FVTPL)
Initial measurement At fair value. Transaction costs of financial assets expensed to Statement of Standalone Statement of Profit and Loss
Subsequent measurement
Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss.
Any gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises. Changes in fair value of such assets are recorded in Standalone Statement of Profit and Loss as other gains/ (losses) in the period in which it arises. Interest income from these financial assets is included in the finance income. Changes in fair value of such instruments are recorded in OCI. On disposal of such instruments, no amount is reclassified to Standalone Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Dividend income from such instruments are however recorded in Standalone Statement of Profit and Loss unless the dividend clearly represents a recovery of part of the cost of the investment.
A. Financial assets (i) Classification, recognition and measurement:
Financial assets are recognized when the Company becomes a party to the contractual provisions of the instrument except for trade receivables which are initially measured at transaction price. The Company classifies its financial assets in the following measurement categories: a) those to be measured subsequently at fair value (either through other comprehensive income, or through profit and loss), and b) those to be measured at amortized cost. The classification depends on the Company’s business model for managing the financial assets and whether the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Equity instruments
FVOCI
The Company’s management has made an irrevocable election at the time of initial recognition to account for the equity investment (on an instrument by instrument basis) at fair value through other comprehensive income. This election is not permitted if the equity investment is held for trading. The classification is made on initial recognition and is irrevocable. When no such election is made, the equity instruments are measured at FVTPL
At fair value plus transaction costs that are directly attributable to the acquisition of the financial asset
For assets measured at fair value, gains and losses will either be recorded in Standalone Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. Type of instruments Classification Rationale for classification Initial measurement Subsequent measurement
FVTPL
At fair value. Transaction costs of financial assets expensed to Standalone Statement of Profit and Loss
Changes in fair value of such assets are recorded Standalone Statement of Profit and Loss.
If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve remains in equity until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-financial item's cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately reclassified to profit or loss. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company’s risk management objective and strategy for undertaking
A ll financial assets are recognised initially at fair value and for those instruments that are not subsequently measured at FVTPL, they are recorded as plus/ minus transaction costs that are attributable to the acquisition of the financial assets. Initial and subsequent measurement of Cash flow hedges: The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value exceeds the contract amount and as financial liabilities when the fair value is less than the contract amount. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Standalone Statement of Profit and Loss account, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to Standalone Statement of Profit and Loss when the hedge item affects profit and loss upon settlement of transactions.
Debt instruments
Amortized cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest on principal amount outstanding are measured at amortized cost. Assets that are held for collection of contractual cash flows and for selling the financial assets, where contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on principal amount outstanding, are measured at FVOCI.
At fair value plus transaction costs that are directly attributable to the acquisition of the financial asset
Amortized cost is calculated using Effective Interest Rate (EIR) method, taking into account interest income, transaction cost and discount or premium on acquisition. EIR amortization is included in finance income. Any gain or loss on derecognition of the financial Instrument measured at amortized cost is recognised in Standalone Statement of Profit and Loss. Changes in carrying value of such instruments are recorded in OCI except for impairment losses, interest income (including transaction cost and discounts or premium on amortization) and foreign exchange gain/loss which is recognized in Standalone Statement of Profit and Loss account Interest income, transaction cost and discount or premium on acquisition are recognized in the Standalone Statement of Profit and Loss account (finance income) using effective interest rate method. On derecognition of the financial assets measured at FVOCI, the cumulative gain or loss previously recognized in OCI is classified from Equity to Standalone Statement of Profit and Loss account in other gain and loss head.
Fair value through other comprehensive income (FVOCI)
At fair value plus transaction costs that are directly attributable to the acquisition of the financial asset
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Fractal Analytics Limited | Annual Report 2023-24
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