Page 127 - FBL AR 2019-20

CORPORATE STATUTORY FINANCIAL
OVERVIEW STATEMENTS STATEMENTS

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

(l) Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Company reviews the carrying amount of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the assets is estimated in order to determine the extent of impairment loss, if any. When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the assets belongs.
When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of cash-generating units for a reasonable and consistent allocation basis to
be identified.
Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is determined:
(i) in the case of an individual asset, at the higher of the net selling price and the value in use; and
(ii) in the case of a cash generating unit (a Group of assets that generates identified, independent cash flows), at the higher of the cash
generating unit’s net selling price and the value in use.
[The amount of value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and
from its disposal at the end of its useful life. For this purpose, the discount rate (pre-tax) is determined based on the weighted average
cost of capital of the Company suitably adjusted for risks specified to the estimated cash flows of the asset.]
For this purpose, a cash generating unit is ascertained as the smallest identifiable Group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or group of assets.
If recoverable amount of an asset (or a cash generating unit) is estimated to be less than its carrying amount, such deficit is recognised
immediately in the statement of profit and loss as impairment loss and the carrying amount of the asset (or cash generating unit) is
reduced to its recoverable amount.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss is recognised for the asset (or a cash generating unit) in prior years. A reversal of an impairment
loss is recognised immediately in the standalone statement of profit and loss.
(m) Impairment of goodwill
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is
determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill
cannot be reversed in future periods.
Any impairment loss for goodwill is recognised directly in profit or loss and is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
(n) Inventories
Inventories consisting of raw materials and packing materials, work-in-progress, stock-in-trade and finished goods are measured at the
lower of cost and net realisable value. The cost of all categories of inventories is based on the weighted average method. Cost of raw
materials and packing materials and stock-in-trade comprises cost of purchases. Cost of work-in-progress and finished goods comprises
direct material, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the
basis of normal operating capacity. Costs of inventories also include all other costs incurred in bringing the inventories to their present
location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs
necessary to make the sale.

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