Page 173 - BCML AR 2019-20

BALRAMPUR CHINI MILLS LIMITED

Notes forming part of the Standalone Financial Statements

Note No. : 2 Significant accounting policies (contd.)

Offsetting of financial instruments
Financial assets and financial liabilities including derivative instruments are offset and the net amount is reported in the balance sheet
if there is currently an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis or to
realize the assets and settle the liabilities simultaneously.
Equity share capital
An equity instrument is a contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Incremental costs directly attributable to the issuance of new equity shares are recognized as a deduction from equity, net of any tax
effects.
2.16 Impairment of Assets
(a) Non-financial assets

An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
To assess impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-
generating units).
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the impairment loss previously recognized is reversed so that the asset is recognized at its recoverable
amount but not exceeding the value which would have been reported in this respect if the impairment loss had not been
recognized.

(b) Financial assets
The Company recognizes loss allowances using the Expected Credit Loss (“ECL”) model for financial assets measured at amortized
cost and fair value through other comprehensive income.

The Company recognizes lifetime expected credit losses for trade receivables.
Loss allowance equal to the lifetime expected credit losses, are recognized if the credit risk of the financial asset has significantly
increased since initial recognition.
2.17 Taxes
Income tax expense comprises current tax and deferred tax and is recognized in the statement of profit and loss except to the extent
it relates to items directly recognized in Equity or other comprehensive income (OCI).
(a) Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities using the tax rates and tax laws that are enacted or substantively enacted by the balance
sheet date and applicable for the period.
Current tax items in correlation to the underlying transaction relating to OCI and Equity are recognized in OCI and Equity
respectively.
Management periodically evaluates positions taken in the tax returns to situations in which applicable tax regulations are
subject to interpretation and full provisions are made where appropriate based on the amount expected to be paid to the tax
authorities.

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