higher of the fair value less cost to sell and the value-inuse) is determined on an individual asset basis unless the asset does not generate cash fl ows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. 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 interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specifi c to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fi xed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term refl ects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to refl ect interest on the lease liability, reducing the carrying amount to refl ect the lease payments made and remeasuring the carrying amount to refl ect any reassessment or lease modifi cations or to refl ect revised in-substance fi xed lease payments. The Company recognises the amount of the remeasurement of lease liability due to modifi cation as an adjustment to the Right-of-use asset and Standalone Statement of Profi t and Loss depending upon the nature of modifi cation. Where the carrying amount of the Rightof-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the remeasurement in the Standalone Statement of Profi t and Loss. The Company as a lessor Leases for which the Company is a lessor is classifi ed as a fi nance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classifi ed as a fi nance lease. All other leases are classifi ed as operating leases. For operating leases, rental income is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. l. Assets included in disposal groups classified as held for sale Assets included in disposal groups classifi ed as “Held for sale” if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classifi cation of “Held for Sale” is met when the non-current asset or the disposal group is available for immediate sale and the same is highly probable of being completed within one year from the date of classifi cation as “Held for Sale”. Assets included in disposal groups classifi ed as held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and disposal group that ceases to be classifi ed as “Held for Sale” shall be measured at the lower of carrying amount before the non-current asset and disposal group was classifi ed as “Held for Sale” adjusted for any depreciation/ amortization and its recoverable amount at the date when the disposal group no longer meets the “Held for sale” criteria. m. Inventories All inventories except stores, spares, consumables, semi-fi nished goods and packaging material, are valued at lower of cost and net realisable value. Stores, spares and consumables, semi-fi nished goods and packing material held for use in the production of fi nished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the fi nished products will exceed their net realisable value. Costs for all categories of inventories have been ascertained using weighted average cost method. Cost of inventories comprises of the following: • Raw material, stock-in-trade, semi-fi nished goods, packaging materials and stores, spares and consumables: Cost includes purchase price, import duties and other taxes excluding taxes those are subsequently recoverable from the concerned authorities, freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. • Finished goods and work in progress: Cost comprises cost of direct material, direct labour and appropriate proportion of variable and fi xed overhead expenditure, the latter being allocated on the basis of normal operating capacity, but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of Heritage Foods Limited | 31st Annual report 2022-23 200
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