The application of simplifi ed approach does not require the Group to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other fi nancial assets and risk exposure, the Group determines that whether there has been a signifi cant increase in the credit risk since initial recognition. If credit risk has not increased signifi cantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased signifi cantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a signifi cant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a fi nancial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date. ECL is the diff erence between all contractual cash fl ows that are due to the Group in accordance with the contract and all the cash fl ows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash fl ows, an entity is required to consider All contractual terms of the fi nancial instrument (including prepayment, extension, call and similar options) over the expected life of the fi nancial instrument. However, in rare cases when the expected life of the fi nancial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the fi nancial instrument. Cash fl ows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the consolidated statement of profi t and loss. This amount is refl ected under the head ‘other expenses’ in the consolidated statement of profi t and loss. Financial assets measured at amortised cost: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the consolidated balance sheet. The allowance reduces the net carrying amount. Until the asset meets writeoff criteria, the Group does not reduce impairment allowance from the gross carrying amount. Financial liabilities Initial recognition and measurement Financial liabilities are classifi ed, at initial recognition, as fi nancial liabilities at fair value through profi t or loss, loans and borrowings or payables, as appropriate. All fi nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s fi nancial liabilities include trade and other payables, loans and borrowings including derivative fi nancial instruments. Subsequent measurement The measurement of fi nancial liabilities depends on their classifi cation, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profi t or loss include fi nancial liabilities held for trading and fi nancial liabilities designated upon initial recognition as at fair value through profi t or loss. Financial liabilities are classifi ed as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative fi nancial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defi ned by Ind AS 109. Separated embedded derivatives are also classifi ed as held for trading unless they are designated as eff ective hedging instruments. Gains or losses on liabilities held for trading are recognised in the consolidated statement of profi t and loss. Financial liabilities designated upon initial recognition at fair value through profi t or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfi ed. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to the consolidated statement of profi t and loss. However, the Group may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the consolidated statement of profi t and loss. The Group has not designated any fi nancial liability as at fair value through profi t and loss. 267 Consolidated | Financial Statements
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