172

Standalone Statement of Changes in Equity

for the year ended March 31, 2023

A. Equity Share Capital

(H in Lacs)
As at As at

CEAT LIMITED
Particulars
March 31, 2023 March 31, 2022

Balance as at beginning of the year 4,045 4,045

Changes in the equity share capital due to prior period errors - -
Restated balance as at the beginning of the year 4,045 4,045
Changes in the equity share capital during the year - -
Balance as at the end of the year 4,045 4,045

b. Other Equity
(H in Lacs)
Item of Other
Reserves & Surplus Comprehensive
income (OCI)
Total
Particulars Capital Effective Reserves
Securities Capital General Retained
redemption portion of cash & surplus
premium Reserve Reserve earnings
reserve flow hedges
( refer note (refer note (refer note (refer note
(refer note (refer note
16(a)) 16(b)) 16(e)) 16(f))
16(c)) 16(d))

As at April 01, 2021 56,703 1,177 390 25,178 2,29,694 (713) 3,12,429
Profit for the year - - - - 5,433 - 5,433
Other comprehensive income/(loss) - - - - 443 (42) 401
Total comprehensive income - - - - 5,876 (42) 5,834
Payment of dividend (refer note 17) - - - - (7,281) - (7,281)
As at March 31, 2022 56,703 1,177 390 25,178 2,28,289 (755) 3,10,982

Standalone Statement of Changes in Equity

for the year ended March 31, 2023

b. Other Equity
(H in Lacs)
Item of Other
Reserves & Surplus Comprehensive
income (OCI)
Total
Capital Effective
Corporate Overview

Particulars Securities Capital General Retained Reserves

redemption portion of cash & surplus
premium Reserve Reserve earnings
reserve flow hedges
( refer note (refer note (refer note (refer note
(refer note (refer note
16(a)) 16(b)) 16(e)) 16(f))
16(c)) 16(d))

Profit for the year - - - - 20,627 - 20,627

Other comprehensive income/(loss) - - - - (741) 861 120
Total comprehensive income - - - - 19,886 861 20,747
Payment of dividend (refer note 17) - - - - (1,214) - (1,214)
As at March 31, 2023 56,703 1,177 390 25,178 2,46,961 106 3,30,515
Value Creation

Refer note no. 16- Other equity

The accompanying notes are an integral part of the standalone financial statements.

For and on behalf of Board of Directors of

CEAT Limited

As per our report of even date

For B S R & Co. LLP Kumar Subbiah H.V.Goenka Anant Goenka
Chartered Accountants Chief Financial Officer Chairman Vice-Chairman
Statutory Reports

ICAI Firm Registration No: 101248W/W-100022 [DIN: 00026726] [DIN: 02089850]

Sadashiv Shetty Vallari Gupte Arnab Banerjee Mahesh Gupta

Partner Company Secretary Managing Director Chairman-Audit Committee
Membership Number : 048648 [DIN:06559516] [DIN:00046810]
Place: Mumbai
Date: May 04, 2023

Place: Mumbai
Integrated Annual Report 2022-23

Date: May 04, 2023

Financial Statements

173

Notes to Standalone Financial Statements
for the year ended March 31, 2023
Note 1: Corporate Information
CEAT Limited (the ‘Company’) is a public limited company
domiciled in India and incorporated under the provisions of the
Companies Act applicable in India. The Company’s principal
business is manufacturing of automotive tyres, tubes and flaps.
The Company started operations in 1958 as CEAT Tyres of
India Limited and was renamed as CEAT Limited in 1990. The
Company caters to both domestic and international markets.
The Company is listed on the Bombay Stock Exchange (BSE)
and the National Stock Exchange (NSE). The registered office of
the Company is located at RPG House, 463, Dr Annie Besant
Road, Worli, Mumbai, Maharashtra 400030. The financial
statements were approved for issue in accordance with a
resolution of the Board of Directors on May 4th, 2023.
Note 2: Basis of preparation, measurement
and significant accounting policies.
2.1 Basis of preparation and measurement
2.1.1 Basis of preparation
These financial statements have been prepared in
accordance with the Indian Accounting Standards
(hereinafter referred to as the ‘Ind AS’) as notified
by Ministry of Corporate Affairs pursuant to Section
133 of the Companies Act, 2013 read with Rule 3 of
the Companies (Indian Accounting Standards) Rules,
2015 as amended from time to time and presentation
requirements of Division II of Schedule III of the
Companies Act 2013 (Ind AS compliant Schedule III).
The financial statements have been prepared on
accrual and going concern basis. The accounting
policies are applied consistently to all the periods
presented in the financial statements.
The financial statements are presented in “H”, the
functional currency of the Company. Items included
in the financial statements of the Company are
recorded using the currency of the primary economic
environment in which the Company operates (the
‘functional currency’).
All amounts disclosed in the financial statements and
notes have been rounded off to the nearest lacs as per
the requirements of Schedule III of the Companies Act,
2013, unless otherwise stated. Wherever the amount
represented ‘0’ (zero) construes value less than Rupees
fifty thousand.
2.1.2 Basis of Measurement
These financial statements are prepared under the
historical cost convention except for the following assets
and liabilities which have been measured at fair value:
• Derivative financial instruments and
• Investment in others (refer accounting policy
regarding financial instruments)
174 CEAT LIMITED
Notes
for the year ended March 31, 2023
In addition, the carrying values of recognised assets
and liabilities designated as hedged items in fair value
hedges that would otherwise be carried at amortised
cost are adjusted to record changes in the fair values
attributable to the risks that are being hedged in
effective hedge relationships.
2.2 Current versus non-current classification
The Company presents assets and liabilities in the Balance
Sheet based on current / non-current classification. An
asset is treated as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle.
• Held primarily for the purpose of trading.
• Expected to be realised within twelve months after the
reporting period, or
Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle.
• It is held primarily for the purpose of trading.
• It is due to be settled within twelve months after the
reporting period, or
• There is no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-
current assets and liabilities.
The operating cycle is the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents. The Company has identified twelve months as
its operating cycle.
2.3 Revenue from operation & other income
2.3.1 Revenue from contracts with customers
Revenues from contracts with customers are recognised
when the performance obligations towards customer
have been met. Performance obligations are deemed
to have been met when control of the goods or
services are transferred to the customer at an amount
that reflects the consideration to which the Company
expects to be entitled in exchange for those goods or
services. The Company acts as the principle in all of its
revenue arrangements since it is the primary obligor in
all the revenue arrangements as it has pricing latitude
and is also exposed to inventory and credit risks.
Corporate Overview Value Creation
to Standalone Financial Statements
An entity collects Goods and Services Tax (‘GST’) on
behalf of the government and not on its own account.
Hence it is excluded from revenue, i.e. revenue is net
of GST.
2.3.2 Sale of Goods
Revenue from sale of goods (Tyres, tubes and flaps) is
recognised at the point of time when control of the goods
is transferred to customer depending on terms of sales.
The Company considers whether there are other
promises in the contract that are separate performance
obligations to which a portion of the transaction price
needs to be allocated (e.g.Sales related obligations).
In determining the transaction price for the sale of
goods, the Company considers the effects of variable
consideration, the existence of significant financing
components, if any.
2.3.2.1 Variable consideration
Variable consideration includes various forms of
discounts like volume discounts, price concessions,
incentives, etc. on the goods sold to its dealers
and distributors. In all such cases, accumulated
experience is used to estimate and provide for the
variability in revenue, using the expected value
method and the revenue is recognised to the
extent that it is highly probable that a significant
reversal in the amount of cumulative revenue
recognised will not occur in future on account of
refund or discounts.
2.3.2.2 Significant financing component
Generally, the Company receives short-term
advances from its customers. Using the practical
expedient in Ind AS 115, the Company does not
adjust the promised amount of consideration for
the effects of a significant financing component
if it expects, at contract inception, that the period
between the transfer of the promised good or service
to the customer and when the customer pays for that
good or service will be one year or less.
2.3.3 Contract balances
Trade receivables
A receivable represents the Company’s right to an
amount of consideration that is unconditional (i.e.,
only the passage of time is required before payment
of the consideration is due). Refer to note 2.15 –
Financial Instruments in accounting policies.
2.3.4 Royalty income
The Company also earns sales based royalty income
which is recognised as revenue over the period of time.
This is because in such arrangements, the customer
gets a right to access the Company’s intellectual
Statutory Reports Financial Statements
property throughout the license period. The revenue
to be recognised is determined based on a specified
percentage of the sales made by the customer.
2.3.5 Interest income
For all debt instruments measured either at amortised
cost or at fair value through other comprehensive
income, interest income is recorded using the Effective
Interest Rate (‘EIR’) method. EIR is the rate that exactly
discounts the estimated future cash payments or receipts
over the expected life of the financial instrument or a
shorter period, where appropriate, to the gross carrying
amount of the financial asset or to the amortised
cost of a financial liability. When calculating the EIR,
the Company estimates the expected cash flows by
considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call
and similar options) but does not consider the expected
credit losses. Interest income is included in finance
income in the Statement of Profit and Loss.
2.3.6 Dividends
Dividend income is recognised when the Company’s
right to receive dividend is established, which is
generally when shareholders approve the dividend.
2.4 Investments in subsidiaries and associates
Investments in subsidiaries and associates are carried at
cost less accumulated impairment losses, if any. Where
an indication of impairment exists, the carrying amount of
the investment is assessed and written down immediately
to its recoverable amount. On disposal of investments in
subsidiaries and associates, the difference between net
disposal proceeds and the carrying amounts are recognised
in the Statement of Profit and Loss.
2.5 Government grants, subsidies and export
incentives
Government grants / subsidies are recognised in statement
of profit and loss as per income approach when there is
reasonable assurance that the Company will comply with
all the conditions attached to them and that the grant /
subsidy will be received.
The Company has determined that reasonable assurance
is established upon receipt of sanction letter approving the
incentive amount in accordance with the respective State
Industrial Promotion Subsidy.
The Company has chosen to adjust grant under the
Export Promotion Capital Goods (‘EPCG’) scheme from
the carrying value of non-monetary asset pursuant to
amendment in Ind AS 20.
Export Incentive under Merchandise Export from India
Scheme (‘MEIS’) is recognised in the Statement of Profit and
Loss as a part of other operating revenues on accrual basis.
Integrated Annual Report 2022-23 175

Notes to Standalone Financial Statements
for the year ended March 31, 2023
2.6 Taxes
2.6.1 Current tax
Current tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted, at the reporting date in India where
the Company operates and generates taxable income.
Current tax relating to items recognised outside
the Statement of Profit and Loss is either in Other
Comprehensive Income (‘OCI’) or in equity. Current
tax items are recognised in correlation to the
underlying transaction either in the Statement of Profit
and Loss or directly in equity. Management periodically
evaluates positions taken in the tax returns with respect
to situations in which applicable tax regulations are
subject to interpretation and establishes provisions
where appropriate.
Interest expenses and penalties, if any, related to
income tax are included in finance cost and other
expenses respectively. Interest Income, if any, related
to income tax is included in Other Income.
Uncertainties exist with respect to the interpretation of
complex tax regulations and the amount and timing
of future taxable income. Given the wide range of
business relationships and the long-term nature
and complexity of existing contractual agreements,
differences arising between the actual results and
the assumptions made, or future changes to such
assumptions, could necessitate future adjustments
to tax income and expense already recorded. The
Company establishes provisions, based on reasonable
estimates, for possible consequences of audits by the
tax authorities of the respective countries in which it
operates. The amount of such provisions is based on
various factors, such as experience of previous tax
audits and differing interpretations of tax regulations
by the taxable entity and the responsible tax authority.
Such differences of interpretation may arise on a
wide variety of issues depending on the conditions
prevailing in the Company’s domicile.
2.6.2 Deferred tax
Deferred tax is recognised in respect of temporary
differences between the tax bases of assets and
liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred tax liability arises from the
initial recognition of an asset or liability in a
transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit and loss.
176 CEAT LIMITED
Notes
for the year ended March 31, 2023
• In respect of taxable temporary differences associated
with investments in subsidiaries and interests in
joint ventures when the timing of the reversal of
the temporary differences can be controlled and it
is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses
can be utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from the
initial recognition of an asset or liability in a
2.7 Property, plant and equipment
transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit and loss.
• In respect of deductible temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures, deferred
tax assets are recognised only to the extent that
it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit
will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred
tax asset to be utilised. Unrecognised deferred tax
assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the
Statement of Profit and Loss is recognised either in
OCI or in equity. Deferred tax items are recognised in
correlation to the underlying transaction either in OCI
or directly in equity.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.
Corporate Overview Value Creation
to Standalone Financial Statements
2.6.3 GST paid on acquisition of assets or on
incurring expenses
Expenses and assets are recognised net of the amount
of GST paid, except:
• When the tax incurred on a purchase of assets
or services is not recoverable from the taxation
authority, in which case, the tax paid is recognised
as part of the cost of acquisition of the asset or as
part of the expense item, as applicable.
• When receivables and payables are stated with
the amount of tax included.
The net amount of tax recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the Balance Sheet.
Property, plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing part
of the plant and equipment and borrowing costs for long-
term construction projects if the recognition criteria are met.
When significant parts of plant and equipment are required
to be replaced at intervals, the Company depreciates them
separately based on their specific useful lives. Likewise,
when a major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All
other repair and maintenance costs are recognised in the
Statement of Profit and Loss as incurred. The present value
of the expected cost for the decommissioning of an asset
after its use is included in the cost of the respective asset if
the recognition criteria for a provision are met. Subsequent
expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow
to the Company and the cost of the item can be measured
reliably. The cost of property, plant and equipment at 1
April 2015, the company’s date of transition to Ind AS, was
determined with reference to its carrying value recognised
as per the previous GAAP (deemed cost), as at the date of
transition to Ind AS.
An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or
when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is
included in the Statement of Profit and Loss when the asset
is derecognised.
Property, plant and equipment which are not ready for
intended use as on the date of Balance Sheet are disclosed
as “Capital work-in-progress”.
Advances paid towards the acquisition of property, plant and
equipment outstanding at each Balance Sheet date is classified
as capital advances under “Other non-current assets”.
Statutory Reports Financial Statements
Depreciation is provided on a pro-rata basis on the
straight-line method based on useful life estimated by the
management and supported by independent assessment by
professionals which may not be necessarily in the alignment
with the useful lives prescribed by schedule II to the Companies
Act, 2013. Depreciation commences when the asset is ready
for it’s intended use. The Company has used the following
useful lives to provide depreciation on its fixed assets.
Asset Class Useful life
Freehold land Non depreciable
Leasehold land Lease term – 95 years
Buildings 1 year - 60 years
(including temporary structures)
Plant & Equipment 1 year - 20 years
Furniture & Fixture 1 Year - 10 years
Vehicle 8 years
Office Equipment 1 Year- 5 years
The identified components are depreciated over their useful
lives, the remaining asset is depreciated over the life of the
principal asset.
The management believes that the depreciation rates fairly
reflect its estimation of the useful lives and residual values
of the fixed assets.
The residual values, useful life and methods of depreciation
of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if
appropriate.
2.8 Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses.
Internally generated intangibles, excluding capitalised
development costs, are not capitalised and the related
expenditure is reflected in the Statement of Profit and Loss in
the period in which the expenditure is incurred. Subsequent
expenditure is capitalised only if it is probable that the
future economic benefits associated with the expenditure
will flow to the Company and the cost of the item can be
measured reliably. The cost of intangible assets at 1 April
2015, the Company’s date of transition to Ind AS, was
determined with reference to its carrying value recognized
as per the previous GAAP (deemed cost), as at the date of
transition to Ind AS.
The useful lives of intangible assets are assessed as either
infinite or finite. Intangible assets with finite lives are
amortised over the useful economic life and assessed
for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
expense on intangible assets with finite lives is recognised
in the Statement of Profit and Loss unless such expenditure
forms part of carrying value of another asset.
Integrated Annual Report 2022-23 177

Notes to Standalone Financial Statements
for the year ended March 31, 2023
Intangible assets with infinite useful lives are not amortised,
but are tested for impairment annually, either individually
or at the cash-generating unit level (the smallest identifiable
group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows from
other assets or groups of assets is considered as a cash
generating unit). The assessment of infinite life is reviewed
annually to determine whether the infinite life continues
to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognised in the Statement of Profit and Loss
when the asset is derecognised.
Intangible assets are amortised on a pro-rata basis on the
straight-line method based on useful life estimated by the
management as under:
Asset Class Useful life
Software 1 Year – 6 years
Brand (refer 2.8.1) 20 years
Technical know-how (refer 2.8.1) 20 years
Product development (refer 2.8.2) 6 - 20 years
2.8.1 Technical know-how and Brand
Technical know-how: The Company has originally
generated technical know-how and assistance from
International Tire Engineering Resources LLC, for
setting up of Halol radial plant. Considering the life of
the underlying plant / facility, this technical know-how,
is amortised on a straight-line basis over a period of
twenty years.
Brand: The Company has acquired global rights of
“CEAT” brand from the Italian tyre maker, Pirelli. Prior
to the said acquisition, the Company was the owner of
the brand in only a few Asian countries including India.
With the acquisition of the brand which is renowned
worldwide, new and hitherto unexplored markets will
be accessible to the Company. The Company will be
in a position to fully exploit the export market resulting
in increased volume and better price realisation.
Therefore, the management believes that the Brand
will yield significant benefits for a period of at least
twenty years.
2.8.2 Research and development costs (Product
development)
Research costs are charged to P&L as and when
they are incurred. Development expenditures on an
individual project are recognised as an intangible
asset when the Company can demonstrate:
• The technical feasibility of completing the
intangible asset so that the asset will be available
for use or sale.
178 CEAT LIMITED
Notes
for the year ended March 31, 2023
• Its intention to complete and its ability and
intention to use or sell the asset.
• How the asset will generate future economic
benefits.
• The availability of resources to complete the asset.
• The ability to measure reliably the expenditure
during development.
The amortisation period and the amortisation method
for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period.
Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the asset are considered to modify the
amortisation period or method, as appropriate, and
are treated as changes in accounting estimates.
2.9 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale (‘qualifying asset’) are capitalised as
part of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity incurs in
connection with the borrowing of funds. Borrowing cost
also includes exchange differences to the extent regarded
as an adjustment to the borrowing costs.
To the extent that the Company borrows funds specifically
for the purpose of obtaining a qualifying asset, the
Company determines the amount of borrowing costs
eligible for capitalisation as the actual borrowing costs
incurred on that borrowing during the period less any
investment income on the temporary investment of those
borrowings.
To the extent that the Company borrows funds generally and
uses them for the purpose of obtaining a qualifying asset,
the Company determines the amount of borrowing costs
eligible for capitalisation by applying a capitalisation rate
to the expenditures on that asset. The capitalisation rate is
the weighted average of the borrowing costs applicable
to the borrowings of the Company that are outstanding
during the period, other than borrowings made specifically
for the purpose of obtaining a qualifying asset.
2.10 Leases
The Company has entered into various arrangements like
lease of premises and outsourcing arrangements which has
been disclosed accordingly under Ind AS 116. At inception
of a contract, the Company assesses whether a contract is,
or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
The assessment of whether a contract conveys the right to
control the use of an identified asset depends on whether
Corporate Overview Value Creation
to Standalone Financial Statements
the Company obtains substantially all the economic benefits
from the use of the asset and whether the Company has the
right to direct the use of the asset.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for short-term
leases and leases of low-value assets. The Company recognises
lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
2.10.1 Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). The cost of right-
of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease
payments made at or before the commencement
date less any lease incentives received. Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. Right-of-use
assets are depreciated on a straight-line basis over
shorter of the lease term or the estimated useful life of
the underlying asset as follows:
Asset Class Useful life
Building 1 – 11 years
Land 95 Years
Others (includes buildings & Plant & 2 – 10 years
machinery)
If ownership of the leased asset transfers to the
Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation
is calculated using the estimated useful life of the asset.
The Company presents right-of-use assets separately
in the Balance Sheet.
In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted
2.11 Inventories
for certain remeasurements of the lease liability.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit
or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
2.10.2 Lease liabilities
At the commencement date of the lease, the Company
recognises lease liabilities measured at the present
value of future lease payments to be made over the
lease term. The lease payments include fixed payments
(including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected
to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase
Statutory Reports Financial Statements
option reasonably certain to be exercised by the
Company and payments of penalties for terminating the
lease, if the lease term reflects the Company exercising
the option to terminate. Variable lease payments that
do not depend on an index or a rate are recognised
as expenses (unless the cost is included in the carrying
value of inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate at
the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term,
a change in the lease payments (e.g., changes to
future payments resulting from a change in an index
or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the
underlying asset.
The Company’s lease liabilities are included in current
and non-current financial liabilities. Lease liability
have been separately presented in the Balance Sheet
and lease payments have been classified as financing
cash flows.
2.10.3 Short-term leases and leases of low-
value assets
The Company applies the short-term lease recognition
exemption to the contracts which have a lease term of
12 months or less from the date of commencement
date and do not contain a purchase option. It also
applies the lease of low-value assets recognition
exemption to the lease contracts that are considered
to be low value. Lease payments on short-term leases
and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Inventories are valued at the lower of cost and net realisable
value on item by item basis.
The cost of inventories includes expenditure incurred in
acquiring the inventories, production or conversion costs
and other costs incurred in bringing them to their present
location and condition. Cost is determined on a weighted
average basis:
• Cost of raw materials includes the transfer of gains
and losses on qualifying cash flow hedges, recognised
in OCI, in respect of the purchases of raw materials.
Raw materials and other items held for use in the
production of inventories are not written down below
cost if the finished products in which they will be
incorporated are expected to be sold at or above cost.
Integrated Annual Report 2022-23 179

Notes to Standalone Financial Statements
for the year ended March 31, 2023
• Work-in-progress and finished goods includes direct
materials, labour and a proportion of manufacturing
overheads based on normal operating capacity but
excluding borrowing cost.
• Traded goods and stores & spares include cost of
purchase and 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 estimated costs of completion
and the estimated costs necessary to make the sale.
2.12 Impairment of non-financial assets
The Company assesses, at each reporting date, whether
2.13 Provisions
there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing
for an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or Cash-Generating Unit’s (‘CGU’)
fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
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. In
determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions
can be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded companies or other
available fair value indicators.
The Company bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
separately for each of the Company’s CGUs to which the
individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For longer
periods, a long-term growth rate is calculated and applied to
project future cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the most recent
budgets / forecasts, the Company extrapolates cash flow
projections in the budget using a steady or declining growth
rate for subsequent years, unless an increasing rate can be
justified. In any case, this growth rate does not exceed the
long-term average growth rate for the products, industries,
or country or countries in which the entity operates, or for the
market in which the asset is used.
Impairment losses of continuing operations, including
impairment on inventories, are recognised in the Statement
of Profit and Loss. The impairment loss is allocated first to
reduce the carrying amount of any goodwill (if any) allocated
to the CGU and then to the other assets of the unit, pro-rata
based on the carrying amount of each asset in the unit.
180 CEAT LIMITED
Notes
for the year ended March 31, 2023
An assessment is made at each reporting date to determine
whether there is an indication that previously recognised
impairment losses no longer exist or have decreased. If
such indication exists, the Company estimates the asset’s
or CGU’s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change
in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the
Statement of Profit and Loss.
2.14 Employee benefits
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event
and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of
the obligation. When the Company expects some or all
of a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognised as a
separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in
the Statement of Profit and Loss net of any reimbursement. If
the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects,
when appropriate, the risks specific to the liability. When
discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
2.13.1 Sales related obligations
The estimated liability for sales related obligations is
recorded when products are sold. These estimates
are established using historical information on the
nature, frequency and average cost of obligations
and management estimates regarding possible future
incidence based on corrective actions on product
failure. The timing of outflows will vary as and when the
obligation will arise - being typically up to three years.
Initial recognition is based on historical experience.
The initial estimate of sales related obligations (related
costs) is revised annually.
2.13.2 Decommissioning liability
The Company records a provision for decommissioning
costs of land taken on lease at one of the manufacturing
facility for the production of tyres. Decommissioning
costs are provided at the present value of expected
costs to settle the obligation using estimated cash
flows and are recognised as part of the cost of the
particular asset. The cash flows are discounted at a
current pre-tax rate that reflects the risks specific to
the decommissioning liability. The unwinding of the
discount is expensed as incurred and recognised in
the Statement of Profit and Loss as a finance cost.
Corporate Overview Value Creation
to Standalone Financial Statements
The estimated future costs of decommissioning are
reviewed annually and adjusted as appropriate.
Changes in the estimated future costs or in the discount
rate applied are added to or deducted from the cost of
the asset.
2.13.3 Litigations
The Company is party to various lawsuits that are at
administrative or judicial level or in their initial stages,
involving tax and civil matters. The Company contests
all claims in the court / tribunals / appellate authority
levels and based on their assessment and that of their
legal counsel, records a provision when the risk or loss
is considered probable. The outflow is expected on
cessations of the respective events.
2.14.1 Defined contribution plan
Retirement benefit in the form of Provident Fund,
Superannuation, Employees State Insurance
Contribution and Labour Welfare fund are defined
contribution scheme. The Company has no
obligation, other than the contribution payable to the
above mentioned funds. The Company recognises
contribution payable to these funds / schemes as
an expense when an employee renders the related
service. If the contribution payable to the scheme
for service received before the Balance Sheet date
exceeds the contribution already paid, the deficit
payable is recognised as a liability after deducting
the contribution already paid. If the contribution
already paid exceeds the contribution due for services
received before the Balance Sheet date, then excess
is recognised as an asset to the extent that the pre-
payment will lead to, for example, a reduction in future
payment or a cash refund.
2.14.1.1 Defined benefit plan
For defined benefit plans, the amount recognised
as ‘Employee benefit expenses’ in the Statement
of Profit and Loss is the cost of accruing employee
benefits promised to employees over the year
and the costs of individual events such as past
/ future service benefit changes and settlements
(such events are recognised immediately in the
Statement of Profit and Loss). The amount of net
interest expense calculated by applying the liability
discount rate to the net defined benefit liability or
asset is charged or credited to ‘Finance costs’ in
the Statement of Profit and Loss. Any differences
between the expected interest income on plan
assets and the return achieved, and any changes
in the liabilities over the year due to changes in
actuarial assumptions or experience adjustments
within the plans, are recognised immediately
in OCI and subsequently not reclassified to the
Statement of Profit and Loss.
Statutory Reports Financial Statements
The defined benefit plan surplus or deficit on the
Balance Sheet date comprises fair value of plan
assets less the present value of the defined benefit
liabilities using a discount rate by reference to
market yields on Government bonds at the end of
the reporting period.
All defined benefit plans obligations are determined
based on valuations, as at the Balance Sheet date,
made by independent actuary using the projected
unit credit method. The classification of the
Company’s net obligation into current and non-
current is as per the actuarial valuation report.
When the benefits of a plan are changed or
when a plan is curtailed, the resulting change in
benefit that relates to past service (‘past service
cost’ or ‘past service gain’) or the gain or loss on
curtailment is recognised immediately in profit or
loss. The Company recognises gains and losses
on the settlement of a defined benefit plan when
the settlement occurs.
2.14.2 Termination benefits
Termination benefits, in the nature of voluntary
retirement benefits or termination benefits arising
from restructuring, are recognised in the Statement of
Profit and Loss. The Company recognises termination
benefits at the earlier of the following dates:
• When the Company can no longer withdraw the
offer of those benefits; or
• When the Company recognises costs for a
restructuring that is within the scope of Ind AS 37:
Provisions, Contingent Liabilities and Contingent
Assets and involves the payment of termination
benefits.
Benefits falling due more than 12 months after the end
of the reporting period are discounted to their present
value.
2.15 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.
2.15.1 Financial assets
Financial assets are recognised when the Company
becomes a party to the contractual provisions of the
instrument.
2.15.1.1 Initial recognition and measurement
On initial recognition, a financial asset is
recognised at fair value. In case of financial
assets which are recognised at fair value through
profit and loss (FVTPL) except for trade receivables
Integrated Annual Report 2022-23 181

Notes to Standalone Financial Statements
for the year ended March 31, 2023
without financing component which are measured
at transaction price, its transaction cost is
recognised in the Statement of Profit and Loss. In
other cases, the transaction cost is attributed to
the acquisition value of the financial asset.
2.15.1.2 Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in four categories:
2.15.1.2.1 Debt instruments at amortised cost
2.15.1.2.2 Debt instruments at Fair Value Through
Other Comprehensive Income (‘FVTOCI’)
2.15.1.2.3 Debt instruments, derivatives and
equity instruments at Fair Value Through
Profit and Loss (‘FVTPL’)
2.15.1.2.4 Equity instruments measured at FVTOCI
2.15.1.2.1 Debt instruments at amortised cost
A debt instrument is measured at the
amortised cost if both the following conditions
are met:
• The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows; and
• Contractual terms of the asset give rise
on specified dates to cash flows that
are Solely Payments of Principal and
Interest (‘SPPI’) on the principal amount
outstanding.
After initial measurement, such financial assets
are subsequently measured at amortised
cost using the EIR method. Amortised cost
is calculated by taking into account any
discount or premium on acquisition and fees
or costs that are an integral part of the EIR.
The EIR amortisation is included in finance
income in the Statement of Profit and Loss.
The losses arising from impairment are
recognised in the Statement of Profit and
Loss. This category generally applies to other
receivables, loans and other financial assets.
2.15.1.2.2 Debt instrument at FVTOCI
A debt instrument is classified as at FVTOCI if
both of the following criteria are met:
• The objective of the business model is
achieved both by collecting contractual
cash flows and selling the financial
assets; and
• The asset’s contractual cash flows
represent SPPI.
182 CEAT LIMITED
Notes
for the year ended March 31, 2023
Debt instruments included within the FVTOCI
category are measured initially as well as at
each reporting date at fair value. Fair value
movements are recognised in the OCI.
However, the Company recognises interest
income, impairment losses & reversals and
foreign exchange gain or loss in the Statement
of Profit and Loss. On derecognition of the
asset, cumulative gain or loss previously
recognised in OCI is reclassified from the
equity to the Statement of Profit and Loss.
Interest earned whilst holding FVTOCI debt
instrument is reported as interest income
using the EIR method.
2.15.1.2.3 Debt instrument at FVTPL
FVTPL is a residual category for debt instruments.
Any debt instrument, which does not meet the
criteria for categorisation as amortised cost or
as FVTOCI, is classified as FVTPL.
In addition, the Company may elect to
designate a debt instrument, which otherwise
meets amortised cost or FVTOCI criteria, as
FVTPL. However, such election is allowed
only if doing so reduces or eliminates a
measurement or recognition inconsistency
(referred to as ‘accounting mismatch’). The
Company has not designated any debt
instrument as FVTPL.
Debt instruments included within the FVTPL
category are measured at fair value with all
changes recognised in the Statement of Profit
and Loss.
2.15.1.2.4 Equity instruments
All investments in equity instruments within the
scope of Ind AS 109 are initially measured
at fair value. Equity instruments which are
held for trading are classified as FVTPL. For
all other equity instruments, the Company
may make an irrevocable election to present
in the OCI subsequent changes in the fair
value. The Company makes such election
on an instrument-by-instrument basis. The
classification is made on initial recognition
and is irrevocable.
In case of equity instrument classified as
FVTOCI, all fair value changes on the
instrument, excluding dividends, are recognised
in the OCI. There is no recycling of the amounts
from OCI to the Statement of Profit and Loss,
even on derecognition of investment. However,
the Company may transfer the cumulative gain
or loss within equity.
Equity instruments included within the FVTPL
category are measured at fair value with all
Corporate Overview Value Creation
to Standalone Financial Statements
changes recognised in the Statement of Profit
and Loss.
2.15.1.3 Derecognition
A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is primarily derecognised when:
• The rights to receive cash flows from the asset
have expired; or
• The Company has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a ‘pass-through’
arrangement; and either (a) the Company
has transferred substantially all the risks and
rewards of the asset, or (b) the Company has
neither transferred nor retained substantially
all the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered into
a pass-through arrangement, it evaluates if and to
what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Company continues to recognise the transferred
asset to the extent of the Company’s continuing
involvement. In that case, the Company also
recognises an associated liability. The transferred
asset and the associated liability are measured on
a basis that reflects the rights and obligations that
the Company has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
that the Company could be required to repay.
2.15.1.4 Impairment of financial assets
In accordance with Ind AS 109, the Company
applies Expected Credit Loss (‘ECL’) model for
measurement and recognition of impairment loss
on the following financial assets and credit risk
exposure:
(i) Trade receivables
(ii) Financial assets measured at amortised cost
(other than trade receivables)
(iii) Financial assets measured at fair value
through other comprehensive income
(FVTOCI).
Statutory Reports Financial Statements
The Company follows ‘simplified approach’ for
recognition of impairment loss allowance on
trade receivables. The application of simplified
approach does not require the Company 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 financial
assets [i.e. (ii) and (iii) above] and risk exposure,
the Company determines that whether there has
been a significant increase in the credit risk since
initial recognition. If credit risk has not increased
significantly, 12 month ECL is used to provide for
impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent
period, credit quality of the instrument improves
such that there is no longer a significant 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 financial 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 difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that the
entity expects to receive (i.e. all cash shortfalls),
discounted at the original EIR. When estimating
the cash flows, an entity is required to consider:
• All contractual terms of the financial
instrument (including prepayment, extension,
call and similar options) over the expected life
of the financial instrument. However, in rare
cases when the expected life of the financial
instrument cannot be estimated reliably, then
the entity is required to use the remaining
contractual term of the financial instrument.
• Cash flows from the sale of collateral held or
other credit enhancements that are integral
to the contractual terms.
As a practical expedient, the Company uses a
provision matrix to determine impairment loss
allowance on portfolio of its trade receivables.
The provision matrix is based on its historically
observed default rates over the expected life of
the trade receivables and is adjusted for forward-
looking estimates. At every reporting date, the
historical observed default rates and changes in
the forward-looking estimates are updated. For
assessing increase in credit risk and impairment
Integrated Annual Report 2022-23 183

Notes to Standalone Financial Statements
for the year ended March 31, 2023
loss, the Company combines financial instruments
on the basis of shared credit risk characteristics
with the objective of facilitating an analysis that is
designed to enable significant increases in credit
risk to be identified on a timely basis.
ECL impairment loss allowance (or reversal)
recognised during the period is recognised as
income / expense in the Statement of Profit and
Loss. This amount is reflected under the head
‘other expenses’ in the Statement of Profit and Loss.
The Balance Sheet presentation for various
financial instruments is described below:
• Financial assets measured at amortised cost
and contractual revenue receivables: ECL is
presented as an allowance, i.e. as an integral
part of the measurement of those assets in
the Balance Sheet. The allowance reduces
the net carrying amount. Until the asset
meets write-off criteria, the Company does
not reduce impairment allowance from the
gross carrying amount.
The Company does not have any purchased or
originated credit-impaired financial assets, i.e.,
financial assets which are credit impaired on
purchase / origination.
2.15.2 Financial liabilities
2.15.2.1 Initial recognition and measurement
Financial liabilities are recognised when the
Company becomes a party to the contractual
provisions of the instrument. All financial liabilities
are recognised initially at fair value and in the
case of borrowings net of directly attributable
transaction costs.
2.15.2.2 Subsequent measurement
The measurement of financial liabilities depends
on their classification, as described below:
2.15.2.2.1 Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial
liabilities held for trading and financial
liabilities designated upon initial recognition
as at FVTPL. Financial liabilities are classified
as held for trading if they are incurred for the
purpose of repurchasing in the near term. This
category also includes derivative financial
instruments entered into by the Company that
are not designated as hedging instruments in
hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are
recognised in the Statement of Profit and Loss.
184 CEAT LIMITED
Notes
for the year ended March 31, 2023
Financial liabilities designated upon initial
recognition at FVTPL are designated as such
at the initial date of recognition, and only if
the criteria in Ind AS 109 are satisfied. For
liabilities designated as FVTPL, fair value
gains / losses attributable to changes in own
credit risks are recognised in OCI. These
gains / loss are not subsequently transferred
to the Statement of Profit and Loss. However,
the Company may transfer the cumulative
gain or loss within equity. All other changes
in fair value of such liability are recognised
in the Statement of Profit and Loss. The
Company has not designated any financial
liability as at FVTPL.
2.15.2.2.2 Financial liabilities at amortised
cost
This is the category most relevant to the
Company. After initial recognition, financial
liabilities are subsequently measured at
amortised cost using the EIR method. Gains
and losses are recognised in the Statement
of Profit and Loss when the liabilities are
derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking
into account any discount or premium on
acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation
is included as finance costs in the Statement
of Profit and Loss.
2.15.2.2.3 Financial guarantee contracts
Financial guarantee contracts issued by the
Company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified
debtor fails to make a payment when due
in accordance with the terms of a debt
instrument. Financial guarantee contracts are
recognised initially as a liability at fair value,
adjusted for transaction costs that are directly
attributable to the issuance of the guarantee.
Subsequently, the liability is measured at
the higher of the amount of loss allowance
determined as per impairment requirements
of Ind AS 109 and the amount recognised
less cumulative amortisation.
2.15.2.3 Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
Corporate Overview Value Creation Statutory Reports Financial Statements
to Standalone Financial Statements
of an existing liability are substantially modified, assets. Changes to the business model are expected
such an exchange or modification is treated as to be infrequent. The Company’s senior management
the derecognition of the original liability and the determines change in the business model as a result
recognition of a new liability. The difference in the of external or internal changes which are significant to
respective carrying amounts is recognised in the the Company’s operations. Such changes are evident
Statement of Profit and Loss. to external parties. A change in the business model
occurs when the Company either begins or ceases to
2.15.3 Reclassification of financial assets perform an activity that is significant to its operations. If
the Company reclassifies financial assets, it applies the
The Company determines classification of financial
reclassification prospectively from the reclassification
assets and liabilities on initial recognition. After
date which is the first day of the immediately next
initial recognition, no reclassification is made for
reporting period following the change in business
financial assets which are equity instruments and
model. The Company does not restate any previously
financial liabilities. For financial assets which are debt
recognised gains, losses (including impairment gains
instruments, a reclassification is made only if there is
or losses) or interest.
a change in the business model for managing those
The following table shows various reclassifications and how they are accounted for:
Original Revised
Accounting treatment
classification classification
Amortised cost FVTPL Fair value is measured at reclassification date. Difference between previous
amortised cost and fair value is recognised in the Statement of Profit and Loss.
Amortised cost FVTOCI Fair value is measured at reclassification date. Difference between previous
amortised cost and fair value is recognised in OCI. No change in EIR due to
reclassification.
FVTPL Amortised Cost Fair value at reclassification date becomes its new gross carrying amount. EIR is
calculated based on the new gross carrying amount.
FVTPL FVTOCI Fair value at reclassification date becomes its new carrying amount. No other
adjustment is required.
FVTOCI Amortised cost Fair value at reclassification date becomes its new amortised cost carrying
amount. However, cumulative gain or loss in OCI is adjusted against fair value.
Consequently, the asset is measured as if it had always been measured at
amortised cost.
FVTOCI FVTPL Assets continue to be measured at fair value. Cumulative gain or loss previously
recognised in OCI is reclassified to the Statement of Profit and Loss at the
reclassification date.
2.15.4 Derivative financial instruments and 2.15.4.1 Fair value hedges
hedge accounting
The change in the fair value of a hedging
The Company uses derivative financial instruments, instrument is recognised in the Statement of Profit
such as forward currency contracts, to manage its and Loss as finance costs. The change in the fair
foreign currency risks. These derivative instruments are value of the hedged item attributable to the risk
designated as cash flow, fair value or net investment hedged is recorded as part of the carrying value
hedges and are entered into for period consistent of the hedged item and is also recognised in the
with currency. Such derivative financial instruments Statement of Profit and Loss as finance costs.
are initially recognised at fair value on the date on
which a derivative contract is entered into and are For fair value hedges relating to items carried at
subsequently re-measured at fair value. Derivatives amortised cost, any adjustment to carrying value is
are carried as financial assets when the fair value is amortised through the Statement of Profit and Loss
positive and as financial liabilities when the fair value over the remaining term of the hedge using the EIR
is negative. Any gains or losses arising from changes method. EIR amortisation may begin as soon as
in the fair value of derivatives are taken directly to the an adjustment exists and no later than when the
Statement of Profit and Loss. hedged item ceases to be adjusted for changes in
its fair value attributable to the risk being hedged.
Integrated Annual Report 2022-23 185

Notes to Standalone Financial Statements
for the year ended March 31, 2023
If the hedged item is derecognised, the
unamortised fair value is recognised immediately
in the Statement of Profit and Loss. When an
unrecognised firm commitment is designated
as a hedged item, the subsequent cumulative
change in the fair value of the firm commitment
attributable to the hedged risk is recognised as an
asset or liability with a corresponding gain or loss
recognised in the Statement of Profit and Loss.
2.15.4.2 Cash flow hedges
The effective portion of the gain or loss on the
hedging instrument is recognised in OCI in the
cash flow hedge reserve, while any ineffective
portion is recognised immediately in the Statement
of Profit or Loss.
The Company uses forward currency contracts as
hedges of its exposure to foreign currency risk in
forecast transactions and firm commitments. The
ineffective portion relating to foreign currency
contracts is recognised in the Statement of Profit
and Loss.
Amounts recognised as OCI are transferred to
the Statement of Profit and Loss when the hedged
transaction affects profit and loss, i.e. when the
hedged financial income or financial expense is
recognised or when a forecast sale occurs. When
the hedged item is the cost of a non-financial asset
or non-financial liability, the amounts recognised
as OCI are transferred to the initial carrying
amount of the non-financial asset or liability.
If the hedging instrument expires or is sold,
terminated or exercised without replacement or
rollover (as part of the hedging strategy), or if
its designation as a hedge is revoked, or when
the hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss previously
recognised in OCI remains separately in equity
until the forecast transaction occurs or the foreign
currency firm commitment is met.
2.15.5 Fair value measurement
The Company measures derivatives instruments like
forward contracts at fair value at each Balance Sheet
date.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most
advantageous market for the asset or liability.
186 CEAT LIMITED
The principal or the most advantageous market must
be accessible by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant’s ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the
asset or liability and the level of the fair value hierarchy
as explained above.
2.15.6 Offsetting of financial instruments
Financial assets and financial liabilities can be offset
and the net amount is reported in the Balance Sheet
if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
2.16 Cash and cash equivalents
Cash and cash equivalent in the Balance Sheet comprises cash
at banks and on hand. For the purpose of cash flow statement,
Cash & Cash equivalent consists of cash & short term deposits
Corporate Overview Value Creation
Notes to Standalone Financial Statements
for the year ended March 31, 2023
as defined above. The Cash flow statement is prepared using
indirect method.
2.17 Dividend distribution to equity shareholders
The Company recognises a liability to pay dividend to
equity shareholders of the Company when the distribution is
authorised and the distribution is no longer at the discretion of
the Company. As per the corporate laws in India, a distribution
is authorised when it is approved by the shareholders.
2.18 Foreign currencies
The Company’s financial statements are presented in H,
which is also the Company’s functional currency.
Transactions in foreign currencies are initially recorded by the
Company at H spot rate at the date the transaction first qualifies
for recognition. Monetary assets and liabilities denominated
in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation
of monetary items are recognised in the Statement of Profit
and Loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when
the fair value is determined. The gain or loss arising on
translation of non-monetary items measured at fair value is
treated in line with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation differences
on items whose fair value gain or loss is recognised in
OCI or profit and loss are also recognised in OCI or the
Statement of Profit and Loss, respectively).
2.19 Earnings Per Share (‘EPS’)
Basic EPS amounts are calculated by dividing the profit for
the year attributable to equity holders of the Company by
the weighted average number of equity shares outstanding
during the year.
Diluted EPS amounts are calculated by dividing the
profit attributable to equity holders of the Company after
adjusting impact of dilution shares by the weighted average
number of equity shares outstanding during the year plus
the weighted average number of equity shares that would
be issued on conversion of all the dilutive potential equity
shares into equity shares.
2.20 Segment Reporting
The Executive Management Committee evaluates the
Company's performance and allocates the resources
based on an analysis of various performance indicators by
business segments.
The Company prepares its segment information in
conformity with the accounting policies adopted for
preparing and presenting the financial statements of the
Company as a whole.
Statutory Reports Financial Statements
2.21 Contingent liabilities and assets
A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company
or a present obligation that is not recognised because it is
not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot
be recognised because it cannot be measured reliably.
The Company does not recognise a contingent liability but
discloses its existence in the financial statements.
A contingent assets is not recognised unless it becomes
virtually certain that an inflow of economic benefits will
arise. When an inflow of economic benefits is probable,
contingent assets are disclosed in the financial statements.
Contingent liabilities and contingent assets are reviewed at
each Balance Sheet date.
2.22 Significant accounting judgments, estimates
and assumptions
The preparation of the financial statements requires
management to make judgments, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could
result in outcomes that require an adjustment to the carrying
amount of assets or liabilities in future periods. Difference
between actual results and estimates are recognised in the
periods in which the results are known / materialised.
The key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year, are described below. The Company has based
its assumptions and estimates on parameters available when
the financial statements were prepared. Existing circumstances
and assumptions about future developments, however, may
change due to market changes or circumstances arising that
are beyond the control of the Company. Such changes are
reflected in the assumptions when they occur.
Information about critical judgments in applying accounting
policies, as well as estimates and assumptions that have
the most significant effect to the carrying amounts of assets
and liabilities within the next financial year, are included in
the following notes:
(a) Measurement of defined benefit obligations – note 37
(b) Measurement and likelihood of occurrence of
provisions and contingencies – note 20
(c) Recognition of current tax and deferred tax assets –
note 21
(d) Key assumptions used in fair valuations – note 43
(e) Measurement of lease liabilities and right-of-use asset
– note 4
Integrated Annual Report 2022-23 187
 Corporate Overview Value Creation Statutory Reports Financial Statements

Notes to Standalone Financial Statements

for the year ended March 31, 2023
Notes to Standalone Financial Statements
for the year ended March 31, 2023

Note 3: Property, plant and equipment and Capital work-in-progress Capital work in progress (CWIP) Ageing Schedule
Refer note 2.7 for accounting policy on Property, plant and equipment As at March 31, 2023
(C in Lacs) (C in Lacs)
Plant and Furniture Capital Amount in CWIP for a period of Total
Particulars Freehold Office
Buildings Equipment and Vehicles work in Total Particulars Less than More than
land equipments 1-2 years 2-3 years
(Owned) Fixtures progress 1 year 3 years
Gross carrying Projects in progress 30,226 14,494 1,325 4,886 50,931
amount Total 30,226 14,494 1,325 4,886 50,931
As at April 01, 2021 48,524 72,159 4,19,731 2,490 744 1,853 70,288 6,15,789
Additions - 9,630 77,742 336 56 507 94,157 1,82,428 As at March 31, 2022
Disposals - (8) (2,024) (0) (20) (4) (2,056)
(C in Lacs)
Capitalised (88,286) (88,286) Amount in CWIP for a period of
Particulars Less than More than Total
As at March 31, 48,524 81,781 4,95,449 2,826 780 2,356 76,159 7,07,875 1-2 years 2-3 years
2022 1 year 3 years
Additions 137 9,559 95,299 388 92 340 80,587 1,86,402 Projects in progress 51,979 8,743 8,655 6,782 76,159
Disposals - (67) (4,140) (21) (16) (64) (4,308) Total 51,979 8,743 8,655 6,782 76,159
Capitalised (1,05,815) (1,05,815)
The capacity expansions undertaken is modular in nature, wherein civil work and major upstream capex are incurred, followed
As at March 31, 48,661 91,273 5,86,608 3,193 856 2,632 50,931 7,84,154
by downstream capex to ramp up production in line with anticipated market demand. Based on long term demand and supply
2023
planning, management estimates the annual capex requirement and project timelines which are approved by the Board. There are
Accumulated
no projects which are overdue based on such timelines or which have exceeded cost compared to plans.
Depreciation
As at April 01, 2021 - 8,282 89,357 941 526 910 - 1,00,016 1. During the year, the company has transferred the following expenses which are attributable to the construction activity and are
Depreciation for the - 2,387 28,505 243 75 302 - 31,512 included in the cost of capital work-in-progress / property, plant and equipment as the case may be. Consequently, expenses
year disclosed under the respective notes are net of such amounts.
(H in Lacs)
Disposals - (6) (1,411) (0) (19) (4) - (1,440)
Particulars Note 2022-23 2021-22
As at March 31, - 10,663 1,16,451 1,184 582 1,208 - 1,30,088
2022 Finance cost 31 2,000 1,790
Depreciation for the - 2,581 31,575 277 44 331 - 34,808 Professional and consultancy charges 33 102 140
year Miscellaneous expenses 33 253 235
Disposals - (34) (3,160) (16) (14) (61) - (3,285) Employee benefit expenses 30 1,200 1,234
As at March 31, - 13,210 1,44,866 1,445 612 1,478 - 1,61,611 Travelling and conveyance 33 142 104
2023 Total 3,697 3,503
Net Book Value:
As at March 31, 2022 48,524 71,118 3,78,998 1,642 198 1,148 76,159 5,77,787 2. As a part of ongoing expansion project at Halol (Phase III), during the year the Company has capitalised and commissioned
assets of H 9,548 lacs (March 31, 2022: H 8,170 lacs).
As at March 31, 2023 48,661 78,063 4,41,742 1,748 244 1,154 50,931 6,22,543
3. As a part of ongoing expansion project at Nagpur, during the year the Company has capitalised and commissioned assets of
H 13,231 lacs (March 31, 2022: H 5,437 lacs).
Net carrying amount
(C in Lacs) 4. As a part of ongoing green field project at Chennai, during the year the Company has capitalised and commissioned assets
As at As at of H 31,708 lacs (March 31, 2022: H 40,165 lacs).
Particulars
March 31, 2023 March 31, 2022
5. As a part of ongoing expansion project at Ambernath (Phase II), during the year the Company has capitalised and commissioned
Property, plant and equipment 5,71,612 5,01,628 of H 13,505 lacs (March 31, 2022: H 11,625 lacs).
Capital work in progress 50,931 76,159
6. The amount of borrowing cost capitalised during the year ended March 31, 2023 is H 2,000 lacs (March 31, 2022: H 1,790
lacs). The rates used to determine the amount of borrowing cost eligible for capitalisation was in the range of 5% to 7.34%
(March 31, 2022: 6.50% to 7.25%) which is the effective interest rate of specific borrowings.

188 CEAT LIMITED Integrated Annual Report 2022-23 189