Page 240 - Hitachi IR 2025

NOTES TO THE FINANCIAL STATEMENTS
A financial liability is primarily derecognised when:
•
The obligation under the liability is discharged or cancelled or expires, or
• The existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original liability and the recognition of a
new liability. The difference in the respective carrying amounts is recognised in the statement of
profit and loss.
b. Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward and option
contracts including commodity contracts to mitigate the risk of changes in exchange rates on foreign
currency exposures and fluctuation in commodity prices. The counterparty for these contracts is generally
a bank.
Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the Company believes that these derivatives constitute hedges from an economic perspective,
they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that
is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized
as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognised initially at fair value and attributable transaction
costs are recognised in the statement of profit and loss when incurred. Subsequent to initial recognition,
these derivatives are measured at fair value through profit or loss and the resulting exchange gains or
losses are included in other income / expenses. Assets/ liabilities in this category are presented as current
assets/current liabilities if they are either held for trading or are expected to be realized within 12 months
after the balance sheet date.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other
provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception
of the contract and depending on their characteristics, accounted for as separate derivative instruments
and shown at their fair value in the balance sheet with changes in their fair value recognised through
profit or loss.
2.14 Fair value measurement of financial instruments
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:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
Fair value hierarchy:
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.
238 Hitachi Energy India Limited