Page 241 - Hitachi IR 2025

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.
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions
that are based on market conditions and risks existing at each reporting date. The methods used to determine
fair value includes discounted cash flow analysis, available quoted market prices and dealer quotes. All methods
of assessing fair value result from general approximation of value and the same may differ from the actual
realised value.
2.15 Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects
of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or
payments and item of income or expenses associated with investing or financing cash flows. The cash flows
from operating, investing and financing activities of the Company are segregated.
2.16 Finance costs
Borrowing costs are recognised in the statement of profit and loss using the effective interest method. The
associated cash flows are classified as financing activities in the statement of cash flows.
2.17 Provisions, contingent liabilities and contingent assets
General
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive
obligation that is reliably estimable, and it is probable that an outflow of economic benefits will be required to
settle the obligation. If the effect of time value of money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from
a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is
measured at the present value of the lower of the expected cost of terminating the contract and the expected
net cost of continuing with the contract. Before a provision is established, the Company recognises any
impairment loss on the assets associated with that contract.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition
is based on historical experience. The initial estimate of warranty-related costs is revised annually. Also, refer
note 22.
Contingent Liabilities
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 beyond 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 recognize
a contingent liability but discloses its existence in the financial statements.
Contingent assets
Contingent assets are not recognised or disclosed in financial statements since this may result in the recognition
of income that may never be realised. However, when the realisation of income is virtually certain, then the
related asset is not a contingent asset and is recognised.
Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet.
Integrated Annual Report 2024-25
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