Note 2A: Material Accounting Policy Information
a) Accounting judgements, estimates and assumptions
The preparation of the Company’s financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities,
income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements
and the reported amount of revenues and expenses for the years presented. Actual results may differ from
the estimates. Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions
to accounting estimates are recognised in the period in which the estimates are revised and future periods
affected.
b) Use of Estimates and Judgements
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 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. Also, the company has made certain judgements in applying accounting policies which have an effect
on amounts recognized in the financial statements.
I) Income taxes
The Company is subject to income tax laws as applicable in India. Significant judgment is required
in determining provision for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course of business. The Company
recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will
be due. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax and deferred tax provisions in the period in which
such determination is made Where tax positions are uncertain, accruals are recorded within income tax
liabilities for management's best estimate of the ultimate liability that is expected to arise based on the
specific circumstances and the Company’s historical experience. Factors that may have an impact on
current and deferred taxes include changes in tax laws, regulations or rates, changing interpretations
of existing tax laws or regulations, future levels of research and development spending and changes in
pre-tax earnings.
II) Contingencies
Contingent Liabilities may arise from the ordinary course of business in relation to claims against the
Company, including legal and other Claims. By virtue of their nature, contingencies will be resolved only
when one or more uncertain future events occur or fail to occur. The assessment of the existence, and
potential quantum, of contingencies inherently involves the exercise of significant judgements and the
use of estimates regarding the outcome of future events.
Hi) Recoverability of deferred taxes
In assessing the recoverability of deferred tax assets, management considers whether it is probable
that taxable profit will be available against which (he losses can be utilised. The ultimate realisation
of deferred tax assets is dependent upon the generation of future taxable income during the periods
in which the temporary differences become deductible. Management considers the projected future
taxable income and tax planning strategies in making this assessment.
Iv) Defined benefit plans
The present value of the gratuity and compensated absences are determined using actuarial valuations.
An actuarial valuation involves making various assumptions that may differ from actual developments
in the future. These include the determination of the discount rate, future salary increases and mortality
rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date
The parameter most subject to change is the discount rate. In determining the appropriate discount rate
for plans operated in India, the actuary considers the interest rates of government bonds in currencies
consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on
publicly available mortality tables for the specific countries. Those mortality tables tend to change only
at interval in response to demographic changes. Future salary increases and gratuity increases are
based on expected future inflation rates for the respective countries.
v) Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting
period This reassessment may result in change in depreciation expense in future periods.
vi) Leases
Where the Company is the lessee, key judgements include assessing whether arrangements
contain a lease and determining the lease term. To assess whether a contract contains a lease
requires judgement about whether it depends on a specified asset, whether the Company obtains
substantially all the economic benefits from the use of that asset and whether the The Company has
a right to direct the use of the asset. In order to determine the lease term judgement is required as
extension and termination options have to be assessed along with all facts and circumstances that may
create an economic incentive to exercise an extension option, or not exercise a termination option.
The Company revises the lease term if there is a change in the non-cancellable period of a lease.
Estimates include calculating the discount rate which is generally based on the incremental borrowing
rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
Where the The Company is the lessor, the treatment of leasing transactions is mainly determined
by whether the lease Is considered to be an operating or finance lease. In making this assessment,
management looks at the substance of the lease, as well as the legal form, and makes a judgement
about whether substantially all of the risks and rewards of ownership are transferred. Arrangements
which do not take the legal form of a lease but that nevertheless convey the right to use an asset are
also covered by such assessments
c) Property, Plant and Equipment
The Company had applied for the one time transition exemption of considering the carrying cost of the
transition date i.e , April 01,2016 as the deemed cost under Ind AS
Property, plant and equipment and capital work in progress are stated at cost less accumulated depreciation
and accumulated impairment losses, if any. Such cost includes expenditure that is directly attributable to the
acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct services,
any other costs directly attributable to bringing the assets to its working condition for their intended use and
cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects If
the recognition criteria are met Glow sign boards, which have no salvage value are charged to Standalone
statement of profit and loss.
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon
disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de¬
recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the standalone statement of profit and loss within other income / expense
(as applicable).
Subsequent costs: The cost of replacing a part of an item of property, plant and equipment is recognised
in the carrying amount of the item of property, plant and equipment, if it is probable that the future economic
benefits embodied within the part will flow to the Company and its cost can be measured reliably with the
carrying amount of the replaced part getting derecognised. The cost for day-to-day servicing of property, plant
and equipment are recognised in standalone statement of profit and loss as and when incurred.
Decommissioning Costs : 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.
Capital work in progress: Capital work in progress comprises the cost of property, plant and equipment that
are not ready for their intended use at the reporting date.
Depreciation : Depreciation on PPE are provided to the extent of depreciable amount on straight line basis
(SLM). Depreciation is provided at the rates and in the manner prescribed in Schedule II to the Companies
Act. 2013. Leasehold Land and Leasehold Improvements are amortised over the period of lease or useful life
of assets whichever is lower. The residual values, useful lives are reviewed at each financial year end and
adjusted appropriately.
Asset costing less than ? 5000/- has been depreciated fully in the year of purchase only.
Intangible Assets
Recognition and measurement
Software, if any, which are notan integral part of related hardware, is treated as intangible asset and amortized
over a period of three years or its licensed period, whichever is less. Leasehold Improvements are amortized
over period of lease
Transition to Ind AS: On transition to Ind AS. the Company has elected to continue with the carrying value
of all its intangible assets recognized as at April 1, 2016, measured as per the previous GAAP, and use that
carrying value as the deemed cost of such intangible assets.
d) Borrowing Costs
Borrowing costs consists of interest and amortization of ancillary costs that an entity incurs in connection with
the borrowing of funds. 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 are capitalised
as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur.
Borrowing cost also Includes exchange differences to the extent regarded as an adjustment to the Interest
cost.
e) Foreign Currency Transactions
Functional and presentational currency
The Company's financial statements are presented in Indian Rupees (' in lakhs) which is also the Company's
functional currency. Functional currency is the currency of the primary economic environment in which a
Company operates and is normally the currency in which the Company primarily generates and expends
cash.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at the functional currency using
exchange rates at the date the transaction. Foreign exchange gains and losses from settlement of these
transactions are recognised in the Standalone standalone statement of profit and loss. Monetary assets
and liabilities denominated in foreign currencies are translated at the functional currency using spot rates
of exchange at the reporting date, the gain or loss arising from such translations are recognised in the
Standalone statement of profit and loss. Differences arising on settlement of Non-monetary items that are
measured in terms of historical cost in a foreign currencies are not retranslated.
f) Revenue recognition & Purchase Recognition
Revenue is to be recognized upon transfer of control of promised products or services to our customers for
an amount that reflects the consideration the Company expects to receive in exchange for those products or
services and when there are no longer any unfulfilled obligations. To recognize revenues, the Company apply
the following five step approach:
(1) Identify the contract with a customer
(2) Identify the performance obligations in the contract
(3) Determine the transaction price.
(4) Allocate the transaction price to the performance obligations in the contract
(5) Recognize revenues when a performance obligation is satisfied.
At contract inception, the Company assesses its promise to transfer products or services to a customer
to identify separate performance obligations. The Company applies judgement to determine whether each
product or services promised to a customer are capable of being distinct, and are distinct in the context of
the contract, if not, the promised product or services are combined and accounted as a single performance
obligation. The Company allocates the arrangement consideration to separately identifiable performance
obligation based on their relative stand-alone selling price or residual method. Stand-alone selling prices are
determined based on sale prices for the components when it is regularly sold separately, in cases where the
Company is unable to determine the stand-alone selling price the Company uses third-party prices for similar
deliverables or the company uses expected cost plus margin approach in estimating the stand-alone selling
price.
For performance obligations where control is transferred over time, revenues are recognized by measuring
progress towards completion of the performance obligation. The selection of the method to measure progress
towards completion requires judgment and is based on the nature of the promised products or services to be
provided,
The method for recognizing revenues and costs depends on the nature of the goods sold & services
rendered:
Interest income is recognized on a time proportion basis using the effective interest rate (EIR) method.
Purchases are recognized upon receipt of such goods by the company. Purchases of imported goods, if any
are to be recognised after completion of custom clearance formalities and upon receipt of such goods by the
company at the warehouse. All other Purchases are accounted for on accrual basis.
g) Inventories
Items of inventories are to be measured at lower of cost and net realizable value after providing for
obsolescence, wherever considered necessary. Cost of inventories comprises of cost of purchase, cost of
h) Employee’s Benefits
Short Term Employee Benefits All employees' benefits falling due wholly within twelve months of rendering
the services are classified as short term employee benefits. The benefits like salaries, wages, short term
compensated absences etc. and the expected cost of bonus are recognized in the period in which the
employee renders the related services at undiscounted amount.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to
a statutory authority and will have no legal or constructive obligation to pay further amounts. Provident Fund
and Employee State Insurance Schemes are defined contribution scheme and contributions paid / payable
are recognised as an expense in the Standalone statement of profit and loss during the year in which the
employee renders the related service. For Defined Contribution Retirements Benefit Schemes, payments are
charged as an expense as they fall due.
Defined Benefit Plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees.
The plan provides for a lump sum payment to vested employees at retirement, death while in employment
or on termination of employment of an amount based on the respective employee's salary and the tenure
of employment. The Company accounts for the liability for gratuity benefits payable In future based on an
independent actuarial valuation report using the projected unit credit method as at the year end.
The obligations are measured at the present value of the estimated future cash flows. The discount rate is
generally based upon the market yields available on Government bonds at the reporting date with a term that
matches that of the liabilities.
Re-measurements, comprising actuarial gains and losses including, the effect of the changes to the asset
ceiling (if applicable), is reflected immediately in Other Comprehensive Income in the Standalone statement
of profit and loss. All other expenses related to defined benefit plans are recognised in Standalone standalone
statement of profit and loss as employee benefit expenses. Gains or losses on the curtailment or settlement
of any defined benefit plan are recognised when the curtailment or settlement occurs.
Other Long Term Employee Benefits
Long term compensated absences are provided for on the basis of actuarial valuation, using the projected unit
credit method, at the end of each financial year. Actuarial gains / toss are recognised in Standalone statement
of Profit & Loss.
I) Leases
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.
Company as a lessee
The Company accounts for each lease component within the contract as a lease separately from non-lease
components of the contract and allocates the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the
non-lease components.
The Company recognises hght-of-use asset representing its right to use the underlying asset for the lease
term at the lease commencement date The cost of the right of use asset measured at inception shall
comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments
made at or before the commencement date less any lease incentives received, plus any initial direct costs
incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying
asset or restoring the underlying asset or site on which it is located. The right of use assets is subsequently
measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted
for any remeasurement of the lease liability. The right of use assets is depreciated using the straight-line
method from the commencement date over the shorter of lease term or useful life of right of use asset. The
estimated useful lives of right of use assets are determined on the same basis as those of property, plant and
equipment. Right of use assets are tested for impairment whenever there is any indication that their carrying
amounts may not be recoverable. Impairment loss, if any, is recognised in the Standalone statement of profit
and loss.
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 specific to the lease or the incremental borrowing
rate for the portfolio as a whole. The lease payments shall include fixed 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 reflects the lessee
exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications
or to reflect revised in-substance fixed lease payments. The company recognises the amount of the re¬
measurement of lease liability due to modification as an adjustment to the right of use asset and standalone
statement of profit and loss depending upon the nature of modification. Where the carrying amount of the
right of 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 re-measurement in standalone statement of profit and
loss.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all
assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value.
The lease payments associated with these leases are recognized as an expense on a straight-line basis over
the lease term
Company as Lessor
At the inception of the lease the Company classifies each of its leases as either an operating lease or a
finance lease. Lease income from operating leases where the Company is a lessor is recognised in income
on a straight-line basis over the lease term
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