2. Material Accounting Policy
a. Statement of compliance
The financial statements have been prepared in accordance with Ind AS notified under the Companies
(Indian Accounting Standards) Rules, 2015 as amended from time to time.
b. Basis of preparation and presentation
The Financial Statements are prepared on the historical cost basis except for following assets and liabilities
that are measured at fair value:
o Defined benefit plan-plan assets measured at fair value,
o Certain financial assets and liabilities (including derivative instruments).
c. Revenue Recognition
Revenue from contracts with customers is recognized on transfer of control of promised goods or services
to a customer at an amount that reflects the consideration to which the company is expected to be entitled
to in exchange for those goods or services. Revenue towards satisfaction of a performance obligation
is measured at the amount of transaction price allocated to that performance obligation. Revenue is
recognized only to the extent that it is highly probable that the amount will not be subject to significant
reversal when uncertainty relating to its recognition is resolved.
o Revenue from Sale of Goods
Revenue from sale of products is recognized when the control on the goods have been transferred to
the customer. The performance obligation in case of sale of product is satisfied at a point in time i.e.,
when the material is shipped to the customer or on delivery to the customer, as may be specified in
the contract.
o Revenue from Windmills Power generation
Revenue from Wind Power Generation is recognized on the basis of actual power sold (net of
reactive energy consumed) as per the terms of the power purchase agreements entered into with the
respective purchasers. Generation Based Incentive Recognized on the basis of actual power sold (net
of reactive energy consumed) in terms of scheme notified by IREDA in this behalf.
o Revenue from Technical Consultancy - Energy Audits:
Revenue from Technical Consultancy - Energy Audits is recognized on the basis of completion of the
audit assignment and submission of audit report to the client.
o Interest income
Interest income from a financial asset is recognized using 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 effective
interest rate, 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 other income in the
statement of profit and loss .
o Dividends
Dividend income is recognized when the right to receive is established, which is generally when
shareholders approve the dividend.
d. Inventories
Inventories including goods-in-transit are valued at lower of cost and estimated net realisable value.
However, 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.
o Raw materials, embellishment, stores & spares and packing material:
Cost includes cost of purchase and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on weighted average basis.’
o Finished goods and work in progress:
Cost includes cost of direct materials (net of realizable value of waste / by product) and labour and
a proportion of manufacturing overheads based on the normal operating capacity but excluding
borrowing costs and selling expenses.
e. Property, Plant and Equipment (PPE)
Recognition and Measurement
Property, plant and equipment (PPE) are carried at cost less accumulated depreciation and accumulated
impairment losses, if any.
The cost of Property, plant and equipment (PPE) comprises its purchase price including any import
duties and non-refundable taxes and net of any trade discounts and rebates. It also includes any directly
attributable expenditure on making the asset ready for its intended use, other incidental expenses, present
value of decommissioning costs (where there is a legal or constructive obligation to decommission) and
interest on borrowings attributable to acquisition of qualifying assets up to the date, the asset is ready for
its intended use.
The company identifies and determines the cost of each component/ part of the asset separately, if the
component / part has a cost which is significant to the total cost of asset and has useful life, that is materially
different from that of remaining assets.
Items of stores and spares that meet the definition of property, plant & equipment are capitalized at cost
and depreciated over the useful life of asset. Otherwise, such items are classified as inventories.
Capital work-in-progress
Projects under which property, plant and equipment are not yet ready for their intended use are carried
at cost less any recognized impairment loss. Cost comprises direct cost, related incidental expenses and
borrowing cost on qualifying assets. Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended use.
Impairment
Property, plants and equipment and intangible assets
The Company assess at each reporting date as to whether there is any indication that any Property, Plant and
Equipment or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication
exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment,
if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is higher of an asset’s fair value less cost of
disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their
present value using pre-tax discount rate that reflects current market assessments of the time value of
money and risk specific to the assets.
The impairment loss recognized in prior accounting period is reversed if there has been a change in the
estimate of recoverable amount
Derecognition of PPE
An item of property, plant and equipment and any significant part initially recognized is derecognized
upon disposal or when no future economic benefits are expected from its use or disposal. 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 Property, Plant and Equipment) is included in the statement of Profit & loss
when the Property, Plant and Equipment is derecognized.
f. Intangible assets
Recognition and Measurement
An Intangible Assets is recognized when it is probable that the expected future economic benefits that are
attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. All other
expenditure is expensed as incurred.
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses.
The cost of a separately acquired intangible asset comprises of its purchase price, including import
duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and any directly
attributable cost of preparing the asset for its intended use.
Impairment
The Company assesses at each reporting date as to whether there is any indication that Intangible Assets
may be impaired. If any such indication exists, the recoverable amount of an asset is estimated to determine
the extent of impairment, if any.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is higher of an asset’s fair value less cost of
disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their
present value using pre-tax discount rate that reflects current market assessments of the time value of
money and risk specific to the assets.
The impairment loss recognized in prior accounting period is reversed if there has been a change in the
estimate of recoverable amount.
Derecognition of Intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, are determined as the
difference between the net disposal proceeds and the carrying amount of the asset and recognized in
Statement of profit and loss when the asset is derecognized.
Internally-generated intangible assets- research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred. An
internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognized if, and only if, all of the following have been demonstrated:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b) the intention to complete the intangible asset and use or sell it;
c) the ability to use or sell the intangible asset;
d) how the intangible asset will generate probable future economic benefits;
e) the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
f) the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no
internally-generated intangible asset can be recognized, development expenditure is recognized in profit
or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that
are acquired separately.
Depreciation and amortization
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties
under construction) less their residual values over their useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
The useful life of property, plant & equipment is consistent with the useful life of assets specified in
schedule II of the Companies Act, 2013.Property, Plant and Equipment which are added / disposed off
during the year, depreciation is provided pro-rata basis with reference to the month of addition / deletion
except for assets costing Rs 5,000 or below which are fully depreciated in the year of addition.
The amortization period and the amortization method for Intangible Assets with a finite useful life are
reviewed at each reporting date. Intangible asset with a finite useful life is amortized over a period over
the period of 3 to 5 years on a straight-line basis & technical knowhow are amortized over the period of
three years on straight-line basis and 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 assets are considered to modify the amortization period or method, as appropriate, and are treated as
changes in accounting estimates.
Intangible asset with indefinite useful lives, if they are not amortized, but are tested for impairment
either individually or at the cash generating unit level. The assessment of indefinite useful life is reviewed
annually to determine whether the indefinite life continues to be supportable. Currently there are no
intangible assets with indefinite useful life.
g. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to
use the asset or assets, even if that right is not explicitly specified in an arrangement.
Where the Company is the lessee
The Company’s lease asset classes primarily consist of leases for land. The Company assesses whether a
contract contains a lease, at inception of a contract. 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. To
assess whether a contract conveys the right to control the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the
economic benefits from use of the asset through the period of the lease and (iii) the Company has the right
to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term
of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases,
the Company recognizes the lease payments as an operating expense on a straight-line basis over the term
of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease
term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be
exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter
of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost
to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate
cash flows that are largely independent of those from other assets. In such cases, the recoverable amount
is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments.
The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are re¬
measured with a corresponding adjustment to the related right of use asset if the Company changes its
assessment whether it will exercise an extension or a termination option. Lease payments are classified as
financing cash flows.
h. Foreign currencies
The Company’s financial statements are presented in INR.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
closing rates of exchange at the reporting date. Exchange differences arising on settlement or translation
of monetary items are recognized in Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using
the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was measured. 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 recognized in Other Comprehensive Income or Statement of Profit and Loss
are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
In case of an asset, expense or income where a non-monetary advance is paid/received, the date of
transaction is the date on which the advance was initially recognized. If there were multiple payments or
receipts in advance, multiple dates of transactions are determined for each payment or receipt of advance
consideration.
i. Employee Benefit
Short-term employee benefits
Short-term employee benefits obligation is measured on undiscounted basis and is expensed as the related
service is provided. A liability is recognized for the amount expected to be paid if the Company has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee and
the obligation can be estimated reliably
Defined Contribution Plan
The Company makes defined contribution to employee’s provident fund organization, pension fund,
superannuation fund and Employees state insurance (ESI), which are accounted on accrual basis as
expenses in the statement of Profit and Loss in the period during which the related services are rendered
by employees. There are no other obligations other than the contribution payable to such funds.
Defined Benefit Plan
The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible
employees of company The Gratuity Plan provides a lumpsum payment to vested employees at retirement,
death, incapacitation or termination of employment; of an amount based on the respective employee’s
salary and the tenure of employment with the company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an
independent actuary, at each balance sheet date using the projected unit credit method.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and fair value of plan assets. This cost is included in employee benefit expense in the statement
of profit and loss.
Re-measurement gain and loss arising from experience adjustments and change actuarial assumptions are
recognized in the period in which they occur, directly in other comprehensive income. They are included
in retained earnings in the statement of change in equity and in the balance sheet.
Changes in the present value of defined benefit obligation resulting from plan amendments and
curtailments are recognized immediately in profit and loss as service cost.
Other long-term employee benefits
The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit
that employees have earned in return for their service in the current and prior periods. That benefit is
discounted to determine its present value and fair value of any related assets is deducted. The liability
for other long-term employee benefits are provided based on actuarial valuation as at the Balance Sheet
date, based on Projected Unit Credit Method, carried out by an independent actuary. Re-measurements are
recognized in profit or loss in the period in which they arise.
If the benefits are not expected to be settled wholly within twelve months of the reporting date, then they
are discounted to present value.
j. Taxation
The tax expenses for the period comprises of current tax and deferred tax. Tax is recognized in Statement of
Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income.
In which case, the tax is also recognized in Other Comprehensive Income.
Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized
in equity and not in the statement of profit and loss. 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.
Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax base used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets
(including unused tax credits such as MAT credit) are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized
if the temporary difference arises from the initial recognition (other than in a business combination) of
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In
addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interests are only recognized to the extent that it is probable that there will be sufficient
taxable profits against which to utilize the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India,
which is likely to give future economic benefits in the form of availability of set off against future income
tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can
be measured reliably and it is probable that the future economic benefit associated with the asset will be
realized.
Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is
convincing evidence that the Company will pay normal income tax during the specified period.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are
recognized in other comprehensive income or directly in equity, in which case, the current and deferred
tax are also recognized in other comprehensive income or directly in equity respectively.
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