2 Material Accounting Policies & Key Accounting
Estimates & Judgement
2.1. Basis of preparation
The financial statements have been prepared on
a historical cost basis, except for certain financial
instruments which are measured at fair values at
the end of each reporting period as explained in
Accounting Policies below (note 2.22).
The financial statements are presented in ‘Indian
Rupees' (H) in Lakhs, which is Company's functional
currency and all values are rounded to the nearest
Lakhs, except when otherwise indicated.
2.2. Current and Non Current Classification
An asset/liabilities is classified as current when it
satisfies any of the following criteria :
i. the asset/liability is expected to be realised/
settled in the Company's normal operating
cycle
ii. the asset is intended for sale or consumption
iii. the asset/liability is held primarily for the
purpose of trading
iv. the asset/liability is expected to be realised
settled within twelve months after the reporting
period
v. the asset is cash or cash equivalent unless it
is restricted from being exchanged or used to
settle a liability for at least twelve months after
the reporting date
vi. in the case of a liability, the Company does not
have an unconditional right to defer settlement
of the liability for at least twelve months after the
reporting date
All other assets and liabilities are classified as non
current
For the purpose of current/non-current classification
of assets and liabilities, the Company has ascertained
its normal operating cycle as twelve months. This is
based on the nature of services and the time between
the acquisition of assets or inventories for processing
and their realisation in cash and cash equivalents.
2.3. Property, Plant and Equipment (PPE)
Recognition and initial measurement
Property, plant and equipment are stated at their
cost of acquisition. The cost comprises purchase
price, borrowing cost if capitalization criteria are met
and directly attributable cost of bringing the asset to
its working condition for the intended use. Any trade
discount and rebates are deducted in arriving at
the purchase price. Subsequent costs are included
in the asset's carrying amount or recognized as
a separate asset, as appropriate, only when it is
probable that future economic benefits associated
with the item will flow to the Company. All other repair
and maintenance costs are recognized instatement
of profit or loss as incurred.
Subsequent measurement (depreciation and
useful lives)
Property, plant and equipment are subsequently
measured at cost less accumulated depreciation and
impairment losses. Depreciation on property, plant
and equipment is provided on a straight-line basis,
computed on the basis of useful lives (asset-out
below) prescribed in Schedule II to the Act:
The residual values, useful lives and method of
depreciation are reviewed at the end of each
financial year.
De-recognition
An item of property, plant and equipment and any
significant part initially recognized is de-recognized
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 asset) is recognized
in the statement of profit and loss, when the asset is
de-recognized.
2.4. Intangible Assets
Recognition and initial measurement
Intangible assets are stated at their cost of
acquisition. The cost comprises purchase price,
borrowing cost, if capitalization criteria are met and
directly attributable cost of bringing the asset to its
working condition for the intended use.
Subsequent measurement (amortisation)
The cost of capitalized software is amortized over a
period of 6 years from the date of its acquisition.
2.5. Borrowing cost
Borrowing costs directly attributable to the
acquisition and/or construction of a qualifying asset
are capitalized during the period of time that is
necessary to complete and prepare the asset for its
intended use or sale. A qualifying asset is one that
necessarily takes substantial period of time to get
ready for its intended use. All other borrowing costs
are charged to the statement of profit and loss as
incurred.
2.6. Investments
a) Investment in equity instruments of
subsidiaries, joint ventures and associates
Investment in equity instruments of subsidiaries,
joint ventures and associates are stated at
cost as per Ind AS 27 ‘Separate Financial
Statements'
b) Investment in Other Equity Instruments
These investments being strategic in nature are
measured at fair value through profit and loss
(FVTPL) since these are not held for trading
purposes. In absence of any contradictory
information cost of investments (net of any
permanent diminution) reflects fair value of
these instruments
2.7. Inventories:
Direct expenditure relating to construction activity is
inventorised. Other expenditure (including borrowing
costs) during construction period is inventorised to
the extent the expenditure is directly attributable
cost of bringing the asset to its working condition
for its intended use. Other expenditure (including
borrowing costs) incurred during the construction
period which is not directly attributable for bringing
the asset to its working condition for its intended
use is charged to the statement of profit and loss.
Direct and other expenditure is determined based
on specific identification to the construction and
real estate activity. Cost incurred/items purchased
specifically for projects are taken as consumed as
and when incurred/ received.
a) Work-in-progress - Contractual: Cost of work
yet to be certified/ billed, as it pertains to
contract costs that relate to future activity on the
contract, are recognised as contract work-in¬
progress provided it is probable that they will
be recovered. Contractual work-in-progress is
valued at lower of cost and net realisable value.
b) Work-in-progress - Real estate projects
(including land inventory): Represents cost
incurred in respect of unsold area of the real
estate development projects or cost incurred
on projects where the revenue is yet to be
recognised. Real estate work-in-progress is
valued at lower of cost and net realisable value.
c) Finished goods - Flats: Valued at lower of cost
and net realisable value.
d) Building materials purchased, not identified with
any specific project are valued at lower of cost
and net realisable value. Cost is determined
based on a weighted average basis.
e) Land inventory: Valued at lower of cost and net
realisable value.
2.8. Revenue Recognition
Revenue is recognised upon transfer of control of
promised inventory to customers in an amount that
reflects the consideration which the company expects
to receive in exchange. Revenue is recognised over
the period of time when control is transferred to the
customer on satisfaction of performance obligation,
based on contracts with customers.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for discounts,
price concessions, incentives, if any, as specified in
the contracts with the customers. Revenue excludes
taxes collected from customers on behalf of the
government.
i. Revenue from Real estate projects
Revenue from Real estate projects is recognized
when it is reasonably certain that the ultimate
collection will be made and that there is buyers
commitment to make the complete payment.
Revenue from real estate under development is
recognized upon transfer of all significant risks
and rewards of ownership of such real estate,
as per the terms of the contracts entered into
with buyers, which generally coincides with
the firming of the sales contracts/ agreement,
except for the contracts where the company
still has obligations to perform substantial
acts even after the transfer of all significant
risks and rewards. In such cases, the revenue
is recognized on percentage of completion
method, when the stage of completion of each
project reaches a reasonable level of progress.
The revenue is recognized in proportion that the
contract cost incurred for work performed up
to the reporting date bear to the estimated total
contract cost.
Revenue from real estate projects including
revenue from sale of undivided share of land
[group housing] is recognised upon transfer of
all significant risks and rewards of ownership
of such real estate/ property, as per the terms
of the contracts entered into with buyers, which
generally coincides with the firming of the sales
contracts/ agreements.
When the outcome of a real estate project can
be estimated reliably and the conditions above
are satisfied, project revenue (including from
sale of undivided share of land) and project
costs associated with the real estate project
should be recognised as revenue and expenses
by reference to the stage of completion of the
project activity at the reporting date arrived
at with reference to the entire project costs
incurred (including land costs). Revenue is
recognized on execution of either an agreement
or a letter of allotment.
ii. Interest Income
Interest income is recognized on a time
proportion basis taking into account the amount
outstanding and the applicable interest rate.
Interest income is included under the head
“other income” in the statement of profit and
loss.
iii. Dividend Income
Dividend income is recognized with the
company's right to receive dividend is
established by the reporting date.
iv. Other Income
Other Income is accounted on accrual basis.
2.9. Cost of revenue
Cost of constructed properties includes cost
of land (including cost of development rights/
land under agreements to purchase), internal
development costs, external development charges,
borrowing costs, overheads, construction costs
and development/construction materials, which is
charged to the statement of profit and loss based on
the revenue recognized as explained in accounting
policy for revenue from real estate projects above,
in consonance with the concept of matching costs
and revenue.
2.10. Foreign Currency Transactions
Functional and Presentation Currency
The financial statements are presented in Indian
Rupees (H) which is also the functional and
presentation currency of the Company.
Transactions and balances
Foreign currency transactions are recorded in the
functional currency, by applying the exchange rate
between the functional currency and the foreign
currency at the date of the transaction.
Foreign currency monetary items outstanding at
the balance sheet date are converted to functional
currency using the closing rate. Non-monetary items
denominated in a foreign currency which are carried
at historical cost are reported using the exchange
rate at the date of the transactions.
Exchange differences arising on monetary items on
settlement, or restatement as at reporting date, at
rates different from those at which they were initially
recorded, are recognized in the statement of profit
and loss in the year in which they arise.
2.11. Employee Benefit Expenses
Retirement and other employee benefits
Retirement benefit in the form of provident fund,
and Employee State Insurance Contribution and
Labour Welfare Fund are defined contribution
scheme. The Company has no obligation, other
than the contribution payable to the provident fund.
The Company recognizes contribution payable to the
provident fund scheme as an expenditure, when an
employee renders the related service.
The Company operates defined benefit plan for
its employee, viz., gratuity. The costs of providing
benefits under this plan are determined on the basis
actuarial valuation at each financial year-end using
the projected unit credit method. Remeasurement,
comprising actuarial gains and losses, the effect of
the changes to the asset ceiling (if applicable) and
the return on plan assets (excluding net interest), is
reflected immediately in the balance sheet with a
charge or credit recognised in other comprehensive
income in the period in which they occur.
Remeasurement recognised in other comprehensive
income is reflected immediately in retained earnings
and is not reclassified to profit or loss. Past service
cost is recognised in profit or loss in the period of
a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the
period to the net defined benefit liability or asset.
Defined benefit costs are categorised as follows:
- Service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
- Net interest expense or income; and
- Remeasurement
The Company presents the first two components of
defined benefit costs in profit or loss in the line item
‘Employee benefits expense'. Curtailment gains and
losses are accounted for as past service costs.
Accumulated leave, which is expected to be utilized,
within next 12 months is treated as short - term
employee benefit. The Company measures the
expected cost of such absences as the additional
amount that it expects to pay as a result of the
unused entitlement that has accumulated at the
reporting date.
The Company recognizes termination benefit as
a liability and an expense when the Company has
a present obligation as a result of past event, 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. If the termination benefits
fall due more than 12 months after the balance sheet
date, they are measured at present value of future
cash flows using the discount rate determined by
reference to market yields at the balance sheet date
on government bonds.
Employee benefit plan
The parameter most subject to change is the discount
rate. In determining the appropriate discount
rate for plans operated in India, the management
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 India. 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.
2.12. Taxation
Tax expense recognized in statement of profit
and loss comprises the sum of deferred tax and
current tax except the ones recognized in other
comprehensive income or directly in equity.
Current tax is determined as the tax payable
in respect of taxable income for the year and
is computed in accordance with relevant tax
regulations. Current income tax relating to items
recognized outside profit or loss is recognized
outside profit or loss (either in other comprehensive
income or in equity).
Deferred tax is recognized in respect of temporary
differences between carrying amount of assets
and liabilities for financial reporting purposes and
corresponding amount used for Taxation purposes.
Deferred tax assets on unrealised tax loss are
recognized to the extent that it is probable that the
underlying tax loss will be utilised against future
taxable income. This is assessed based on the
Company's forecast of future operating results,
adjusted for significant on-taxable income and
expenses and specific limits on the use of any
unused tax loss. Unrecognized deferred tax assets
are re-assessed at each reporting date and are
recognized 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 recognized
outside statement of profit and loss is recognized
outside statement of profit or loss (either in other
comprehensive income or in equity).
2.13. Impairment of non-financial assets
At each reporting date, the Company assesses
whether there is any indication based on internal/
external factors, that an asset may be impaired.
If any such indication exists, the recoverable amount
of the asset or the cash generating unit is estimated.
If such recoverable amount of the asset or cash
generating unit to which the asset belongs is less
than its carrying amount. The carrying amount is
reduced to its recoverable amount and the reduction
is treated as an impairment loss and is recognized
in the statement of profit and loss. If, at the reporting
date, there is an indication that a previously assessed
impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected
at the recoverable amount. Impairment losses
previously recognized are accordingly reversed in
the statement of profit and loss.
2.14. 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 for financial
assets.
ECL is the weighted-average of difference between
all contractual cash flows that are due to the
Company in accordance with the contract and
all the cash flows that the Company expects to
receive, discounted at the original effective interest
rate, with the respective risks of default occurring
as the weights. When estimating the cash flows, the
Company is required to consider:
All contractual terms of the financial assets (including
prepayment and extension) over the expected life of
the assets.
Cash flows from the sale of collateral held or
other credit enhancements that are integral to the
contractual terms.
2.15. Trade Receivables
In respect of trade receivables, the Company applies
the simplified approach of Ind AS 109, which requires
measurement of loss allowance at an amount equal
to lifetime expected credit losses. Lifetime expected
credit losses are the expected credit losses that
result from all possible default events over the
expected life of a financial instrument.
In respect of its other financial assets, the Company
assesses if the credit risk on those financial assets
has increased significantly since initial recognition.
If the credit risk has not increased significantly since
initial recognition, the Company measures the loss
allowance at an amount equal to 12-monthexpected
credit losses, else at an amount equal to the lifetime
expected credit losses.
When making this assessment, the Company uses
the change in the risk of a default occurring over
the expected life of the financial asset. To make
that assessment, the Company compares the risk
of a default occurring on the financial asset as at
the balance sheet date with the risk of a default
occurring on the financial asset as at the date of
initial recognition and considers reasonable and
supportable information, that is available without
undue cost or effort, that is indicative of significant
increases in credit risk since initial recognition.
The Company assumes that the credit risk on a
financial asset has not increased significantly since
initial recognition if the financial asset is determined
to have low credit risk at the balance sheet date.
2.17. Cash and Cash Equivalent
Cash and cash equivalents comprise cash in
hand, demand deposits and short-term highly
liquid investments that are readily convertible into
known amount of cash and which are subject to an
insignificant risk of changes in value.
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