4. Summary of significant accounting policies:
i) Use of estimates:
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates,
judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting
policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting
policies that require critical accounting estimates involving complex and subjective judgements and the use of
assumptions in financial statements have been specified below. Accounting estimates could change from period to
period. Actual results could differ from estimates. Appropriate changes in estimates are made as the Management
becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in financial
statements in the period in which the changes are made and, if material, their effects are disclosed in these notes to the
individual financial statements.
a. Income Taxes
Significant judgements are involved in determining the provision for Income Taxes, including amount expected to be paid
/ recovered for uncertain tax positions. (Refer note.23)
b. Impairment of Financial Assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates.
The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation based
on empirical evidence available without under cost or effort, existing market conditions as well as forward looking
estimates at the end of each reporting period. (Refer note.24)
C.Other estimates
The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets,
liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues
and expenses for the reporting period. Specifically, the Company estimates the probability of collection of accounts
receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current
economic trends. If the financial condition of a customer deteriorates, additional allowances may be required.
ii) income recognition:
Revenue from Contacts with Customers
Sales Invoices are prepared on the basis of services received from sub contracting of such contract on a month to month
basis without any fixed markup.
ii) Inventories:
Stock in Trade
Stock in Trade is valued at lower of cost and net realisable value. Cost is determined on FIFO basis and it includes all cost
incurred in bringing the inventories to their present location and condition..
vi) Financial Instruments:
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial Assets
a. Initial recognition and measurement
At initial recognition, the Company measures a financial asset (which are not measured at fair value) through profit or
loss at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the
financial asset.
b. Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
i) Financial assets measured at amortised cost;
ii) Financial assets at fair value through profit or loss (FVTPL) and
iii) Financial assets at fair value through other comprehensive income (FVTOCI).
The Company classifies its financial assets in the above mentioned categories based on:
a) The Company's business model for managing the financial assets, and
b) The contractual cash flows characteristics of the financial asset.
i) Financial assets measured at amortised cost :
A financial asset is measured at amortised cost if both of the following conditions are met:
a) A financial asset is measured at amortised cost if the financial asset is held within a business model whose objective
is to hold financial assets in order to collect contractual cash flows and the Contractual terms of the financial assets give
rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount
outstanding.
b) Financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from
impairment are recognised in the profit or loss.
Trade receivables, Advances, Security Deposits, Cash and Cash Equivalents etc. are classified for measurement at
amortised cost.
ii) Financial assets at fair value through profit or loss (FVTPL):
A financial asset is measured at fair value through profit or loss unless it is measured at amortised cost or fair value
through other comprehensive income. In addition, The Company may elect to designate a financial asset, which
otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so
reduces or eliminates a measurement or recognition inconsistency (referred to as 'accounting mismatch').
iii) Financial assets at fair value through other comprehensive income (FCTOCI):
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within
a business model whose objective is achieved by collecting both contractual cash flows that gives rise on specified dates
to solely payments of principal and interest on the principal amount outstanding and by selling financial assets.
c. Derecognition
The Company derecognizes a financial asset when contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of
the consideration received and receivable is recognized in the Statement of Profit and Loss.
d. Impairment
The Company applies expected credit losses (ECL) model for measurement and recognition of loss allowance on the
following:
i. Trade receivables,
ii. Financial assets measured at amortized cost (other than trade receivables and lease receivables),
iii. Financial assets measured at fair value through other comprehensive income (FVTOCI).
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract
and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original effective
interest rate.
In case of trade receivables, the Company follows a simplified approach wherein an amount equal to lifetime ECL is
measured and recognized as loss allowance. As a practical expedient, the Company uses a provision matrix to measure
lifetime ECL on its portfolio of trade receivables.
In case of other assets (listed as ii and iii above), the Company determines if there has been a significant increase in
credit risk of the financial asset since initial recognition. If the credit risk of such assets has not increased significantly, an
amount equal to 12-month ECL is measured and recognized as loss allowance. However, if credit risk has increased
significantly, an amount equal to lifetime ECL is measured and recognized as loss allowance.
Subsequently, if the credit quality of the financial asset improves such that there is no longer a significant increase in
credit risk since initial recognition, the Company reverts to recognizing impairment loss allowance based on 12-month
ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial
asset. 12-month ECL are a portion of the lifetime ECL which result from default events that are possible within 12
months from the reporting date.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the
Statement of Profit and Loss under the head 'Other expenses'.
ECL are measured in a manner that they reflect unbiased and probability weighted amounts determined by a range of
outcomes, taking into account the time value of money and other reasonable information available as a result of past
events, current conditions and forecasts of future economic conditions.
Financial Liabilities
a. Initial recognition and measurement
At initial recognition, the Company measures a financial liabilities (which are not measured at fair value) through profit
or loss at its fair value plus or minus transaction costs that are directly attributable to the financial liability.
The company's financial liabilities include trade and other payables, loans and borrowings, bank overdrafts and financial
guarantee.
b. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
i) Financial liabilities measured at amortised cost.
ii) Financial liabilities at fair value through profit or loss.
i) Financial liabilities measured at amortised cost :
All financial liabilities are measured at amortised cost. Any discount or premium on redemption/ settlement is
recognised in the Statement of Profit and Loss as finance cost over the life of the liability using the effective interest
method and adjusted to the liability figure disclosed in the Balance Sheet.
ii) Financial liabilities at fair value through profit or loss (FVTPL):
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading
are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the
initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value
gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently
transferred to P&L. However, the company may transfer the cumulative gain or loss within equity. All other changes in
fair value of such liability are recognised in the statement of profit and loss.
c. Derecognition
Financial liabilities are derecognised when the liability is extinguished, that is, when the contractual obligation is
discharged or cancelled or expiry. When an 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.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there
is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis,
to realize the assets and settle the liabilities simultaneously. Also refer note 3(i).
Fair Value Measurement
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 under current market conditions.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the ability to
observe inputs employed in their measurement which are described as follows:
(a) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
(b) Level 2 inputs are inputs that are observable, either directly or indirectly, other than quoted prices included within
level 1 for the asset or liability.
(c) Level 3 inputs are unobservable inputs for the asset or liability reflecting significant modifications to observable
related market data or Company's assumptions about pricing by market participants.
vii) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an
original maturity of three months or less from the date of acquisition), which are subject to an insignificant risk of
changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as
defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company's cash
management.
viii) Employee benefits
Short term employee benefits
Short Term benefits are recognised as an expense at the undiscounted amounts in the Statement of Profit and Loss of
the year in which the related service is rendered.
Long term employee benefits
The provisions of The payment of gratuity Act,1972 is not applicable to the company. The company also does not
permits accumulation of leave to the employees.
ix) Income Taxes:
Income tax expense represents the sum of tax currently payable and deferred tax. Tax is recognised in profit or loss
except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Since the company has not adopted the provision of 115BAA of Income Tax Act, 1961, the provision of section 115JB is
applicable to the company.
Current tax
Current tax is determined on income for the year chargeable to tax in accordance on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period. Current tax items are recognised in correlation to the
underlying transaction either in profit or loss or OCI or directly in equity. The Company has adopted Appendix C of Ind AS-
12 and has provided for the tax liability based on the significant judgment that the taxation authority will accept the tax
treatment.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance
sheet and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised
for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences,
unabsorbed losses and tax credits to the extent that it is probable that future taxable profits will be available against
which those deductible temporary differences, unabsorbed losses and tax credits will be utilised. The carrying amount of
deferred tax assets is reviewed at the end of financial year 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 assets and
liabilities are measured at the tax rates that are expected to apply in the period in which the liability is expected to be
settled or the asset realised, based on tax rates and tax laws that have been substantively enacted by the balance sheet
date. 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.
The Company restricts recognition of deferred tax asset on unabsorbed depreciation to the extent of the corresponding
deferred tax liability in absence of availability of sufficient future taxable profit which allow the full or part of the assets
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.
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