2 SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been
consistently applied to all the years presented, unless otherwise stated.
i) Basis of preparation
a) Compliance with Ind AS
This financial statement has been prepared to comply in all material respects with the Indian Accounting Standard Act, 2013, read together with Rule
3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 issued by
the Ministry of Corporate Affairs (‘MCA’). In addition, the Guidance notes/announcements issued by the Institute of Chartered Accountants of India
(ICAI) are also applied except where compliance with other statutory promulgations requires a different treatment
b) Basis of Measurement
The financial statements have been prepared on the accrual and going concern basis and the historical cost convention except where the Ind-AS
requires a different accounting treatment. Historical cost is generally based
on fair value of the consideration given in exchange of Goods & Services
c) Use of Estimates & Judgements
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical
judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in
the following notes:
i) Income taxes: The Company’s tax jurisdiction is India. Significant management judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
ii) 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 etc.
d) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
-Expected to be realised or intended to be sold or consumed in normal operating cycle
Held primarily for the purpose of trading
Expected to be realised within twelve months after the reporting period, or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
It is expected to be settled in normal operating cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after the reporting period, or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. Based on the
nature of products/ activities of the Company and the normal time between the aquisition of the assets and their realisation in cash or cash
equivalent, the Company has determined its operating cycle as 48 months for real estate projects and 12 montths for others for the purpose of
classification of its assets and liabilities as current and non current.
i) Property, plant and equipment
Property, Plant and Equipment is carried at cost less accumulated depreciation and accumulated impairment losses, if any. The cost comprises its
purchase price, directly attributable cost of bringing the asset to its working condition for its intended use and borrowing Costs attributable to
construction of qualifying asset, upto the date assset is ready for its intended use; any trade discounts and rebates are deducted in arriving at the
purchase price.
Transition to Ind AS:
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at April
1, 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Subsequentcosts
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecoginition
An item of Property, Plant & Equipment is derecognised upon disposal or when no future economic benefits are expected from the use. Any gains
and losses on disposal of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying
amount of Property, Plant and Equipment and are recognised net within “Other income/ Other expenses” in the Statement of Profit and Loss.
Depreciation
Depreciation is charged on the assets as per Written Down Value method at rates worked out based on the useful lives and in the manner prescribed
in the Schedule II to the Companies Act, 2013.The depreciation method, useful lives and residual value are reviewed at each of the reporting
date.Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which the asset is ready for use (disposed off).
The residual values and useful life are reviewed, and adjusted if appropriate, at the end of each reporting period.An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
ii) Intangible assets
Computer software
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any.
Amortisation methods and periods:
The intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis,
commencing from the date the asset is available to the Company for its use. The amortisation period are reviewed at
the end of each financial year and the amortisation method is revised to reflect the changed pattern.
iii) Financial Instruments
a) Financial Assets
Financial assets comprise investments in equity instruments, loans and advances , trade receivables, Cash and cash equivalents and other eligible
assets.
Initial recognition and measurement:
All financial assets are recognised initially at fair value except trade recievables which are initially measured at transaction price. Transaction costs
that are attributable to the acquisition of the financial asset (other than financial assets recorded at fair value through profit or loss) are included in the
fair value of the financial assets. Purchase or sale of financial assets that require delivery of assets within a time frame established by regulation or
convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the
asset.
Subsequent Measurement:
-Financial Assets measured at amortised cost: Financial assets 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 asset give rise on specified dates to cash flows that are solely payment of
principal and interest (SPPI) on principal amount outstanding are measured at amortised cost using effective interest rate (EIR) method.
They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current
assets. These financial assets are subsequently carried at amortized cost using the effective interest method, less any impairment loss. The EIR
amortisation is recognised as finance income in the Statement of Profit and Loss.
- Financial assets at fair value through other comprehensive income (FVTOCI): Financial assets held within a business model whose objective is
achieved by both collecting the contractual cash flows and selling the financial assets and the contractual terms of the financial assets give rise on
specified dates to cash flows that are solely payment towards principal and interest (SPPI) on principal outstanding are subsequently measured at
FVTOCI. Fair value movements in financial assets at FVTOCI are recognised in other comprehensive income. However, the Company recognises
interest income, impairment losses & reversals and foreign exchange gain loss in statement of profit and loss. On derecognition of the asset,
cumulative gain or loss previously recognised in OCI is reclassified from equity to profit and loss. Interest earned is recognised under the expected
interest rate (EIR) model.
-Equity instruments other than investment in associates: Equity instruments held for trading are classified at fair value through Profit or Loss
(FVTPL). For other equity instruments the Company classifies the same as at FVTOCI. The classification is made on initial recognition and is
irrevocable. Fair value changes on equity instruments at FVTOCI, excluding dividends, are recognised in other comprehensive income (OCI).
- Financial assets at fair value through fair value through Profit or Loss (FVTPL): Financial assets are measured at FVTPL if is does not meet
the criteria for classification as measured at amortised cost or at fair value through other comprehensive income. Fair value changes are recognised
in Statement of Profit and Loss.
Derecognition of financial assets:
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or the financial asset is transferred
and the transfer qualified for derecognition. On derecognition of financial asset in its entirety the difference between the carrying amount (measured
at the date of derecognition) and the consideration received (including any new asset obtained less any new liability assumed) shall be recognised in
Statement of Profit and Loss.
Impairment of financial assets:
Trade receivables, contract assets, receivables under Ind AS 109 are tested for impairment based on the expected credit losses (ECL) for the
respective financial asset. ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/expense in the
Statement of Profit and Loss. The approach followed by the company for recognising the impairment loss is given below:
1) Trade receivables
An impairment analysis is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the
simplified approach using a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future economic
conditions.
2) Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant
increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss.
However, if credit risk has increased significantly, lifetime ECL issued. If in subsequent period, credit quality of the instrument improves such that
there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based
on 12 month ECL.
b) Financial liabilities:
Financial liabilities comprise borrowings, trade payables and other eligible liabilities.
Initial recognition and measurement:
Financial liabilities are initially recognised at fair value. Any transaction costs that are attributable to the acquisition of the financial liabilities (except
financial liabilities at fair value through profit or loss) are deducted from the fair value of financial liabilities.
Subsequent measurement
Financial liabilities at amortised cost: The Company has classified the following under amortised cost:
a) Trade payables
b) Other financial liabilities
Amortised cost for financial liabilities represents amount at which financial liability is measured at initial recognition minus the cumulative amortisation
using the effective interest rate (EIR) method of any difference between that initial amount and the maturity amount.
- 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.
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 trade and other payables maturing within one year from the Balance Sheet Date are carried at a value which is approximately equal to fair value
due to the short maturity of these instuments.
Derecognition of financial liabilities
A financial liability shall be derecognised when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged or
cancelled or expires.
c) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable
right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or
bankruptcy of the Company or the counterparty.
d) Reclassification of Financial Assets
The Company determines the classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made
for financial assets which are categorised as equity instruments at FVTOCI and financial assets or financial liabilities that are specifically designated
at FVTPL. For financial assets, which are debt instruments, a reclassification is made only if there is a change in the business model for managing
those assets. Changes to the business model are expected to be infrequent. The management determines change in the business model as a result
of external or internal changes which are significant to the Company’s operations. A change in the business model occurs when the Company either
begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification
prospectively from the reclassification date which is the first day of immediately next reporting period following the change in business model. The
Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
iv) Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of
that asset. Other borrowing costs are recognized as expenses in the period in which they are incurred. To the extent the Company borrows funds
generally and uses them for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowings costs eligible for
capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined based on the weighted
average of borrowing costs applicable to the borrowings of the Company which are outstanding during the period, other than borrowings made
specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Company capitalizes during a period does not exceed
the amount of borrowing costs incurred during that period.
v) Impairment of non-financial assets
The carrying amount of the Company’s non-financial assets, other than deferred tax assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risk specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from the continuing use that are largely independent of cash inflows of other
assets or group of assets (the cash generating unit).
An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in the Statement of Profit and Loss. Impairment losses are recognised in respect of cash generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of
units on a pro rata basis.
Reversal of impairment loss
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized directly in other comprehensive income and presented within equity.
vi) Inventories
Inventories are valued at lower of cost and net realizable value. The costs comprise its purchase price and any directly attributable cost of bringing to
its present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and the estimated variable costs necessary to make the sale.
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