2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
a) Basis of preparation and presentation of
financial statements
i) Accounting convention
The financial statements are prepared in accordance with
the Indian Accounting Standards (Ind AS) notified under the
Companies (Indian Accounting Standards) Rules, 2015 as
amended by the Companies (Indian Accounting Standards)
Amendment Rules, 2016.
All amounts included in the financial statements are reported
in Indian Rupees (').
ii) Basis of measurement
The financial statements have been prepared on an accrual
basis and in accordance with the historical cost convention,
unless otherwise stated. These financial statements comply
in all material aspects with Indian Accounting Standards (Ind
AS) notified under Section 133 of the Companies Act, 2013
(the Act) [Companies (Indian Accounting Standards) Rules,
2015] and other relevant provisions of the Act. All assets and
liabilities are classified into current and non-current based
on the operating cycle of less than twelve months or based
on the criteria of realisation/settlement within twelve months
period from the balance sheet date.
b) Use of estimates
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future
periods.
The Company bases its estimates and assumptions 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
Significant management judgements
The following are significant management judgements in
applying the accounting policies of the Company that have
the most significant effect on the financial statements.
Classification of leases
The Company enters into leasing arrangements for various
assets. The classification of the leasing arrangement as a
finance lease or operating lease is based on an assessment
of several factors, including, but not limited to, transfer of
ownership of leased asset at end of lease term, lessee’s
option to purchase and estimated certainty of exercise of
such option, proportion of lease term to the asset’s economic
life, proportion of present value of minimum lease payments
to fair value of leased asset and extent of specialised nature
of the leased asset.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised
is based on an assessment of the probability that future
taxable income will be available against which the deductible
temporary differences and tax loss carry forward can be
utilised. In addition, significant judgement is required in
assessing the impact of any legal or economic limits or
uncertainties in various tax jurisdictions.
Evaluation of indicators for impairment of assets
The evaluation of applicability of indicators of impairment of
assets requires assessment of several external and internal
factors which could result in deterioration of recoverable
amount of the assets. In assessing impairment, management
estimates the recoverable amount of each asset or cash
generating units based on expected future cash flows and
uses an interest rate to discount them. Estimation uncertainty
relates to assumptions about future operating results and the
determination of a suitable discount rate.
Recoverability of advances/receivables
At each balance sheet date, based on historical default rates
observed over expected life, the management assesses
the expected credit loss on outstanding receivables and
advances.
Useful lives of depreciable/amortisable assets
Management reviews its estimate of the useful lives of
depreciable/amortisable assets at each reporting date, based
on the expected utility of the assets. Uncertainties in these
estimates relate to technical and economic obsolescence
that may change the utility of certain items of property, plant
and equipment.
Defined benefit obligation (DBO)
Management’s estimate of the DBO is based on a number
of critical underlying assumptions such as standard rates
of inflation, medical cost trends, mortality, discount rate and
anticipation of future salary increases. Variation in these
assumptions may significantly impact the DBO amount and
the annual defined benefit expenses.
Fair value measurements
Management applies valuation techniques to determine the
fair value of financial instruments (where active market quotes
are not available) and non-financial assets. This involves
developing estimates and assumptions consistent with how
market participants would price the instrument. Management
bases its assumptions on observable data as far as possible
but this is not always available. In that case management uses
the best information available. Estimated fair values may vary
from the actual prices that would be achieved in an arm’s
length transaction at the reporting date.
c) 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 realized or intended to be sold or
consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized 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.
All other liabilities are classified as non-current.
The operating cycle is the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents. The Company has evaluated and considered its
operating cycle as 12 months.
d) Property, plant and equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation and impairment, if any. Costs
directly attributable to acquisition are capitalised until the
property, plant and equipment are ready for use, as intended
by management.
Advances paid towards the acquisition of property, plant
and equipment outstanding at each balance sheet date
is classified as capital advances under other non-current
assets and the cost of assets not put to use before such date
are disclosed under ‘Capital work-in-progress’. Subsequent
expenditures relating to property, plant and equipment is
capitalised only when it is probable that future economic
benefits associated with these will flow to the Company and
the cost of the item can be measured reliably.
The cost and related accumulated depreciation are eliminated
from the financial statements upon sale or retirement of the
asset and the resultant gains or losses are recognised in the
statement of profit and loss. Assets to be disposed off are
reported at the lower of the carrying value or the fair value less
cost to sell.
Property, plant and equipment [other than freehold land and
lease hold land (perpetual lease)] are depreciated under
straight line method ("SLM method") over the estimated useful
lives of the assets, which are prescribed under Schedule II to
the Companies Act, 2013.
Useful life adopted by the Company for various class of assets
is as follows:
The Company has evaluated the applicability of component
accounting as prescribed under Ind AS 16 and Schedule II of
the Companies Act, 2013, the management has not identified
any significant component having different useful lives.
Depreciation methods, useful lives and residual values are
reviewed periodically and updated at each financial year end.
e) Intangible assets
The Company has elected to continue with the carrying
value for all of its intangible assets as recognized in its
Previous GAAP financial statements as deemed cost at the
transition date, viz., 1 April 2016.
Intangible assets are recorded at the consideration paid for
the acquisition of such assets and are carried at cost less
accumulated amortisation and impairment. Advances paid
towards the acquisition of intangible assets outstanding at
each balance sheet date are disclosed as other non-current
assets and the cost of intangible assets not ready for their
intended use before such date are disclosed as intangible
assets under development.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and
are recognised in the statement of profit and loss when the
asset is derecognised.
The residual values, useful lives and methods of amortization
of intangible assets are reviewed at each financial year end
and adjusted prospectively, if appropriate.
f) Impairment of property, plant and equipment
and intangible assets
At each reporting date, the Company assesses whether there
is any indication that an asset may be impaired, based on
internal or external factors. If any such indication exists, the
Company estimates the recoverable amount of the asset or
the cash generating unit. 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. The reduction is treated as an
impairment loss and is recognised 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
recognised are accordingly reversed in the statement of profit
and loss.
Intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances
indicate that they might be impaired. Other assets are tested
for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
g) Revenue recognition
Revenue from projects
The Company has adopted Ind AS 115 “Revenue from
Contracts with Customers” effective April 1, 2018. Ind AS 115
supersedes Ind AS 11 “Construction Contracts” and Ind AS
18 “Revenue”. The Company has applied Ind AS 115 using the
modified retrospective method.
The Company recognises revenue from contracts with
customers when it satisfies a performance obligation by
transferring promised good or service to a customer. The
revenue is recognised to the extent of transaction price
allocated to the performance obligation satisfied.
Performance obligation is satisfied over time when the
transfer of control of asset (good or service) to a customer is
done over time and in other cases, performance obligation is
satisfied at a point in time.
For performance obligation satisfied over time, the revenue
recognition is done by measuring the progress towards
complete satisfaction of performance obligation. The
progress is measured in terms of a proportion of actual cost
incurred to-date, to the total estimated cost attributable to the
performance obligation.
Transaction price is the amount of consideration to which the
Company expects to be entitled in exchange for transferring
good or service to a customer excluding amounts collected
on behalf of a third party. Variable consideration is estimated
using the expected value method or most likely amount as
appropriate in a given circumstance.
Payment terms agreed with a customer are as per business
practice and there is no financing component involved in
the transaction price. Costs to obtain a contract which are
incurred regardless of whether the contract was obtained
are charged-off in Profit & Loss immediately in the period in
which such costs are incurred. Incremental costs of obtaining
a contract, if any, and costs incurred to fulfil a contract are
amortised over the period of execution of the contract in
proportion to the progress measured in terms of a proportion
of actual cost incurred to-date, to the total estimated cost
attributable to the performance obligation.
Significant judgments are used in:
1. Determining the revenue to be recognised in case of
performance obligation satisfied over a period of time;
revenue recognition is done by measuring the progress
towards complete satisfaction of performance obligation.
The progress is measured in terms of a proportion of
actual cost incurred to-date, to the total estimated cost
attributable to the performance obligation.
2. Determining the expected losses, which are recognised
in the period in which such losses become probable
based on the expected total contract cost as at the
reporting date.
Revenue from construction/project related activity is
recognised as follows:
1. Cost plus contracts: Revenue from cost plus contracts
is recognized over time and is determined with reference
to the extent performance obligations have been
satisfied. The amount of transaction price allocated to
the performance obligations satisfied represents the
recoverable costs incurred during the period plus the
margin as agreed with the customer.
2. Fixed price contracts: Contract revenue is recognised
over time to the extent of performance obligation
satisfied and control is transferred to the customer.
Contract revenue is recognised at allocable transaction
price which represents the cost of work performed
on the contract plus proportionate margin, using the
percentage of completion method. Percentage of
completion is the proportion of cost of work performed
to-date, to the total estimated contract costs.
Rental income
Income from rentals are recognized as an income in the
statement of profit and loss on a straight-line basis over
the lease term except where scheduled increase in rent
compensates the Company with expected inflationary costs.
Interest income
Interest income is reported on an accrual basis using the
effective interest method and is included under the head
“other income” in the statement of profit and loss.
Dividend income
Income from dividends are recognized when the Company’s
right to receive the payment is established, it is probable
that the economic benefits associated with the dividend will
flow to the Company, and the amount of the dividend can be
measured reliably.
h) Inventories
Raw materials
Inventory includes raw materials used for the construction
activity of the Company. Raw materials are valued at the lower
of cost and net realizable value with the cost being determined
on a ‘First In First Out’ basis.
Properties under development
Properties under development represents construction work
in progress which are stated at the lower of cost and net
realizable value. This comprises of cost of land, construction
related overhead expenditure, borrowing costs and other net
costs incurred during the period of development.
Properties held for sale
"Completed properties held for sale are stated at the lower
of cost and net realizable value. Cost includes cost of land,
construction related overhead expenditure, borrowing costs
and other costs incurred during the period of development.
Net realizable value is the estimated selling price in the ordinary
course of business less estimated costs of completion and
estimated costs necessary to make the sale.
Properties held for development
Properties held for development represents land acquired for
future development and construction, and is stated at cost
including the cost of land, the related costs of acquisition
and other costs incurred to get the properties ready for their
intended use.
i) Employee benefits
Expenses and liabilities in respect of employee benefits are
recorded in accordance with Ind AS 19, Employee Benefits.
Defined contribution plan
The Company’s contribution to provident fund is charged to the
statement of profit and loss or inventorized as a part of project
under development, as the case may be. The Company’s
contributions towards provident fund are deposited with
a government administered fund, in accordance with
Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952.
Defined benefit plan
(i) Gratuity
The liability or asset recognised in the balance sheet in respect
of defined benefit gratuity plans is the present value of the
defined benefit obligation at the end of the reporting period
less the fair value of plan assets (if any). The cost of providing
benefits under the defined benefit plan is determined using
the projected unit credit method.
The present value of the defined benefit obligation
denominated in ' is determined by discounting the estimated
future cash outflows by reference to market yields at the end
of the reporting period on government bonds that have terms
approximating to the terms of the related obligation.
Service cost on the Company’s defined benefit plan is included
in employee benefits expense. Employee contributions, all of
which are independent of the number of years of service, are
treated as a reduction of service cost. Net interest expense on
the net defined benefit liability is included in finance costs.
Gains and losses through re-measurements of the defined
benefit plans are recognized in other comprehensive income,
which are not reclassified to profit or loss in a subsequent
period.
Short-term employee benefits
Short-term employee benefits comprise of employee costs
such as salaries, bonus etc. is recognized on the basis of the
amount paid or payable for the period during which services
are rendered by the employee.
j) 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.
For arrangements entered into prior to 1 April 2016 (date of
transition to Ind AS), the Company has determined whether
the arrangement contain lease on the basis of facts and
circumstances existing on the date of transition.
Finance Lease
A lease is classified at the inception date as a finance lease
or an operating lease. A lease that transfers substantially all
the risks and rewards incidental to ownership to the Company
is classified as a finance lease. Finance leases are capitalised
at the commencement of the lease at fair value of the leased
property or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease.
Lease payments are apportioned between finance charges
and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance
charges are recognised in finance costs in the statement of
profit and loss.
A leased asset is depreciated on a straight-line basis over the
useful life of the asset or the useful life, whichever is lower.
However, if there is no reasonable certainty that the Company
will obtain the ownership by the end of the lease term, the
capitalised asset is depreciated on a straight-line basis over
the shorter of the estimated useful life of the asset or the lease
period.
Operating Lease
Leases in which a significant portion of the risks and rewards
of ownership are not transferred to the Company as lessee
are classified as operating leases. Payments made under
operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over
the period of the lease unless the payments are structured to
increase in line with expected general inflation to compensate
for the lessor’s expected inflationary cost increases.
k) Foreign currency transactions
Functional and presentation currency
The functional currency of the Company is the Indian Rupee
('). These financial statements are presented in Indian
Rupees (').
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated
in foreign currencies at year end exchange rates are generally
recognised in Statement of Profit or Loss.
- Foreign exchange differences regarded as an
adjustment to borrowing costs are presented in the
statement of profit and loss, within finance costs. All
other foreign exchange gains and losses are presented
in the statement of profit and loss on a net basis within
other gains/(losses).
- Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain or
loss.
l) Borrowing costs
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 costs consist of interest and other
costs that an entity incurs in connection with the borrowing of
funds. Borrowing cost also includes exchange differences to
the extent regarded as an adjustment to the borrowing costs.
m) Investments in subsidiaries
The Company’s investment in equity instruments in
subsidiaries are accounted for at cost. Where the carrying
amount of an investment in greater than its estimated
recoverable amount, it is written down immediately to its
recoverable amount and the difference is transferred to
the statement of profit and loss. On disposal of investment,
the difference between the net disposal proceeds and the
carrying amount is charged or credited to the statement of
profit and loss.
n) Government Grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis
over the periods that the related costs, for which it is intended
to compensate, are expensed. When the grant relates to an
asset, it is adjusted against the cost of the depreciable asset,
to which the grant relates to, on receipt of such subsidy.
o) Income taxes
Income tax expense comprises current and deferred income
tax. Current and deferred tax is recognised in the statement
of profit and loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity In this case, the tax is also recognised in other
comprehensive income or directly in equity respectively
Current income tax for current and prior periods is recognised
at the amount expected to be paid to or recovered from the
tax authorities, using the tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date.
Deferred tax is recognized on temporary differences at the
balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes, except when the deferred income tax arises from
the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and affects
neither accounting nor taxable profit or loss at the time of the
transaction.
Deferred income tax assets are recognized for all deductible
temporary differences, carry forward of unused tax credits
and unused tax losses, to the extent that it is probable that
taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available
to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the
deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Deferred tax items are
recognised in correlation to the underlying transaction either
in OCI or directly in equity
"Deferred income tax assets and liabilities are measured
using tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date and are
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect of changes in tax rates on deferred income
tax assets and liabilities is recognised as income or expense
in the period that includes the enactment or the substantive
enactment date.
A deferred income tax asset is recognised to the extent that
it is probable that future taxable profit will be available against
which the deductible temporary differences and tax losses
can be utilised. The Company offsets current tax assets and
current tax liabilities, where it has a legally enforceable right
to setoff the recognised amounts and where it intends either
to settle on a net basis, or to realise the asset and settle the
liability simultaneously
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