Note 2: Summary of Material Accounting Policies
a) Statement of Compliance
The financial statements of the company have been
prepared in accordance with Indian Accounting
Standards ("Ind-AS") notified under the Companies
(Indian Accounting Standards) Rules, 2015 as
amended by the Companies (Indian Accounting
Standards) Rules, 2016 and other relevant provisions
of the Act.
b) Basis of Measurement
The financial statements have been prepared on
a historical cost basis except for certain financial
assets and financial liabilities (including financial
instruments) which have been measured at fair value
at the end of each reporting period as explained in
the accounting policies stated below. The Financial
Statements have been prepared on accrual and
going concern basis.
c) Current versus non-current classification
The Company has classified all its assets and
liabilities under current and non-current as required
by Ind AS 1- Presentation of Financial Statements.
The 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 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 treated as 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 liability for at least twelve months
after the reporting period.
All other liabilities are classified 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
realizations in cash and cash equivalents. The
Company has ascertained its operating cycle as
twelve months for the purpose of current and non¬
current classification of assets and liabilities.
The Company's functional currency is the Indian
Rupee. These financial statements are presented
in Indian Rupees and all values are rounded to the
nearest lakhs, except when otherwise stated.
d) Use of Estimates, Judgments and Assumptions
The preparation of the financial statements in
conformity with Ind-AS requires management to
make estimates, judgments and assumptions. These
estimates, judgments 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 judgments and the use of assumptions
in these financial statements have been disclosed
in Note 3(i) below. Accounting estimates could
change from period to period. Actual results could
differ from those estimates. Appropriate changes
in estimates are made as management becomes
aware of changes in circumstances surrounding the
estimates. Changes in estimates are reflected in the
financial statements in the period in which changes
are made and, if material, their effects are disclosed
in the notes to the financial statements.
e) Revenue Recognition
Revenue is recognized to the extent that it is
probable that the economic benefits will flow to the
Company and the revenue can be reliably measured,
regardless of when the payment is being received.
Revenue towards satisfaction of performance
obligation is measure at the amount of transaction
prices (net of variable consideration) allocates to
the performance obligation. Transaction price of
goods sold and services rendered is net of variable
consideration on account of various discount and
scheme offered by the company as per Ind AS,
specially INDA AS 115. Revenue is measured at value
of the consideration received or receivable, taking
into account contractually defined terms of payment
including excise duty collected which flows to the
Company on its own account but excluding taxes or
duties collected on behalf of the government.
Revenue from contracts with customers Ind AS
115 establishes a single comprehensive model for
entities to use in accounting for revenue arising from
contracts with customers. Under Ind AS 115, an entity
recognises revenue when (or as) a performance
obligation is satisfied i.e. when control of the goods
and service underlying the particular performance
obligation is transferred to the customer.
The Company follows specific recognition criteria as
described below before the revenue is recognized.
• Sale of goods
• Revenue from sale of goods is recognized when
the significant risks and rewards of ownership
have been transferred to the buyer, usually on
delivery of goods, recovery of the consideration
is probable, the associated cost can be estimated
reliably, there is no continuing effective control or
managerial involvement with the goods, and the
amount of revenue can be measured reliably.
• Revenue is measured at the transaction value
of the consideration received or receivable.
The amount recognized as revenue is exclusive
of Goods and Service Tax (GST), Value Added
Taxes (VAT), and is net of discounts.
• Sale of solar power
• Sale is recognized when the power is delivered by
the Company at the delivery point in conformity
with the parameters and technical limits and
fulfilment of other conditions specified in the
Power Purchase Agreement. Sale of power is
accounted for as per tariff specified in the Power
Purchase Agreement.
• The sale of power is accounted for net of all local
taxes and duties as may be leviable on sale of
electricity for all electricity made available and
sold to customers.
• Other Operating Revenue
• Other Operating revenue comprises of following
Items
1. Job work income
2. Duty drawback and other export incentives
• Revenue from manufacturing charges is
recognized on completion of contractual
obligation of manufacturing and delivery of
product manufactured.
• Revenue from export incentives are recognized
upon adherence to the compliances as may
be prescribed with regard to export and / or
realization of export proceeds as per foreign
trade policy and its related guidelines.
• Revenue from sale of scrap is recognized on
delivery of scrap items.
• The Company recognises revenue from
Operations and Maintenance services using
the time-elapsed measure of progress i.e. input
method on a straight line basis.
• Other Income
• Other income comprises of interest income, rent
income, dividend from investment and profits on
redemption of investments.
• Interest income from financial assets is
recognized when it is probable that the economic
benefit will flow to the Company and the amount
of income can be measured reliably. Interest
income is accrued on time basis by reference to
the principal outstanding and at the effective rate
applicable, which is the rate exactly discounts
estimated future cash receipts through the
expected life of the financial asset to that asset's
net carrying amount on initial recognition.
• Dividend income from investment is recognized
when the shareholder's right to receive payment
has been established (provided that it is
probable that the economic benefit will flow to
the Company and the amount of income can be
measured reliably).
• Profit on redemption of investment is recognized
by upon exercise of power by the company to
redeem the investment held in any particular
security / instrument (non-current as well as
current investment).
• Contract assets
Contract assets are recognised when there is excess
of revenue earned over billings on contracts. Contract
assets are classified as unbilled receivables (only act
of invoicing is pending) when there is unconditional
right to receive cash, and only passage of time is
required, as per contractual terms.
• Contract liabilities
Contract Liabilities are recognised when there is
billing in excess of revenue and advance received
from customers.
f) Foreign Currency-Transactions and Balances
Items included in the Financial Statements of the
Company are measured using the currency of
the primary economic environment in which the
Company operates ('functional currency'). The
Company's functional currency is Indian Rupee and
accordingly, the financial statements are presented
in Indian Rupee.
Transactions in foreign currencies are initially
recorded by the company in functional currency spot
rates at the date the transaction first qualifies for
recognition.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
period. Gains and losses arising on account of
differences in foreign exchange rates on settlement/
translation of monetary assets and liabilities are
recognized in the Statement of Profit and Loss
except exchange differences on foreign currency
borrowings relating to assets under construction
for future productive use, which are included in the
cost of those assets when they are regarded as
an adjustment to interest costs on those foreign
currency borrowings.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates as at the dates of the initial
transactions. 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
determined. 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 that item (i.e. translation
differences on items whose fair value gain or loss is
recognized in OCI or profit or loss are also recognised
in OCI or profit or loss, respectively).
g) Employee Benefits
• Short-term obligations
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the
period in which the employees render the related
service are recognised in respect of employee's
services up to the end of the reporting period
and are measured at the undiscounted amounts
of the benefits expected to be paid when the
liabilities are settled. The liabilities are presented
as current employee benefit obligations in the
balance sheet.
• Other Long-term employee benefit obligations
The liabilities for compensated absences (annual
leave) which are not expected to be settled wholly
within 12 months after the end of the period in
which the employee render the related service
are presented as non-current employee benefits
obligations. They are therefore measured as
the present value of expected future payments
to be made in respect of services provided by
employees up to the end of the reporting period
using the Projected Unit Credit method. The
benefits are discounted using the market yields
at the end of the reporting period on government
bonds that have terms approximating to the terms
of the related obligations. Re-measurements as
a result of experience adjustments and changes
in actuarial assumptions (i.e. actuarial losses/
gains) are recognised in the Statement of Profit
and Loss.
The obligations are presented as current in the
balance sheet, if the Company does not have
an unconditional right to defer settlement for at
least twelve months after the reporting period,
Regardless of when the actual settlement is
expected to occur.
• Post-employment obligations
The Company operates the following post¬
employment schemes:
I. Defined benefit plans such as gratuity
II. Defined contribution plans such as provident
fund.
I. Defined benefit plan - Gratuity Obligations
The Company provides for gratuity,
a defined benefit plan (the "Gratuity
Plan") covering eligible employees in
accordance with the Payment of Gratuity
Act, 1972. The Gratuity Plan provides a
lump sum 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.
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. The defined benefit
obligation is actuarially determined using
the Projected Unit Credit method.
The present value of the defined benefit
obligation 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 a terms approximating
to the terms of the obligation. The net
interest cost, calculated by applying the
discount rate to the net balance of the
defined benefit obligation and the fair
value of the plan assets, is recognised
as employee benefit expenses in the
statement of profit and loss.
Re-measurement gains and losses
arising from experience adjustments and
changes in actuarial assumptions are
recognised in the other comprehensive
income in the year in which they arise
and are not subsequently reclassified to
Statement of Profit and Loss.
Changes in the present value of the
defined benefit obligation resulting from
plan amendments or curtailments are
recognised immediately in profit or loss
as past service cost.
II. Defined Contribution Plan
The Company pays provident fund
contributions to publicly administered
provident funds as per local regulatory
authorities. The Company has no further
obligations once the contributions
have been paid. The contributions are
accounted for as defined contribution
plans and the contributions are
recognised as employee benefit expense
when they are due.
h) Tax Expenses
The tax expense for the period comprises current and
deferred tax. Taxes are recognised in the statement
of profit and loss, except to the extent that it relates to
the items recognised in the comprehensive income
or in Equity. In which case, the tax is also recognised
in the comprehensive income or in Equity.
• Current tax:
Current tax payable is calculated based on taxable
profit for the year. Current tax is recognized
based on the amount expected to be paid to
or recovered from the tax authorities based on
applicable tax laws that have been enacted or
substantively enacted by the balance sheet date.
Management periodically evaluates positions
taken in the tax return with respect to situations
in which applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate.
• Deferred tax:
Deferred tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities are generally recognized
for all taxable temporary timing difference.
Deferred tax assets are recognized for
deductible temporary differences to the extent
that it is probable that taxable profit will be
available against which the deductible temporary
difference can be utilized.
The carrying amount of deferred tax assets is
reviewed at each reporting date and adjusted
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 utilized.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
the year when the asset is realized or liability is
settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted on
the reporting date. Current and deferred tax for
the year 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.
i) Property, Plant and Equipment
Land is carried at historical cost. All other items of
property, plant and equipment are stated at cost, net
of recoverable taxes, trade discount and rebates less
accumulated depreciation and impairment losses, if
any. Such cost includes purchase price, borrowing
cost and any cost directly attributable to bringing the
assets to its working condition for its intended use.
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 entity and the cost can be measured reliably.
When significant parts of plant and equipment are
required to be replaced at intervals, the company
depreciates them separately based on their specific
useful lives. All other repairs and maintenance costs
are recognized as expense in the statement of profit
and loss account as and when incurred.
Expenses incurred relating to project, net of income
earned during the project development stage prior
to its intended use, are considered as pre - operative
expenses and disclosed under Capital Work- in¬
Progress.
Cost of the assets less its residual value (estimated
at 5% of the cost) is depreciated over its useful life.
Depreciation is calculated on written down basis
over the useful life of the assets as prescribed in
Schedule II to the Companies Act, 2013.
Depreciation on additions/ deletions to fixed assets
is calculated pro-rata from/ up to the date of such
additions/ deletions.
The carrying values of property, plant and equipment
are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may
not be recoverable. The residual values, useful life and
depreciation method are reviewed at each financial
year-end to ensure that the amount, method and
period of depreciation are consistent with previous
estimates and the expected pattern of consumption
of the future economic benefits embodied in the
items of property, plant and equipment.
An item of property, plant and equipment is
derecognized upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising
on disposal or retirement of an item of property,
plant and equipment is determined as the difference
between sale proceeds and the carrying amount
of the asset and is recognised in profit and loss
account.
The management believes that the estimated useful
lives are realistic and reflects fair approximation
of the period over which the assets are likely to
be used. At each financial year end, management
reviews the residual values, useful lives and method
of depreciation of property, plant and equipment and
values of the same are adjusted prospectively where
needed.
j) Investment Properties
Investment properties are properties that is held for
long- term rentals yields or for capital appreciation
(including property under construction for such
purposes) or both, and that is not occupied by the
Company, is classified as investment property.
Investment properties are measured initially at cost,
including transaction costs. Subsequent to initial
recognition, investment properties are stated at cost
less accumulated impairment loss, if any.
Though the Company measures investment property
using cost based measurement, the fair value of
investment property is disclosed in the notes.
Fair values are determined based on reasonable
interval performed by an accredited external
independent valuer.
Investment properties are de-recognized either
when they have been disposed of or when they are
permanently withdrawn from use and no future
economic benefit is expected from their disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognised
in profit and loss in the period of de- recognition.
k) Borrowing Costs
General and specific borrowing costs directly
attributable to the acquisition, construction or
production of qualifying assets, which are assets
that necessarily take a substantial period of time to
get ready for their intended use or sale, are added
to the cost of those assets, until such time as the
assets are substantially ready for their intended use
or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which
they are incurred.
l) Impairment of Non-Financial Assets
The Company assesses at each reporting date as
to whether there is any indication that any property,
plant and equipment and intangible assets 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.
m) Inventories
Inventories are valued at lower of cost (on First-In¬
First- Out) or net realizable value after providing for
obsolescence and other losses, where considered
necessary. Cost of inventories comprises all costs
of purchase and other costs incurred in bringing the
inventories to their present location and condition.
Cost of purchased inventory is determined after
deducting rebates and discounts. 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.
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