1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1.1 Compliance with Ind AS:
The financial statements comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under Section
133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) rules, 2015], as amended from time
to time and other relevant provisions of the Act.
1.2 Historical cost convention:
The financial statements are prepared under historical cost basis, except for the following:
certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair
value;
defined benefit plans - plan assets measured at fair value
1.3 Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in India requires
management, where necessary, to make estimates and assumptions that affect the reported amounts of assets and
liabilities,disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised.
2. FOREIGN CURRENCY TRANSLATION
2.1 Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the Company operates (‘the functional currency’). The financial statements are presented in Indian
rupee (INR), which is Bharat Dynamics Limited’s functional and presentation currency.
2.2 Transactions and Balances
i) Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of
the transaction. 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
recognized in profit and loss.
ii) 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.
iii) Liability for deferred payments (and receivable from Indian army and ordnance factory) including interest thereon, on
supplies/ services from the USSR (erstwhile) is set up at the rate of exchange notified by the Reserve Bank of India for
deferred payments including interest thereon under the protocol arrangements between the Government of India and
Government of Russia. The differences due to fluctuations in the rate of exchange are charged to revenue.
3. REVENUE RECOGNITION:
A. Revenue from Contract with Customers
(i) Revenue is recognized when (or as) the company satisfies a performance obligation.
(ii) Satisfaction of performance obligation over time
a. Revenue is recognised overtime where the transfer of control of goods or services take places over time by
measuring the progress towards complete satisfaction of that performance obligation, if one of the following
criteria is met:
• the company’s performance entitles the customer to receive and consume the benefits simultaneously as
the company performs
• the company’s performance creates or enhances an asset that the customer controls as the asset is created
or enhanced
• the company’s performance does not create an asset with an alternative use to the company and the
company has an enforceable right to payment including a reasonable profit margin for performance
completed to date.
b. Progress made towards satisfying a performance obligation is assessed based on Input Method on the ratio of
actual costs incurred on the contract up to the reporting date to the estimated total costs expected to complete
the contract. If the outcome of the performance obligation cannot be estimated reliably and where it is probable
that the costs will be recovered, revenue is recognised to the extent of costs incurred.
c. In case of AMC contracts, where passage of time is the criteria for satisfaction of performance obligation, revenue
is recognised using the output method.
(iii) Satisfaction of performance obligation at a point in time
a. In respect of cases where the transfer of control does not take place over time, the company recognises the
revenue at a point in time when it satisfies the performance obligations.
b. The performance obligation is satisfied when the customer obtains control of the asset. The indicators for transfer
of control include the following:
• the company has transferred physical possession of the asset
• the customer has legal title to the asset
• the customer has accepted the asset
• when the company has a present right to payment for the asset
• The customer has the significant risks and rewards of ownership of the asset. The transfer of significant risks
and rewards ownership is assessed based on the Incoterms of the contracts.
Ex-Works contract - In case of Ex-works contract, revenue is recognised when the specified goods are unconditionally
appropriated to the contract after prior Inspection and acceptance, if required.
FOR Contracts - In the case of FOR contracts, revenue is recognised when the goods are handed over to the carrier
for transmission to the buyer after prior inspection and acceptance, if stipulated, and in the case of FOR destination
contracts, if there is a reasonable expectation of the goods reaching destination within the accounting period.
Bill and hold Sales:
Bill and hold sales is recognised when all the following criteria are met:
• the reason for the bill and hold sales is substantive
• the product is identified separately as belonging to the customer
• the product is currently ready for physical transfer to the customer
• the company does not have the ability to use the product or to direct it to another customer
(iv) Measurement
a. Revenue is recognized at the amount of the transaction price that is allocated to the performance obligation.
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange
for transferring promised goods or services to a customer, excluding amount collected on behalf of third parties
and net of estimated liquidated damages.
Exchange rate variation and any other additional consideration isrecognised based on contractual terms of the
contract.
b. The company’s obligation to replace or repair faulty goods under the standard warranty terms is recognized
as a provision and is not adjusted against transaction price as the customer does not have option to purchase
warranty seperately.
c. In case where the contracts involve multiple performance obligations, the company allocates the transaction
price to each performance obligation on the relative stand-alone selling price basis.
Bundled Contracts - In case of a Bundled contract, where separate fee for installation and commissioning or
any other separately identifiable component is not stipulated, the Company applies the recognition criteria to
separately identifiable components (sale of goods and installation and commissioning, etc.) of the transaction and
allocates the revenue to those separate components based on stand-alone selling price.
Multiple Elements - In cases where the installation and commissioning or any other separately identifiable
component is stipulated and price for the same agreed separately, the Company applies the recognition criteria
to separately identified components (sale of goods and installation and commissioning, etc.) of the transaction
and allocates the revenue to those separate components based on their stand-alone selling price.
d. If the stand-alone selling price is not available the company estimates the stand alone selling price.
(v) Significant financing component
Advances received towards execution of Defence related projects are not considered for determining significant
financing component since the objective is to protect the interest of the contracting parties.
In respect of other contracts, the existence of significant financing component is reviewed on a case to case basis.
(vi) Customer financed assets:
The Customer Financed Assets (CFA) are those assets cost of which is funded by the customer, fully or in part. Customer
may or may not obtain control over the CFA. The funding by customer is recognised as revenue synchronising it in line
with completion of performance obligations in accordance with contractual terms. The expenditure incurred by the
company is recognised as per GAAP.
a. Where the company has obtained control over the assets funded by customer:
The assets financed by customer are recognised initially at fair value. The corresponding revenue in respect of
a contract is recognised to the extent of executed quantity in proportion to the existing order quantity plus
additional quantity, if any, for which orders are anticipated as on the date of receipt of the contract from customer.
b. Where the company has not obtained control over the assets funded by customer:
The expenditure incurred in respect of assets funded by the customer is initially recognised as inventory and
revenue is recognised on transfer of control of the asset
B. Other Income:
Recognition of other income is as follows
i) Interest income:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on
initial recognition.
ii) Dividend:
Dividend income is recognized when the Company’s right to receive the payment is established.
4. GOVERNMENT GRANTS
4.1 Grants from the government are recognized at their fair value where there is reasonable assurance that grant will be
received and the Company will comply with all attached conditions.
4.2 Government grants relating to income are deferred and recognized in the profit and loss over the period necessary to match
them with the costs that they are intended to compensate and presented within other income.
4.3 Grants related to non-depreciable assets may also require the fulfilment of certain obligations and would then be recognised
in profit or loss over the periods that bear the cost of meeting the obligations.
4.4 Government Grants received either as subsidy or otherwise for acquisition of depreciable assets are accounted as deferred
income. If the grant/subsidy is absolute, amount corresponding to the depreciation is treated as income over the life of the
asset. If the grant/subsidy is attached with any conditions, such as repayment, income is accounted as per the terms of the
grant/subsidy.
5. INCOME TAX
5.1 The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rates adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
and to unused tax losses.
5.2 Current tax:
The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company operates and generates taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
5.3 Deferred tax:
i) Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities
are not recognized if they arise from initial recognition of goodwill. Deferred income tax is also not accounted for if it
arises from the initial recognition of asset or liability in a transaction other than business combination that at the time
of the transaction affects neither accounting profit nor the taxable profit (tax loss). Deferred income tax is determined
using the tax rates (and laws) that have been enacted or substantively enacted at the end of the reporting period and
are expected to apply when the related deferred income tax assets is realized or the deferred income tax liability is
settled.
ii) Deferred tax assets are recognized for all deductible temporary differences and unused losses only if it is probable that
future taxable amounts will be available to utilize those temporary differences and losses. Deferred tax asset is also
recognised for the indexation benefit on land available for taxation purpose since it results in a temporary difference.
iii) Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize
the liability simultaneously.
iv) Current and deferred tax is recognized in profit or loss, except to the extent that it relates to the items recognized in
other comprehensive income or directly equity. In this case, the tax is also recognized in other comprehensive income
or directly equity, respectively.
6. LEASES
6.1 Company as a lessee:
Contracts with third party, which give the company the right of use in respect of an Asset, are accounted in line with the
provisions of Ind AS 116 - “Leases” if the recognition criteria as specified in the Accounting standard are met.
Lease payments associated with short term lease (term of twelve months or less) and lease in respect of low value assets
are charged off as expenses on straight line basis over lease term or other systematic basis, as applicable.
At commencement date, the value of “right of use” is capitalised at the present value of outstanding lease payments plus
any initial direct cost and estimated cost, if any, of dismantling and removing the underlying asset.
Liability for lease is created for an amount equivalent to the present value of outstanding lease payments. Subsequent
measurement ,if any,is made using cost model.
Each lease payment is allocated between the liability created and finance cost. The finance cost is charged to the statement
of profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
The right of use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the
company’s incremental borrowing rate.
Lease modifications, if any, are accounted as a separate lease if the recognition criteria specified in the standard are met.
6.2 Company as a Lessor:
Lease are classified as finance or operating leasebased on the recognition criteria specified in Ind AS 116 - Leases.
a) Finance Lease:
At commencement date, amount equivalent to the “net investment in the lease” is presented as a receivable. The
implicit interest rate is used to measure the value of the “net investment in Lease”
Each lease payment is allocated between the Receivable created and finance income. The finance income is recognised
in the statement of profit and loss over the lease period so as to reflect a constant periodic rate of return on the net
investment in lease.
The asset is tested for de-recognition and impairment requirements as per Ind AS 109- Financial Instruments.
Lease modifications, if any, are accounted as a separate lease if the recognition criteria specified in the standard are
met.
b) Operating lease:
The company recognises lease payments from operating leases as income on either a straight line basis or another
systematic basis, if required.
Lease modifications, if any, are accounted as a separate lease if the recognition criteria specified in the standard are
met.
A lease is classified at the inception date as a finance lease or operating lease.
7. INVENTORIES
7.1 Inventories are valued at lower of cost and net realizable value.The cost of raw material,components and stores are assigned
by using the actual weighted average cost formula and those in transit at cost to date.In the case of stock-in-trade and
work-in-progress,cost includes material,labour and related production overheads.
7.2 Stationery, uniforms, welfare consumables, medical and canteen stores are charged off to revenue at the time of receipt.
7.3 Raw-materials, Components, Construction Materials, Loose Tools and Stores and Spare Parts declared surplus/
unserviceable/ redundant are charged to revenue.
7.4 Provision for redundancy is made in respect of closing inventory of Raw materials and Components, Work in progress,
Finished Goods, Stores and spare parts,Loose toolsand Construction Materials non-moving for more than 5 years. Besides,
where necessary, adequate provision is made for redundancy of such inventory in respect of completed/ specific projects
and other surplus/ redundant materials pending transfer to salvage stores.
8. FINANCIALINSTRUMENTS
8.1 Financial Assets:
All financial assets are recognised on trade date when the purchase of a financial asset is under a contract whose term
requires delivery of the financial asset within the timeframe established by the market concerned. Financial assets are
initially measured at fair value, plus transaction costs, except for those financial assets which are classified as at fair value
through profit or loss
(FVTPL) at inception. All recognised financial assets are subsequently measured in their entirety at either amortized cost or
fair value.
i) Classification of financial assets:
The Company classifies its financial assets in the following measurement categories:
o those to be measured subsequently at fair value (either through other comprehensive income, or through profit
or loss), and
o those measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms
of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in debt instruments, this will depend on the business model in which the investment is held.
For investments in equity instruments, this will depend on whether the Company has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through other comprehensive
income. The Company reclassifies debt investments when and only when its business model for managing those assets
changes.
ii) Measurement:
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash
flows are solely payment of principal and interest.
a) Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the
asset and the cash flow characteristics of the asset. The Company classifies its debt instruments as:
(a)(i) Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt
investment that is subsequently measured at amortised cost and is not part of a hedging relationship is
recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial
assets is included in finance income using the effective interest rate method.
(a)(ii) Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of
principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements
in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the
financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is
included in other income using the effective interest rate method.
(a) (iii)Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are
measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently
measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or
loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which
it arises. Interest income from these financial assets is included in other income.
b) Equity instruments
(b) (i)The Company subsequently measures all equity investments at fair value. Where the Company’s management
has elected to present fair value gains and losses on equity investments in other comprehensive income,
there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such
investments are recognised in profit or loss as other income when the Company’s right to receive payments
is established.
(b)(ii) Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/
(losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other changes in fair value.
(iii) Impairment of financial assets:
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments,
which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Time barred dues from the government / government departments / government companies are generally not
considered as increase in credit risk of such financial asset.
(iv) Derecognition of financial assets
A financial asset is derecognized only when
- The Company has transferred the rights to receive cash flow from the financial asset or
- retains the contractual rights to receive the cash flows of the financial assets, but assumes a contractual obligation
to pay cash flows to one or more recipients
Where the company has transferred an asset, the Company evaluates whether it has transferred substantially all risks
and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized.
Where the company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership
of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset.
Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of
continuing involvement in the financial asset.
v) Trade receivables:
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. If collection is expect to be collected within a period of 12 months or less from the reporting date (or in the
normal operating cycle of the business if longer), they are classified as current assets otherwise as non-current assets.
Trade receivables are measured at their transaction price unless it contains a significant financing component in
accordance with Ind AS 115 (or when the entity applies the practical expedient) or pricing adjustments embedded in
the contract.
Loss allowance for expected life time credit loss is recognised on initial recognition.
8.2 Financial liabilities and equity instruments issued by the Company
Classification
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the
contractual arrangement.
i) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue
costs.
ii) Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net
carrying amount on initial recognition.
iii) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company. Trade and other payables are
presented as current liabilities if payment is due within 12 months after the reporting period otherwise as non-current.
They are recognized initially at their fair value and subsequently measured at amortized cost using the effective
interest method.
iv) Derivatives
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
re-measured to their fair value at the end of each reporting period. The derivatives that are not designated as hedges
are accounted for at fair value through profit and loss and are included in other gains/ (losses).
a) Embedded derivatives
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated.
Financial Assets with embedded derivatives are considered in their entirety when determining whether their cash
flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if economic characteristics and risks of the
embedded derivatives are not closely related to the economic characteristics and risks of the host contract and
are measured at fair value through profit and loss. Embedded derivatives closely related to the host contract are
not separated.
b) Embedded foreign currency derivatives
Embedded foreign currency derivatives are not separated from the host contract if they are closely related. Such
embedded derivatives are closely related to the host contract, if the host contract is not leveraged, does not contain
any option feature and requires payments in one of the following currencies:
- The functional currency of any substantial party to that contract,
- The currency in which the price of the related good or service that is acquired or delivered is routinely denominated
in commercial transactions around the world,
- A currency that is commonly used in contracts to purchase or sell non-financial items in the economic environment
in which the transaction takes place (i.e. relatively liquid and stable currency)
Foreign currency embedded derivatives which do not meet the above criteria are separated and the derivative is
accounted for at fair value through profit and loss.
8.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realize 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.
9. CASH AND CASH EQUIVALENTS:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
10. FAIR VALUE MEASUREMENT
10.1 The Company measures certain financial instruments, such as derivatives and other items in its financial statements at fair
value at each balance sheet date.
10.2 All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within fair
value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. Derived from prices).
Level 3 - Inputs for the assets and liabilities that are not based on observable market data (unobservable inputs).
10.3 For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy.
11. PROPERTY, PLANT AND EQUIPMENT
11.1 Measurement
i. Land is capitalised at cost to the Company. Development of land such as levelling, clearing and grading is capitalised
along with the cost of building in proportion to the land utilized for construction of buildings and rest of the development
expenditure is capitalised along with cost of land. Development expenditure incurred for the purpose of landscaping
or for any other purpose not connected with construction of any building is treated as cost of land.
ii. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical costs includes
expenditure that is directly attributable to the acquisition of items.
iii. Subsequent costs are included in the asset’s carrying amount and 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 and the cost
of the item can be measured reliably. The carrying amount of the component accounted for as a separate asset is
derecognized when replaced. All other repairs and maintenance are charged to profit and loss during the reporting
period in which they are incurred.
iv. Where the cost of a part of the asset is significant to the total cost of the asset and useful life of that significant part
is different from the useful life of the remaining asset, useful life of that significant part is determined separately and
the significant part is depreciated on straight line method over its estimated useful life.
11.2 Depreciation method, estimated useful life and residual value:
i. Depreciation is calculated using the straight line method to allocate their cost, net of residual values, over the estimated
useful life.
ii. The useful lives have been determined to be equal to those prescribed in Schedule II to the Companies Act; 2013.
iii. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
11.3 Disposal
Gains and losses on disposal are determined by comparing net sale proceeds with carrying amount. These are included in
statement of profit and loss.
12. INTANGIBLE ASSETS:
12.1 Licences
Separately acquired licences are shown at historical cost. They have a finite useful life and are subsequently carried at cost
less accumulated amortization and impairment losses.
12.2 Computer software
a) The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in
significant future economic benefits-, is recognised as an Intangible Asset in the books of accounts when the same is
ready for use. Intangible Assets that are not yet ready for their intended use as at the Balance Sheet date are classified
as “Intangible Assets under Development.
b) Cost associated with maintaining of software programs are recognized as an expense as incurred.
c) Development costs that are directly attributable to the design and testing of identifiable and unique software products
controlled by the Company are recognized as intangible assets when the following criteria are met:
• It is technically feasible to complete the software so that it will be available for use
• Management intends to complete the software and use or sell it
• There is an ability to use or sell the software
• It can be demonstrated how the software will generate probable future economic benefits
• Adequate technical, financial and other resources to complete the development and to use or sell the software
are available, and
• The expenditure attributable to the software during its development can be reliably measured.
d) Directly attributable costs that are capitalized as part of the software include employee costs and an appropriate
portion of relevant overheads.
e) Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is
available for use.
12.3 Research and development
Research expenditure and development expenditure that do not meet the criteria in 12.2(c) above are recognized as
an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a
subsequent period.
In the event of the Company financed project(s) being foreclosed/ abandoned, the expenditure incurred up to the stage of
foreclosure/ abandonment is charged off to revenue in the year of foreclosure/ abandonment.
12.4 Amortization methods and periods
The Company amortizes intangible assets with a finite useful life using the straight-line method over the following periods:
Licences Useful Life/Production
Computer software 3 years
13. INVESTMENT PROPERTY:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company,
is classified as investment property. Investment property is measured initially at its cost, including related transaction costs
and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is
probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be
measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is
replaced, the carrying amount of the replacedpart is derecognised.
14. NON-CURRENT ASSETS (OR DISPOSAL GROUPS) HELD FOR SALE ANDDISCONTINUED OPERATIONS:
14.1 Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured
at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets
arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically
exempt from this requirement.
14.2 An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.
14.3 Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are
classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for
sale continue to be recognised.
14.4 Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
14.5 A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to
dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately in the statement of profit and loss.
15. IMPAIRMENT OF ASSETS:
15.1 Intangible assets that have an indefinite useful life are not subject to amortization 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. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
15.2 The recoverable amount is the higher of an asset’s fair value less costs ofdisposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
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