2. Summary of Material Accounting Policy
Information
a) Property, Plant and Equipment (PPE)
i) The cost of an item of property, plant and equipment
is recognised as an asset if, and only if:
(a) It is probable that the future economic
benefits associated with the item will flow to
the company; and
(b) The cost of the item can be measured reliably.
ii) 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.
iii) 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.
iv) Subsequent expenditures are capitalised only when
they increase the future economic benefits embodied
in the specific asset to which they relate. Such
assets are classified to the appropriate categories of
property, plant and equipment when completed and
ready for intended use. Depreciation of these assets,
on the same basis as other assets, commences when
the assets are ready for their intended use.
v) In the carrying amount of an item of property, plant
and equipment, the cost of replacing the part of such
an item is recognised when that cost is incurred if
the recognition criteria are met. The carrying amount
of those parts that are replaced is derecognised in
accordance with the derecognition principles.
vi) An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset.
vii) Any gains or losses arising from derecognition of
a property, plant and equipment are measured as
the difference between the net disposal proceeds
and the carrying amount of the property, plant and
equipment and are recognised in the Statement of
Profit and Loss when the asset is derecognised.
viii) Depreciation is recognised on the cost of assets
less their residual values. Depreciation is provided
based on useful life of the assets. The management
has evaluated that the useful life is in conformity
with the useful life as prescribed in Schedule II
of the Companies Act, 2013. Each part of an item
of Property, Plant & Equipment with a cost that is
significant in relation to the total cost of the item is
depreciated separately based on its’ useful life
ix) The residual values, useful lives and methods of
depreciation of property, plant and equipment
are reviewed at each financial year end and,
if expectations differ from previous estimates,
the changes are accounted for as change in an
accounting estimate.
x) The depreciation for each year is recognised in the
Statement of Profit & Loss unless it is included in the
carrying amount of another asset.
xi) Depreciation has been provided on the Written
Down Value method based on life assigned to
each asset in accordance with Schedule II of the
Companies Act, 2013.
b) Leases
i) The Company assesses at contract inception
whether a contract is, or contains, a lease. That is, if
the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether:
(a) the contract involves the use of an
identified asset
(b) the Company has substantially all of the
economic benefits from use of the asset through
the period of the lease and
(c) the Company has the right to direct the
use of the asset.
ii) Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets.
The Company recognises lease liabilities to make
lease payments and right-of-use assets representing
the right to use the underlying assets.
iii) Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses. The cost of the
right-of-use asset shall comprise: the amount of the
initial measurement of the lease liability, any lease
payments made at or before the commencement
date, less any lease incentives received; any initial
direct costs incurred by the lessee; and an estimate of
costs to be incurred by the lessee in dismantling and
removing the underlying asset, restoring the site on
which it is located or restoring the underlying asset
to the condition required by the terms and conditions
of the lease, unless those costs are incurred to
produce inventories. The lessee incurs the obligation
for those costs either at the commencement date
or as a consequence of having used the underlying
asset during a particular period. Right-of-use assets
are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful
lives of the assets.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in
section (o) Impairment of non-financial assets.
iv) Lease Liabilities
At the commencement date of the lease, the lease
payments included in the measurement of the
lease liability comprise the following payments
for the right to use the underlying asset during the
lease term that are not paid at the commencement
date: fixed payments (including in-substance fixed
payments), less any lease incentives receivable;
variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date; amounts expected
to be payable by the lessee under residual value
guarantees; the exercise price of a purchase option
if the lessee is reasonably certain to exercise that
option; and payments of penalties for terminating the
lease, if the lease term reflects the lessee exercising
an option to terminate the lease.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
at the lease commencement date if the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
After the commencement date the carrying amount
of lease liabilities is remeasured to reflect changes in
the lease payments. The amount of remeasurement
of the lease liability is recognised as an adjustment
to the carrying amount of the right-of-use of the
asset and any remaining amount of remeasurement
in profit or loss.
v) Variable rents that do not depend on an index or
rate are not included in the measurement of the
lease liability and the right-of-use asset. The related
payments are recognised as an expense in the
period in which the event or condition that triggers
those payments occurs.
vi) Short-term leases and leases of low-value assets
The Company has elected to apply the exemption
from lease recognition to short term leases (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option) and leases for which the
underlying assets is of low value. Lease payments
on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the grease term.
c) Intangible assets
i) Intangible assets that are acquired by the Company
and that have finite useful lives are stated at cost of
acquisition net of recoverable taxes, trade discount
and rebates less accumulated amortization /
depletion and impairment loss, if any. Such cost
includes purchase price, borrowing costs, and any
cost directly attributable to bringing the asset to
its working condition for the intended use, and
adjustments arising from exchange rate variations
attributable to the intangible assets.
ii) 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.
iii) Intangible assets are de-recognised either on their
disposal or where no future economic benefits are
expected from their use. 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.
iv) Intangible assets having finite useful life are
amortized on a written down value basis over their
estimated useful lives. An intangible asset with
an indefinite useful life is tested for impairment by
comparing it’s recoverable amount with its’ carrying
amount (a) annually and (b) whenever there is an
indication that the intangible asset may be impaired.
v) The management has assessed the useful
life of software classified as intangible assets
as three years.
vi) The amortisation period and the amortisation
method for intangible asset with a finite useful
life are reviewed at each financial year end. If the
expected useful of such asset is different from the
previous estimates, the changes are accounted for
as change in an accounting estimate.
d) Capital Work-in-progress
i) Expenditure incurred on assets under construction
(including a project) is carried at cost under Capital
Work-in-Progress. Such costs comprise purchase
price of asset including import duties and non¬
refundable taxes, after deducting trade discounts
and rebates, and costs that are directly attributable
to bringing the asset to the location and condition
necessary for it to be capable of operating in the
manner intended by management.
ii) Cost directly attributable to projects under
construction, net of income earned during such period,
include costs of employee benefits, expenditure in
relation to survey and investigation activities of the
projects, cost of site preparation, initial delivery and
handling charges, installation and assembly costs,
professional fees, expenditure on maintenance
and upgradation, among others of common public
facilities, depreciation on assets used in construction
of project, interest during construction and other costs
if attributable to construction of projects. Such costs
are accumulated under 'Capital Work-in-Progress'
and subsequently allocated on systematic basis
over major assets, other than land and infrastructure
facilities, on commissioning of projects.
e) Investment Property
i) Recognition and measurement:
Investment properties comprises of land and
building are measured initially at cost, including
transaction costs. Subsequent to initial recognition,
investment properties are stated at cost less
accumulated depreciation and 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 annually.
ii) Depreciation
The Company depreciates investment properties
over their estimated useful lives.
iii) Derecognition
Investment properties are derecognised 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 or loss in the period of derecognition. In
determining the amount of derecognition from the
derecognition of investment properties the Company
considers the effects of variable consideration,
existence of a significant financing component, non¬
cash consideration, and consideration payable to the
buyer (if any).
f) Borrowing Cost
i) Borrowing costs consist of interest and other
costs that an entity incurs in connection with the
borrowing of funds.
ii) All other borrowing costs are expensed in the period
in which they occur.
g) Inventories
i) Inventories consist of stock-in-trade and is measured
at the lower of cost and net realisable value. The
cost of inventories of items that are not ordinarily
interchangeable are assigned by using specific
identification of their individual costs. The cost of
raw material and other inventories is based on the
first-in-first out method.
ii) Cost of inventories comprise of cost of purchase
and other costs net of recoverable taxes incurred
in bringing them to their respective present
location and condition.
iii) Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
cost of completion and the estimated cost necessary
to make the sale.
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