3 Material accounting policies
This note provides a list ofthe material accounting policies adopted in the preparation ofthe financial statements. These policies have been consistently applied to all the years presented,
unless otherwise stated.
a) Use of estimates and judgements
The preparation of standalone financial statements in conformity with the recognition and measurement principles of Ind AS requires management of the Company to make estimates
and judgements that affect the reported balances of assets and liabilities, disclosures of contingent liabilities as at the date of standalone financial statements and the reported amounts
of income and expenses for the periods presented. Estimates and underlyingassumptions are reviewed onan ongoing basis. Revisions to accountingestimates are recognised in the period
in which the estimates are revised and future periods are affected. The Company uses the following critical accounting judgements, estimates and assumptions in preparation of its
standalone financial statements
Revenue recognition
Revenue for fixed-price contracts is recognised using percentage-of-completion method. The Company estimates the future cost-to-completion of the contracts which is used to
determine degree of completion of the performance obligation. The Company exercises judgement for identification of performance obligations, determination of transaction price,
ascribing the transaction price to each distinct performance obligation and in determining whetherthe performance obligation is satisfied at a point in time or over a period of time. These
judgements have been explained in detail under the revenue note.
Impairment of investments in subsidiaries
The Company reviews its carrying value of investments carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable
amount is less than its carrying amount, the impairment loss is accounted for in the statement of profit and loss.
Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured
using valuation techniques including the Discounted Cash Flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a
degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these
factors could affect the reported fair value of financial instruments.
Impairment of financial assets (other than at fair value)
Measurement of impairment of financial assets require use of estimates, which have been explained in the note on financial assets, financial liabilities and equity instruments, under
impairment of financial assets (other than at fair value).
Provision for income tax and deferred tax assets
The Company uses judgements based on the relevant rulings in the areas of allocation of revenue, costs, allowances and disallowances which is exercised while determining the provision
for income tax. A deferred 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. Accordingly, the Company exercises its judgement to reassess the carrying amount of deferred tax assets at the end of each reporting period.
Provisions and contingent liabilities
The Company estimates the provisions that have present obligations as a result of past events and it is probable that outflow of resources will be required to settle the obligations. These
provisions are reviewed at the end of each reporting period and are adjusted to reflect the current best estimates. The Company uses significant judgements to assess contingent liabilities.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate ofthe amount cannot be made. Contingent assets are neither recognised nor disclosed in the standalone financial
statements.
Employee benefits
The accounting of employee benefit plans in the nature of defined benefit requires the Company to use assumptions. These assumptions have been explained under employee benefits
note .
Leases
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgement. The Company uses
significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable period
of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to
terminate the lease ifthe Company is reasonably certain not to exercise that option. In assessing whetherthe Company is reasonably certain to exercise an option to extend a lease, or not
to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease,
or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
Other income
Interest is recognized using the time-proportion method, based on rates implicit in the transaction.
b) Borrowing Costs
Borrowing costs include interest, amortization of ancillary costs incurred, and exchange differences arising from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost. Costs in connection with the borrowing of funds, to the extent not directly related to the acquisition of qualifying assets, are charged to the Statement of
Profit and Loss over the tenure of the loan. Borrowing costs allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities related to the
construction or development of the qualifying asset up to the date of capitalization of such asset, are included in the cost ofthe assets. Capitalization of borrowing costs is suspended and
charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for
capitalization. Other borrowing costs are expensed in the period in which they are incurred.
c) Employee benefits
(i) 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 recognized in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are
settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are, therefore,
measured at 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 that have terms approximating the terms of the related obligations. Remeasurements as a
result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement forat least twelve months after the reporting
period, regardless of when the actual settlement is expected to occur.
(iii) Gratuity obligations
The liability or assets recognized in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fairvalue
of plan assets. The defined benefit obligation is calculated annually by actuaries 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 terms approximating the terms of the
related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee
benefit expense in the statement of profit and loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the
period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss.
The gratuity liability is determined based on actuarial valuation and is recognized as a provision in the financial statements. The expense is charged to the Statement of Profit and Loss.
(iv) Defined contribution plans
The company pays provident fund contributions to publicly administered funds as per local regulations. The Company has no further payment obligations once the contributions have
been paid. The contributions are accounted for as defined contribution plans and are recognized as employee benefit expenses when they are due.
(v) Employee Share-based payments
Stock Options are granted to eligible employees in accordance with the CTE Employee Stock Option Schemes (“CTE ESOS”), as may be decided by the Nomination & Compensation
Committee. Eligible employees for this purpose include employees of the Company including Directors.
Equity- settled share-based payments to employees are measured at the fair value of the employee stock options at the grant date. The fair value determined at the grant date of the
equity-settled share-based payments is amortised over the vesting period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase
in equity. At the end of each reporting period, the Company revises its estimate of the numberof equity instruments expected to vest. The impact of the revision ofthe original estimates,
if any, is recognised in the Statement of Profit and Loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
d) Income Taxes
Tax expense for the year comprises current and deferred tax.
Current Tax is the amount of tax payable on the taxable income for the yearas determined in accordance with the applicable tax rates and the provisions of the Income-taxAct, 1961 and
other applicable tax laws that have been enacted or substantively enacted by the end of the reporting period.
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 recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets
and liabilities are not recognised if the temporary differences arise from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Tax relating to items recognized directly in equity or other comprehensive income is recognised in equity or other comprehensive income and not in the Statement of Profit and Loss.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they are related to income taxes levied by the same tax
authority, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
e) Property, plant and equipment:
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or 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 any component accounted for as separate asset is derecognized when replaced.
All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
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. Any gain or loss
arisingon the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.
Lease Hold improvements are stated at original cost including taxes, freight and other incidental expenses related to acquisition/installation and after adjustment of input taxes less
accumulated depreciation in accordance with Lease hold period.
f) Depreciation
Depreciation on tangible assets is provided on the written down value method and at the useful life and in the manner specified in Schedule II of the Companies Act, 2013. For assets
acquired or disposed off during the year, depreciation is provided on prorata basis.Individual assets acquired for less than Rs.5,000/-are entirely depreciated in the year of acquisition.
Leasehold improvements are depreciated over the the remaining primary period of lease.
g) Intangible Assets and Amortization:
Intangible assets are recorded at consideration paid for acquisition and other direct costs that can be directly attributed, or allocated on a reasonable and consistent basis, to creating,
producing and making the asset ready for its intended use.
The amortized period and amortization method are reviewed at each financial year end.Software used in development for projects are amortized over the license period or estimated
useful life of two years, whichever is lower.
h) Impairment of Assets:
Intangible assets and property, plant and equipment: Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances
indicate that theircarrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher ofthe fair value less cost to sell and the value-
in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable
amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets
exceeds the estimated recoverable amount ofthe asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine
the recoverable aer comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss.
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