2. Material Accounting Policy Information
Pursuant to the Companies (Indian Accounting Standards) Amendment Rules, 2023 effective 01 -
04-2023, the company is required to disclose ‘material accounting policy Information’ in lieu of
the earlier requirement of disclosing ‘significant accounting policies’.
All accounting policies followed by the company are in accordance with the Indian Accounting
Standards (Ind AS) notified u/s 133 of the Companies Act, 2013 read with the Companies (Indian
Accounting Standards) Rules, 2015 and conform to Schedule III to the Companies Act, 2013 as
applicable.
Specific disclosure of material accounting policy information where Ind AS permits options is
made hereunder:
The company has assessed the materiality of the accounting policy information, which involves
exercising judgement and considering both quantitative and qualitative factors by taking into
account not only the size and nature of the item or condition but also the characteristics of the
transactions, events or conditions that could make the information more likely to impact the
decisions of the users of the financial statements.
a) Basis of preparation
(i) Compliance with Ind AS
These Financial Statement have been prepared in accordance with the Companies (Indian
Accounting Standards) Rules, 2015 as a going concern on an accrual basis.
(ii) Historical cost convention
The Financial Statements have been prepared on a historical cost basis, except for the
following:
• Equity Investments in entities are measured at fair value;
•Certain financial assets & liabilities are measured at fair value;
(iii) Use of estimates
In preparing the Financial Statements in conformity with accounting principles generally
accepted in India, management is required to make estimates and assumptions that affect
reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the
date of Financial Statements and the amounts of revenue and expenses during the reported
period. Actual results could differ from those estimates. Any revision to such estimates is
recognized in the period the same is determined.
b) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non¬
current classification.
An asset is treated as current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period.
The Company classifies all other liabilities 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
realization in cash and cash equivalents.
c) Fair value measurement
The Company measures financial instruments, at fair value at each balance sheet date. Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer
the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or
liability
The principal or the most advantageous market must be accessible by the Company. The fair
value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of un-observable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
• Level 2 —Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable.
• Level 3 —Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above. This note summarizes accounting policy
for a fair value. Other fair value related disclosures are given in the relevant notes.
d) Revenue recognition
The Company earns revenue primarily from sale of products and sale of services.
Sale of Products and Services
Revenues are recognized when the Company satisfies the performance obligation by
transferring a promised product or service to a customer. A product is transferred when the
customer obtains control of that product. To recognize revenues, company applies the
following five step approach: (1) identify the contract with a customer, (2) identify the
performance obligations in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract, and (5) recognize revenues
when a performance obligation is satisfied. Revenue from the sale of goods is measured at
the fair value of the consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates.
Engineering Services
When the outcome of a transaction involving the rendering of services can be estimated
reliably, revenue associated with the transaction shall be recognized by reference to the stage
of completion of the transaction at the end of reporting period
Interest Income
Revenue from Interest is recognized on accrual basis and determined by contractual rate of
interest.
Rental Income
Rental income from the property leased under the leave and license agreement is recognized
as income on a straight-line basis over the period of contractual lease terms. The respective
leased assets are included in the balance sheet based on their nature.
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 made. Revenue is measured at the fair value of the consideration received or
receivable, taking into account contractually defined terms of payment and excluding taxes or
duties collected on behalf of the government. Revenue is measured net of indirect taxes,
returns and discounts.
Dividend Income
Dividend income is stated at gross and is recognized when right to receive payment is
established.
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 made. Revenue is measured at the fair value of the consideration received or
receivable, taking into account contractually defined terms of payment and excluding taxes or
duties collected on behalf of the government. Revenue is measured net of indirect taxes,
returns and discounts.
e) Transactions in Foreign Currency
Foreign currency transactions are recorded in the reporting currency, by applying to the
foreign currency amount the exchange rate between the reporting currency and the foreign
currency at the date of the transaction. Premium on forward cover contracts, if any, in respect
of imports is charged to profit & loss account over the period of contract. All monetary assets
and liabilities as at the Balance sheet date, not covered by forward contracts are restated at
the applicable exchange rates prevailing on that date. All exchange differences arising on
transactions, not covered by forward contracts, are charged to Profit & Loss Account.
f) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents
includes cash in hand, cash at bank and 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.
g) Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method, less provision for impairment.
h) Inventories
Inventories are valued at the lower of cost and net realizable value.
• Costs includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition.
• Net realisable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale.
i) Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less depreciation.
Historical Cost represents direct expenses incurred on acquisition or construction of the
assets and the share of indirect expenses relating to construction allocated in proportion to
the direct cost involved.
Depreciation methods, estimated useful lives and residual value
Depreciation on property, plant and equipment, is provided on ‘Straight Line Method’ based
on useful life as prescribed under Schedule II of the Companies Act 2013.
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 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 recognized in the Statement of Profit and Loss.
j) Investment Properties
Investment properties consist of commercial offices not required presently for own use or
administrative purposes and which are leased to others to earn rentals and/or for capital
appreciation. Investment properties are measured initially at cost, including transaction
costs. Subsequent to initial recognition, investment properties are stated at cost less
accumulated depreciation and impairment losses, if any.
The Company, based on technical assessment made by management, depreciates the
building over estimated useful lives of 60 years. The management believes that these
estimated useful lives are realistic and reflect fair approximation of the period over which the
assets are likely to be used.
Though the Company measures investment property using cost-based measurement, the fair
value of investment property is disclosed in notes. Fair value is determined based on ready
reckoner rate prescribed by the Government of Maharashtra for the purpose of levy of stamp
duty.
k) Lease
,4s a Lessee
The Company’s lease asset classes primarily consist of leases for buildings. The Company
assesses whether a contract contains a lease, at inception of a contract. A contract is, or
contains, a lease 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: (i) the contract
involves the use of an identified asset (ii) the Company has substantially all of the economic
benefits from use of the asset through the period of the lease and (iii) the Company has the
right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset
(“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of twelve months or less (short-term leases) and low value
leases. For these short-term and low value leases, the Company recognizes the lease
payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the
end of the lease term. ROU assets and lease liabilities includes these options when it is
reasonably certain that they will be exercised.
The right-of-use assets (“ROU”) are initially recognized at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated depreciation and impairment losses.
Modification of the lease terms relating to period of lease and lease payments are recognized
in accordance with Paragraphs 42 to 46B of Indian AS 116 and appropriate adjustments are
made to ROU and Lease liability during the year of modification of lease.
Right-of-use assets are depreciated from the commencement date on a straight-line basis
over the shorter of the lease term and useful life of the underlying asset. Right of use assets
are evaluated for recoverability whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable. For the purpose of impairment testing, the
recoverable amount (i.e. the higher of the 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.
The lease liability is initially measured at amortized cost at the present value of the future
lease payments. The lease payments are discounted using the interest rate implicit in the
lease or, if not readily determinable, using the incremental borrowing rates in the country of
domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to
the related right of use asset if the Company changes its assessment of whether it will
exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
The weighted average incremental borrowing rate applied to lease liabilities is 6.75%.
,4s a lessor
Lease income from operating leases where the Company is a lessor is recognized in income
on a straight-line basis over the lease term unless the receipts are structured to increase in
line with expected general inflation to compensate for the expected inflationary cost
increases. The respective leased assets are included in the balance sheet based on their
nature.
l) Financial instruments
Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Company becomes a party to the
contractual provisions of the financial instrument. The Company determines the
classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus, in the
case of financial assets not at fair value through profit or loss directly attributable transaction
costs. Transaction costs of financial assets carried at fair value through profit or loss are
expensed in the Statement of Profit and Loss.
Classification
• Cash and Cash equivalents
Cash and cash equivalents comprises cash on hand and demand deposits with banks.
• Debt Instruments
The Company classifies its debt instruments as subsequently measured at amortised
cost, fair value through Other Comprehensive Income or fair value through profit or loss
based on its business model for managing the financial assets and the contractual cash
flow characteristics of the financial asset.
(i) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets
are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest. Interest income from these financial assets is
included as a part of the Company’s income in the Statement of Profit and Loss using the
effective interest rate method.
(ii) Financial assets at fair value through Other Comprehensive Income (FVOCI)
Financial assets are subsequently measured at fair value through Other Comprehensive
Income if these financial assets 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. Movements in the carrying value are taken through Other
Comprehensive Income, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains or losses which are recognised in the
Statement of Profit and Loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in Other Comprehensive Income is reclassified from
Other Comprehensive Income to the Statement of Profit and Loss. Interest income on
such financial assets is included as a part of the Company’s income in the Statement of
Profit and Loss using the effective interest rate method.
(iii) Financial assets at fair value through profit or loss (FVTPL)
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 such debt instrument that is subsequently
measured at FVTPL as well as interest income is recognised in the Statement of Profit
and Loss.
Equity Instruments
The Company subsequently measures all equity investments (other than the
investment in subsidiaries which are measured at cost) at fair value. Dividends from
such investments are recognised in the Statement of Profit and Loss as other income
when the Company’s right to receive payment is established.
Derecognition
A financial asset is derecognised only when the Company has transferred the rights to
receive cash flows from the financial asset. 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
derecognised. Where the Company has not transferred substantially all risks and
rewards of ownership of the financial asset, the financial asset is not derecognised.
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.
Financial Liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Company becomes a party
to the contractual provisions of the financial instrument. The Company determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value, plus, in the case of financial
liabilities not at fair value through profit or loss directly attributable transaction costs.
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value through profit
or loss are subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the Statement of Profit and Loss when the liabilities
are derecognised, and through the amortisation process.
Derecognition
A financial liability is de-recognised when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a de-recognition
of the original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company assesses, at each reporting date, whether a financial asset or a group of
financial assets is impaired. Ind AS-109 on Financial Instruments, requires expected
credit losses to be measured through a loss allowance. For trade receivables only, the
Company recognises expected lifetime losses using the simplified approach permitted
by Ind AS-109, from initial recognition of the receivables. For other financial assets (not
being equity instruments or debt instruments measured subsequently at FVTPL) the
expected credit losses are measured at the 12 month expected credit losses or an
amount equal to the lifetime expected credit losses if there has been a significant
increase in credit risk since initial recognition.
m) Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Company prior to
the end of financial year which are unpaid. The amounts are unsecured and are usually paid
within 30 days of recognition. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the reporting period. They are recognised
initially at their fair value and subsequently measured at amortized cost using the effective
interest method.
n) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as part of the cost of
respective assets during the period of time that is required to complete and prepare the asset
for its intended use. Qualifying assets are assets that necessarily take a substantial period of
time to get ready for their intended use or sale. Other borrowing costs are expensed in the
period in which they are incurred.
o) Employee Benefits
(i) Short-term obligations
The costs of all short-term employee 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 during the period in which the employee renders the related services. The
accruals for employee entitlements of benefits such as salaries, bonuses and annual leave
represent the amount which the Company has a present obligation to pay as a result of the
employees' services and the obligation can be measured reliably. The accruals have been
calculated at undiscounted amounts based on current salary levels at the Balance Sheet
date.
(ii) Post-employment obligations
The Company operates the following post-employment schemes:
Provident Fund
The Company pays provident fund contributions to a fund administered by Government
Provident Fund Authority. The Company has no further payment obligations once the
contributions have been paid. The contributions are accounted for as defined contribution
plans and the contributions are recognized as employee benefit expense when they are
due.
Gratuity
The Company has provided for gratuity in terms Payment of Gratuity Act, 1972 to eligible
employees considering that all employees retire on the Balance Sheet date.
p) Tax expenses
(i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
‘profit before tax’ as reported in the statement of profit and loss because of items of
income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Company’s current tax is calculated using tax rates that have
been enacted or substantively enacted, by the end of the reporting period.
(ii) Deferred Tax
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
separate Financial Statements.
Deferred tax assets are recognized for all deductible temporary differences and unused tax
losses only if it is probable that future taxable amounts will be available to utilize those
temporary differences and losses. 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 tax 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 asset and settle
the liability simultaneously.
Current and Deferred tax is recognized in profit or loss, except to the extent that it relates
to items recognized in other Comprehensive Income or directly in equity. In this case, the
tax is also recognized in other comprehensive income or directly in equity, respectively.
q) Earnings per share
Basic earnings per share is computed by dividing the profit or loss after tax by the weighted
average number of equity shares outstanding during the year. Diluted earnings per share is
computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other
charges to expense or income (net of any attributable taxes) relating to the dilutive
potential equity shares, by the weighted average number of equity shares considered for
deriving basic earnings per share.
r) Impairment of assets
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. Assets that
suffered impairment are reviewed for possible reversal of the impairment at the end of
each reporting period. In case of such reversal, the carrying amount of the asset is
increased so as not to exceed the carrying amount that would have been determined had
there been no impairment loss.
s) Segment Reporting
Segments are identified based on the manner in which the Chief Operating Decision Maker
(‘CODM’) decides about resource allocation and reviews performance. Segment results
that are reported to the CODM include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Segment capital expenditure is the total
cost incurred during the period to acquire property and equipment and intangible assets
including goodwill.
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