1.8. Material accounting policies
1.8.1. Property, plant and equipment
a. Recognition and measurement
Items of property, plant and equipment are
measured at cost, which includes capitalized
borrowing costs, less accumulated depreciation
and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any
directly attributable cost of bringing the item to
its working condition for its intended use and
estimated costs of dismantling and removing the
item and restoring the site on which it is located.
The cost of a self-constructed item of property,
plant and equipment comprises the cost of
materials and direct labor, any other costs directly
attributable to bringing the item to working
condition for its intended use and estimated
costs of dismantling and removing the item and
restoring the site on which it is located.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of property,
plant and equipment is recognized in profit or loss.
b. Subsequent expenditure
Subsequent expenditure is capitalized only if it
is probable that the future economic benefits
associated with the expenditure will flow to the
Company.
c. Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values over their estimated useful lives
using the straight-line method, and is generally
recognized in the statement of profit and loss. The
useful life of the asset is determined as prescribed
in schedule II to the Companies Act, 2013 as
follows:
• Plant and machinery (including office
equipment) - 5 to 25 years
• Furniture and Fixtures - 5 to 10 years
• Vehicles - 8 years
Depreciation method, useful lives and residual
values are reviewed at each financial year-
end and adjusted if appropriate. Based on
technical evaluation and consequent advice, the
management believes that its estimates of useful
lives as given above best represent the period over
which management expects to use these assets.
Depreciation of additions (disposals) is provided
on a pro-rata basis i.e. from (up to) the date on
which asset is ready for use (disposed of).
d. Derecognition of property, plant and equipment
An item of property, plant and equipment is
derecognized upon disposal or when no future
economic benefits are expected to arise from
its use or disposal. 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.
e. Reclassification to investment property
When the use of a property changes from owner-
occupied to investment property, the property is
reclassified as investment property at its carrying
amount on the date of reclassification.
1.8.2. Intangible assets
a. Service concession arrangements - Windmill
The Company recognizes an intangible asset
arising from a service concession arrangement to
the extent it has a right to charge the regulator for
sale of electricity at agreed prices. Subsequent to
initial recognition, the intangible asset is measured
at cost, less any accumulated amortization and
accumulated impairment losses.
b. Others
Other intangible assets include software and
technical know-how which are measured at cost.
Such intangible assets are subsequently measured
at cost less accumulated amortization and any
accumulated impairment losses.
c. Subsequent expenditure
Subsequent expenditure is capitalized only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure is recognized in profit or loss as incurred.
d. Amortization
Amortization is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight¬
line method and is included in depreciation and
amortization in Statement of Profit and Loss. The
useful life of the asset is determined as prescribed
in schedule II to the Companies Act, 2013.
1.8.3. Investment property
Investment property is property held either to earn
rental income or for capital appreciation or for both,
but not for sale in the ordinary course of business, use
in the production or supply of goods or services or for
administrative purposes. Upon initial recognition, an
investment property is measured at cost. Subsequent
to initial recognition, investment property is measured
at cost less accumulated depreciation and accumulated
impairment losses, if any.
An investment property is derecognized upon disposal
or when no future economic benefits are expected to
arise from its use or disposal. 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.
Property that is being constructed for future use as
investment property is accounted for as investment
property under construction until construction or
development is complete. All costs which are directly
attributable to construction of the investment property
are capitalized.
Depreciation is calculated on cost of items of investment
property less their estimated residual values over their
estimated useful lives using the straight-line method and
is generally recognized in the statement of profit and loss.
The useful life of the asset is determined as prescribed in
schedule II to the Companies Act, 2013 as follows:
• Buildings - 60 years
• Plant and machinery (including office equipment) -
5 to 30 years
• Furniture and Fixtures - 5 to 10 years
1.8.4. Right of Use Assets (ROU Assets)
The Company recognizes right-of-use asset at the
commencement date of the respective lease. Upon initial
recognition, cost comprises of the initial lease liability,
initial direct costs incurred when entering into the leases,
an estimate of the cost of dismantle and removal of the
underlying assets. Prepaid lease payments (including
the difference between nominal amount of the deposit
and the fair value) are also included in the initial carrying
amount of the ROU Asset. They are subsequently
measured at cost less accumulated depreciation and
impairment loss, if any.
The ROU assets are presented as a separate line in
the balance sheet. The residual values, useful lives and
methods of depreciation of ROU Asset are reviewed at
the end of each financial year and adjusted prospectively,
if appropriate.
Variable rents that do not depend on an index or rate
are not included in the measurement of ROU Assets. The
related payments are recognized as an expense in the
period in which the event or condition that triggers those
payments occurs and are included in the line Statement
of Profit and Loss.
Leasehold premises are amortized/ depreciated over
the period of the lease. Leasehold improvements are
amortized/ depreciated over the period of the lease or
useful life of respective assets whichever is less.
1.8.5. Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. The Company recognizes a
financial asset or a liability in its balance sheet only when
the entity becomes party to the contractual provisions of
the instrument.
a. Financial assets
i. Initial recognition and measurement
All financial assets are recognized initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or
loss, transaction costs that are attributable
to the acquisition of financial assets.
Investments in subsidiary companies,
associate and joint venture are carried at
cost as per Ind AS 27 - Separate Financial
Statements. Trade or Other receivables
that do not contain a significant financing
component (as defined in Ind AS 115) which
are recorded at transaction price.
ii. Subsequent measurement
For purposes of subsequent measurement,
financial assets of the Company are
classified in three categories:
• Amortized cost;
• FVTOCI (fair value through other
comprehensive income) - Debt
investment;
• FVTOCI (fair value through other
comprehensive income) - Equity
investment; or
• FVTPL (fair value through profit or loss)
Financial assets are not reclassified
subsequent to their initial recognition,
except if and in the period the
Company changes its business model
for managing financial assets.
• Amortized cost
Debt instruments are measured at
amortized cost if the asset is held
within a business model whose
objective is to hold financial assets
in order to collect contractual cash
flows, and the contractual terms
of the financial asset give rise on
specified dates to cash flows that
are solely payments of principal and
interest on the principal amount
outstanding. These financials assets
are measured at amortized cost by
using the effective interest rate (EIR)
method, less impairment, if any. The
Company recognizes the interest
income in the statement of profit
and loss. The losses arising from
impairment are recognized in the
statement of profit and loss.
• FVOCI (fair value through other
comprehensive income) - Debt
investment
Debt instruments are measured at fair
value through other comprehensive
income, if the asset is held within
a business model whose objective
is achieved by both collecting
contractual cash flows and selling
financial assets and the contractual
terms of the financial asset give rise
on specified dates to cash flows
that are solely payments of principal
and interest on the principal
amount outstanding. The Company
measures debt instruments included
within the FVOCI category at each
reporting date at fair value with such
changes being recognized in Other
Comprehensive Income (OCI). The
Company recognizes interest income
on these assets in statement of profit
and loss.
• FVOCI (fair value through other
comprehensive income) - Equity
investment
On initial recognition of an equity
investment (directly or through
different market schemes) that
is not held for trading, the
Company may irrevocably elect
to present subsequent changes in
the investment's fair value in OCI
(designated as FVOCI - equity
investment). This election is made on
an investment by investment basis.
These assets are subsequently
measured at fair value. Dividends are
recognized as income in statement
of profit or loss unless the dividend
clearly represents a recovery of part
of the cost of the investment. Other
net gains and losses are recognized
in OCI and are not reclassified to
profit or loss.
• FVTPL (fair value through profit or
loss)
All financial assets not classified
as measured at amortized cost
or FVOCI as described above are
measured at FVTPL. This includes
all derivative financial assets. On
initial recognition, the Company
may irrevocably designate a financial
asset that otherwise meets the
requirements to be measured at
amortized cost or at FVOCI as at
FVTPL if doing so eliminates or
significantly reduces an accounting
mismatch that would otherwise
arise. These assets are subsequently
measured at fair value. Net gains
and losses, including any interest or
dividend income, are recognized in
profit or loss.
iii. Impairment of financial assets
In accordance with Ind-AS 109, the company
applies Expected Credit Loss (ECL) model
for measurement and recognition of
impairment loss on the following financial
assets and credit risk exposure:
• Financial assets that are debt
instruments, and are measured at
amortized cost e.g., loans, debt
securities, deposits, and bank
balance;
• Lease receivables;
• Other trade receivables, etc.
The company follows 'simplified approach'
for recognition of impairment loss
allowance on trade receivables which do not
contain a significant financing component
and all lease receivables resulting from
transactions.
The application of simplified approach does
not require the company to track changes in
credit risk. Rather, it recognizes impairment
loss allowance based on lifetime ECL's at
each reporting date, right from its initial
recognition.
For recognition of impairment loss on
other financial assets and risk exposure,
the company determines whether there
has been a significant increase in the credit
risk since initial recognition. If credit risk
has not increased significantly, 12-month
ECL is used to provide for impairment
loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a
subsequent period, credit quality of the
instrument improves such that there is no
longer a significant increase in credit risk
since initial recognition, then the entity
reverts to recognizing impairment loss
allowance based on 12-month ECL.
iv. Derecognition
The Company derecognizes a financial
asset when the contractual rights to the
cash flows from the financial asset expire,
or it transfers the rights to receive the
contractual cash flows in a transaction
in which substantially all of the risks and
rewards of ownership of the financial asset
are transferred or in which the Company
neither transfers nor retains substantially
all of the risks and rewards of ownership
and does not retain control of the financial
asset.
If the Company enters into transactions
whereby it transfers assets recognized on
its balance sheet, but retains either all or
substantially all of the risks and rewards
of the transferred assets, the transferred
assets are not derecognized.
b. Financial Liabilities
• Financial liabilities are classified as
measured at amortized cost or FVTPL.
Financial liability is classified as at FVTPL
if it is classified as held for trading, or it is
a derivative or it is designated as such on
initial recognition. Financial liabilities at
FVTPL are measured at fair value and net
gains and losses, including any interest
expense, are recognized in profit or loss.
Other financial liabilities are subsequently
measured at amortized cost using the
effective interest method. Interest expense
and foreign exchange gains and losses are
recognized in profit or loss. Any gain or loss
on derecognition is also recognized in profit
or loss.
• The Company derecognizes financial
liability when its contractual obligations
are discharged or cancelled or expire.
The Company also derecognizes financial
liability when its terms are modified and
the cash flows under the modified terms
are substantially different. In this case, a
new financial liability based on the modified
terms is recognized at fair value. The
difference between the carrying amount
of financial liability extinguished and the
new financial liability with modified terms is
recognized in profit or loss.
c. Offsetting
Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the company currently
has a legally enforceable right to set off the
amounts and it intends either to settle them on
a net basis or to realize the asset and settle the
liability simultaneously.
1.8.6. Revenue recognition
In accordance with Ind AS 115 "Revenue from Contracts
with Customers" Revenue is recognized upon transfer of
control of promised products or services to customers
in an amount that reflects the consideration that the
company expects to receive in exchange for those
products or services.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for discounts and
other credits, if any, as specified in the contract with the
customer. The following are the revenue recognized by
the company through Statement of Profit and Loss:
a. Revenue from sale of goods is recognized
upon transfer of control of promised products
to customer in an amount that reflects the
consideration which the Company expects to
receive in exchange for those products.
b. Revenue in respect of rental and maintenance
services is recognized on an accrual basis, in
accordance with the terms of the respective
contract as and when the Company satisfies
performance obligations by delivering the services
as per contractually agreed terms.
c. Revenue from wind mill power project is
recognized on the basis of actual power sold as
per the terms of the power purchase agreements
entered into with the respective parties.
d. Revenue from real estate projects: Revenue is
recognized at the point of time w.r.t., sale of real
estate units, including land, plots, apartments,
commercial units, development rights including
development agreements as and when the control
passes on to the customer which coincides with
handing over of the possession to the customer.
e. Dividend income (including from FVOCI
investments) is recognized when the Company's
right to receive the payment is established, it is
probable that the economic benefits associated
with the dividend will flow to the entity and the
amount of the dividend can be measured reliably.
This is generally when the shareholders or Board
of Directors approve the dividend.
f. Under Ind AS 109 "Financial Instruments",
interest income is recorded using the Effective
Interest Rate (EIR) method for all financial
instruments measured at amortized cost,
debt instruments measured through fair value
through other comprehensive income or fair
value through profit or loss. The EIR is the
rate that exactly discounts estimated future
cash receipts through the expected life of the
financial instrument or, when appropriate, a
shorter period, to the net carrying amount of
the financial asset. The EIR (and therefore the
amortized cost of the asset) is calculated by
taking into account any discount or premium on
acquisition, fees and costs that are integral part
of the EIR.
g. The Company's share in profits/ (losses) from
Limited Liability Partnerships (LLPs), where
company is a partner, is recognized as income/ loss
in the statement of profit and loss as and when the
right to receive its profit/ loss share is established
by the company in accordance with the terms of
contract between the company and the LLP.
h. Contract Balances
A Contract asset is the right to consideration in
exchange for goods or services transferred to the
customer. If the Company performs by transferring
goods or services to a customer before the
customer pays consideration or before payment is
due, a contract asset is recognized for the earned
consideration that is conditional.
Trade receivable represents the Company's right
to an amount of consideration that is unconditional
(i.e., only the passage of time is required before
payment of the consideration is due).
Contract liability is the obligation to transfer goods
or services to a customer for which the Company
has received consideration (or an amount of
consideration is due) from the customer. Contracts
in which the goods or services transferred are
lower than the amount billed to the customer, the
difference is recognized as "Unearned revenue"
and presented in the Balance Sheet under "Other
current liabilities".
1.8.7. Leases
The Company enters into contract as a lessee for assets
taken on lease. The Company at the inception of a
contract assesses whether the contract contains a lease
by conveying the right to control the use of an identified
asset for a period of time in exchange for consideration.
A Right-of-use asset is recognized representing its right
to use the underlying asset for the lease term at the
lease commencement date except in case of short term
leases with a term of twelve months or less and low value
leases which are accounted as an operating expense on a
straight line basis over the lease term.
The cost of the right-of-use asset measured at inception
shall comprise of the amount of the initial measurement
of the lease liability adjusted for any lease payments
made at or before the commencement date less any
lease incentives received, plus any initial direct costs
incurred. The Right-of-use assets is subsequently
measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted for
any remeasurement of the lease liability.
The Right-of-use assets is depreciated using the straight¬
line method from the commencement date over the
shorter of lease term or useful life of right-of-use asset.
Right-of-use assets are tested for impairment whenever
there is any indication that their carrying amounts may
not be recoverable. Impairment loss, if any, is recognized
in the Statement of Profit and Loss.
1.8.8. Inventories
Inventories are stated at the lower of cost and net
realizable value. In determining the cost of loose tools,
stores and spares, raw materials and components, the
weighted average method is used. Cost of manufactured
components, work in progress and manufactured finished
goods include cost of conversion and other costs incurred
in bringing the inventories to their present location and
condition which is determined on absorption cost basis.
Project in progress is valued at lower of cost or net
realizable value. Cost includes cost of land, materials,
construction, services, borrowing costs and other
overheads relating to the particular projects.
1.8.9. Impairment of non-financial assets
The Company's non-financial assets, other than
inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any
indication of impairment. If any such indication exists,
then the asset's recoverable amount is estimated.
For impairment testing, assets that do not generate
independent cash inflows are grouped together into
Cash-Generating Units (CGU's). Each CGU represents
the smallest group of assets that generates cash inflows
that are largely independent of the cash inflows of other
assets or CGU's.
The recoverable amount of a CGU (or an individual asset)
is the higher of its value in use and its fair value less costs
to sell. Value in use is based on the estimated future cash
flows, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the CGU
(or the asset).
An impairment loss is recognized if the carrying amount
of an asset or CGU exceeds its estimated recoverable
amount. Impairment losses are recognized in the
(All amounts are Rs. in lakhs, except share data and as stated)
statement of profit and loss. Impairment loss recognized
in respect of a CGU is allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and then
to reduce the carrying amounts of the other assets of the
CGU (or group of CGU's) on a pro rata basis.
In respect of assets for which impairment loss has been
recognized in prior periods, the company reviews at each
reporting date whether there is any indication that the loss
has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used
to determine the recoverable amount. Such a reversal is
made only to the extent that the asset's carrying amount
does not exceed the carrying amount that would have
been determined, net of depreciation or amortization, if
no impairment loss had been recognized.
1.8.10. Employee benefits
a. Short term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A
liability is recognized for the amount expected
to be paid e.g., under short-term cash bonus, if
the Company has a present legal or constructive
obligation to pay this amount as a result of past
service provided by the employee, and the amount
of obligation can be estimated reliably.
b. Retirement benefits
i. Defined benefit obligations
A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. The Company's net obligation in
respect of defined benefit plans is calculated
separately for each plan by estimating the
amount of future benefit that employees
have earned in the current and prior periods,
discounting that amount and deducting the
fair value of any plan assets.
The calculation of defined benefit
obligation is performed annually by a
qualified actuary using the projected unit
credit method. When the calculation results
in a potential asset for the Company, the
recognized asset is limited to the present
value of economic benefits available in
the form of any future refunds from the
plan or reductions in future contributions
to the plan ('the asset ceiling'). In order to
calculate the present value of economic
benefits, consideration is given to any
minimum funding requirements.
Remeasurements of the net defined benefit
liability, which comprise actuarial gains and
losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling
(if any, excluding interest), are recognized
in OCI. The Company determines the
net interest expense (income) on the net
defined benefit liability (asset) for the
period by applying the discount rate used
to measure the defined benefit obligation
at the beginning of the annual period to
the then-net defined benefit liability (asset),
taking into account any changes in the
net defined benefit liability (asset) during
the period as a result of contributions and
benefit payments. Net interest expense and
other expenses related to defined benefit
plans are recognized in profit or loss.
When the benefits of a plan are changed
or when a plan is curtailed, the resulting
change in benefit that relates to past
services ('past service cost' or 'past service
gain') or the gain or loss on curtailment is
recognized immediately in profit or loss.
The Company recognizes gains and losses
on the settlement of a defined benefit plan
when the settlement occurs.
ii. Defined contribution plans
The Company's contribution to provident
fund is considered as defined contribution
plan and is charged as an expense based
on the amount of contribution required
to be made. The Company has no further
payment obligations once the contributions
have been paid.
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