3. Summary of significant accounting policies
3.1 Overall considerations
The standalone financial statements have been prepared using the significant accounting policies
and measurement basis summarized below. These accounting policies have been used throughout
all periods presented in the standalone financial statements.
Accounting policies have been consistently applied except where a newly issued accounting
standard is initially adopted or a revision to an existing accounting standard requires a change in
the accounting policy hitherto in use.
3.2 Revenue recognition
Revenue is measured at the fair value of consideration received or receivable by the Company
for goods supplied and services provided, excluding trade discounts and other applicable taxes.
Revenue is recognised upon transfer of control of promised goods or services under a contract.
Revenue is recognised when the amount can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the Company, the costs incurred or to be
incurred can be measured reliably, and when the criteria for each of the Company’s different
activities has been met.
The Company derives revenues from three types of activities:
a) Construction contracts - Customer contracts towards delivering a sewerage water treatment
facility that is fit for purpose as per the contract.
b) Operation and maintenance contracts - Customer contracts towards operation and
maintenance of sewerage water treatment facilities.
c) Manufacturing - The company is engaged in manufacturing of own items which are used
for construction purposes.
The Company determines its performance obligations included in the contracts signed with
customers. When a customer contract includes both a construction and operation & maintenance,
the performance obligations are separately identified and revenue is recognised in accordance
with the principles of Ind AS 115.
a) Construction Contracts:
Construction contracts generally involve design, supply, construction, installation
and commissioning of sewerage water treatment facilities on turnkey basis, Electricity
transmission and distribution & Building.
The transaction price is usually a fixed consideration with a variable consideration on a
case to case basis. Variable consideration (penalties, damages, claims etc.) is included in the
transaction price to the extent it is highly probable that a significant reversal in the amount
of revenue recognised will not occur.
Construction contracts usually have a single performance obligation, wherein the control
of goods and services are transferred progressively over the period of the contract. The
Company satisfies its performance obligation upon completing the scope of the construction
contract and achieving customer acceptance.
Contract revenue and Contract costs in respect of construction contracts, execution of
which is spread over different accounting periods is recognised as revenue and expense
respectively by using percentage of completion method at the reporting date.
The percentage of completion is measured by reference to the contract costs incurred up to
the end of the reporting period as a percentage of total estimated costs for each contract.
Only costs that reflect work performed are included in cost incurred to date.
When the Company cannot measure the outcome of a contract reliably, revenue is recognised
only to the extent of contract costs that have been incurred and are recoverable.
Unbilled revenue represents the value of goods and services performed in accordance with
the contract terms but not billed and shown as Unbilled dues in Trade Receivables.
The amount of retention money held by the customer pending completion of performance is
disclosed under Other Financial Assets (Non-Current) as Customer Retention withheld.
b) Operation & Maintenance contracts
Operation and maintenance contracts involve operation and maintenance services for water
treatment facilities and the supply of spares. Revenue from operation and maintenance contracts
are recognized as the services are provided and invoiced to the customer, as per the terms of the
contract. Unbilled revenue represents the value of services performed in accordance with the
contract terms but not billed and shown as Unbilled dues in Trade Receivables.
c) The company is engaged in manufacturing of own items which are used for construction
purposes.
Other Income
Interest income is recognized on a time-proportion basis using the effective interest method.
3.3 Cost of sales and services
Cost of sales and services comprise costs including costs that are directly related to the contract,
attributable to the contract activity in general, and such costs that can be allocated to the contract
and specifically chargeable to the customer under the terms of the contracts, which is charged to
the statement of profit and loss.
3.4 Property, Plant & Equipment
Buildings and other equipment
Property, Plant & Equipment (comprising of Building, Plant & Machinery, Vehicles, Furniture &
Fixtures, Office Equipment & Computers ) are initially recognised at acquisition cost, including
any costs directly attributable to bringing the assets to the location and condition necessary for
them to be capable of operating in the manner intended by the Company’s management.
Advances paid towards acquisition of property, plant and equipment outstanding at each balance
sheet date is classified as capital advances under other non-current assets and the cost of
property, plant and equipment not ready for the intended use before reporting date is disclosed
as capital work in progress.
Subsequent expenditure incurred on an item of property, plant and equipment is added to the
book value of that asset only if this increases the future benefits from the existing asset beyond
its previously assessed standard of performance.
Depreciation methods, estimated useful lives and residual value
Depreciation on assets is provided on written down method at the rates and in the manner
prescribed in Schedule II to the Companies Act, 2013.Schedule II to the companies Act 2013
prescribes the useful lives for various class of assets. For certain class of assets, based on technical
evaluation and assessment, Management believes that the useful lives adopted by it reflect the
period over which these assets are expected to be used.
Accordingly for those assets, the useful lives estimated by the management are different from
those prescribed in the Schedule. Management’s estimates of the useful lives for various classes
of fixed assets are as given below:-
The components of assets are capitalised only if the life of the components vary significantly and
whose cost is significant in relation to the cost of respective asset.
- Investment Property
Property that is held for long-term rental yields or for capital appreciation or both 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 replaced part is derecognised.
3.5 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following
initial recognition, the intangible assets are carried at cost less accumulated amortisation and
accumulated impairment, if any.
Computer software is stated at cost less accumulated amortisation and are being amortised on a
straight line basis over the estimated useful life of 5-10 years.
Amortisation is included within depreciation and amortisation expense in the statement of profit
and loss.
The amortisation period and method are reviewed at each balance sheet date. Residual values
and useful lives are reviewed at each reporting date.
3.6 Impairment of property, plant and equipment
For the purpose of impairment assessment, assets are grouped at the lowest levels for which there
are largely independent cash inflows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating unit level. Goodwill (if any) is
allocated to those cash generating units that are expected to benefit from synergies of a related
business combination and represent the lowest level within the Company at which management
monitors goodwill.
All individual assets or cash-generating units are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets’ (or cash-generating unit’s)
carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of
disposal and value in-use. To determine the value-in-use, management estimates expected future
cash flows from each cash generating unit and determines a suitable discount rate in order to
calculate the present value of those cash flows. The data used for impairment testing procedures
are directly linked to the Company’s latest approved budget, adjusted as necessary to exclude
the effects of future reorganisations and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect current market assessments of the time
value of money and assets specific risk factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill
allocated to that cash-generating unit. Any remaining impairment loss is charged pro-rata to the
other assets in the cash-generating unit.
3.7 Leases
The Company recognizes lease contracts as per the single lease accounting model for lessees.
The model requires a lessee to recognize right to use assets and corresponding lease liabilities for
all leases with a lease term of more than twelve months, unless the underlying asset is of a low
value. For such leases the lease payments are recognized as an operating expense on a straight
line basis over the term of the lease contract.
The recognition, measurement, presentation and disclosure of leases are in accordance with the
principles of the standard. At the time of initial measurement, the lease liabilities are recognized
at the present value of lease payments payable. The lease liability is discounted at the interest rate
implicit to the lease, or incremental borrowing rate to arrive at the present value. The lease liabilities
are diluted over the remaining lease period by lease payments. The right to use assets are initially
recognized at lease liability amount. The incremental borrowing rate is considered as 10% which
reflects the borrowing rate in the prevailing economic environment with similar terms and security.
The right to use assets are thereafter depreciated over the period of lease term or the useful life of
underlying asset whichever is lower. An impairment loss is recognised where the carrying amount
of right to use asset exceeds its recoverable amount.
3.8 Investments
- in subsidiaries
Investments in subsidiaries are accounted at cost less impairment, if any. During the year,
EMS Limited has acquired 6000 (60%) shares of Brij Bihari Pulp & Papers private limited at
a premium of ' 12905/- per share at a face value of ' 10/- each per share for an aggregate
amount of ' 7.75 crores. Accordingly it becomes the subsidiary of EMS Limited.
- in unlisted Companies
The Fair value of Polymatech Electronics Limited, being unlisted entity, could not be assessed
because of unavailability of latest financial statement of 31st March 2025, hence the value of
shares is considered at Cost Price only.
3.9 Financial Instruments
Financial assets (other than trade receivables) and financial liabilities are recognised when the
Company becomes a party to the contractual provisions of the financial instrument and are
measured initially at fair value adjusted for transaction costs, except for those carried at fair
value through statement of profit and loss which are measured initially at fair value.
Trade receivables are recognised at their transaction price as the same do not contain significant
financing component. Subsequent measurement of financial assets and financial liabilities are
described below.
a) Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets are classified and measured
based on the entity’s business model for managing the financial asset and the contractual
cash flow characteristics of the financial asset at:
a. Amortised cost
b. Fair Value Through Other Comprehensive Income (FVTOCI) or
c. Fair Value Through Profit or Loss (FVTPL)
b) Financial assets at amortised cost
A financial asset is subsequently measured at amortised cost using effective interest rate if it
is held within a business model where the objective is to hold the financial assets to collect
contractual cash flows and the contractual terms gives rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding. The
Company has classified the following financial Assets at amortised Cost as disclosed in Note
40 of the Standalone Financial Statement.
c) Financial assets at Fair Value through Other Comprehensive Income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income
if it is held within a business model where the objective is both collecting contractual cash
flows and selling financial assets along with the contractual terms giving rise on specified
dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding. There are no assets in this category which are measured at fair value
with gains or losses recognised in Other Comprehensive income. However the actuarial
loss/ gain on remeasurement on defined benefit plan is recognised in other comprehensive
income based on actuarial valuation by a certified actuarial valuer.
d) Financial assets at Fair Value Through Profit or Loss (FVTPL)
Financial assets at FVTPL include financial assets that are designated at FVTPL upon
initial recognition and financial assets that are not measured at amortised cost or at fair
value through other comprehensive income. There are no assets in this category which are
measured at fair value with gains or losses recognised in statement of profit and loss.
Hedge Accounting
For the reporting periods under review, the Company has not designated any forward
currency contracts as hedging instruments.
e) Trade receivables
Trade receivables do not carry any interest and are stated at their normal value as reduced
by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables
are written off when management deems them not to be collectible.
The Company follows ‘simplified approach’ for recognition of impairment loss allowance
on trade receivables which does not require the Company to track changes in credit risk.
The company has created allowance for expected credit risk based on the management
assessment
f) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e. removed from the Company’s balance sheet) when:
i. the rights to receive cash flows from the asset have expired, or
ii. the Company has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay
to a third party under a ‘pass-through’ arrangement; and either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has
neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has retained
the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the Company continues to recognise the transferred
asset to the extent of the Company’s continuing involvement. In that case, the Company also
recognises an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Company has retained.
g) Classification, subsequent measurement and derecognition of financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss or at amortised cost. The Company’s financial liabilities include
borrowings, trade payables and other financial liabilities.
Subsequent measurement
Financial liabilities are measured subsequently at amortised cost using the effective interest
method except for derivatives and financial liabilities designated at FVTPL, which are carried
subsequently at fair value with gains or losses recognised in statement of profit and loss (other
than derivative financial instruments that are designated and effective as hedging instruments).
The Company has classified the following financial liabilities at amortised Cost as disclosed in
Note 40 of the Standalone Financial Statement.
Derecognition
A financial liability is derecognised 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 the derecognition of the original liability and the
recognition of a new liability. The difference in the respective carrying amounts is recognised in
the statement of profit and loss.
3.10 Inventories
Material at Site- valued at cost Price.
Work in Progress- valued at Cost or NRV, whichever is lower.
3.11 Income Taxes
Tax expense recognised in statement of profit and loss comprises the sum of deferred tax and
current tax not recognised in other comprehensive income or directly in equity.
Calculation of current tax is based on tax rates in accordance with tax laws that have been
enacted or substantively enacted as at the reporting period. Deferred income taxes are calculated
using the liability method on temporary differences between tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at reporting date.
Deferred taxes pertaining to items recognised in other comprehensive income are also disclosed
under the same head.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or
deductible temporary difference will be utilised against future taxable income. This is assessed
based on the Company’s forecast of future operating results, adjusted for significant non-taxable
income and expenses and specific limits on the use of any unused tax loss or credit.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or
expense in statement of profit and loss, except where they relate to items that are recognised in
other comprehensive income (such as re-measurement of net defined benefit plans) or directly in
equity, in which case the related deferred tax is also recognised in other comprehensive income
or equity, respectively. The company has disclosed Income Tax and its reconciliation in Note 33
of the standalone financial statement.
3.12 Cash & Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other
short-term, highly liquid investments maturing within three months from the date of acquisition
that are readily convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
3.13 Equity & Reserves and Surplus
Share capital represents the nominal (par) value of shares that have been issued and paid-up.
Other components of equity include the following:
i) Retained earnings- This reserve represents undistributed accumulated earnings of the
Company as on the balance sheet date.
ii) Securities premium reserve includes any premiums received on issue of share capital. Any
transaction costs associated with the issuing of shares are deducted from securities premium,
iii) Other comprehensive income represents actuarial loss or gain on remeasurement of
defined benefits plans.
3.14 Post-employment benefits and short-term employee benefits
(i) Short term Employee Benefits
Employee benefits such as salaries, wages, short term compensated absences, bonus, ex-
gratia and performance-linked rewards falling due wholly within twelve months of rendering
the service are classified as short-term employee benefits and are expensed in the period in
which the employee renders the service.
(ii) Post-Employee Benefits
A. Defined contribution plan
The Company’s provident fund scheme and employee state insurance scheme are
defined contribution plans. The contribution paid / payable under the schemes is
recognised as an expense during the period in which the employee renders the service.
The Company has no legal or constructive obligations to pay contributions in addition
to its fixed contributions.
a. Provident fund and Employee state insurance scheme
The Company makes contributions to the statutory provident fund and employee state
insurance scheme in accordance with Employees Provident Fund and Miscellaneous
Provisions Act, 1952 and Employees’ State Insurance Act, 1948. These contributions,
paid or payable, are recognised as expenses in the period in which it falls due.
B. Defined benefits plans
Under the Company’s defined benefit plans, the amount of benefit that an employee
will receive on retirement is defined by reference to the employee’s length of service and
final salary. The legal obligation for any benefits remains with the Company, even if
plan assets for funding the defined benefit plan have been set aside. Plan assets may
include assets specifically designated to a long-term benefit fund as well as qualifying
insurance policies
The defined benefit plans maintained by the Company are as below:
(i) Gratuity& Leave Encashment
The Company has Defined Benefit plan, namely gratuity for employees and leave
encashment , the liability for which is determined on the basis of an actuarial
valuation (using the Projected Unit Credit method) at the end of each annual
reporting period. Remeasurements, comprising actuarial gains and losses, the
effect of the changes to the return on plan assets (excluding net interest), is
reflected immediately in the balance sheet with a charge or credit recognised in
other comprehensive income in the period in which they occur.
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