Summary of material accounting policies
(i) 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:
• Expected to be settled in normal operating cycle
• Held primarily for the purpose of trading
• 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 realisation in cash
and cash equivalent. The Company has identified twelve
months as its operating cycle.
(ii) Cash Dividend
The Company recognises a liability to make cash
distributions to the shareholders of the Company when
the distribution is approved by the shareholder in the
Annual General Meeting of the Company.
(iii) Fair values measurements
Fair value is the price that would be received to sell
an asset or paid to transfer a liability 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
• I n the absence of a principal market, in the most
advantageous market for the asset or liability
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 best economic 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.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
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 - Other techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3 - Techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
(iv) Property, Plant and Equipment
Property, plant & equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalisation criteria are
met, directly attributable cost of bringing the asset to
its working condition for the intended use. Such cost
includes the cost of replacing part of the plant and
equipment.
The cost of replacing part of an item of property, plant
and equipment is recognised in the carrying amount
of the item if it is probable that the future economic
benefits embodied within the part will flow to the
Company and its cost can be measured reliably. The
costs of repairs and maintenance are recognised in the
statement of profit and loss as incurred.
The Company identifies and determines cost of
each component/ part of the asset separately, if the
component/ part has a cost which is significant to
the total cost of the asset and has useful life that is
materially different from that of the remaining asset.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset is included
in the Statement of Profit or Loss when the asset is
derecognised.
The residual values, useful lives and methods of
depreciation of Property, plant and equipment are
reviewed at each financial year end and adjusted, if
appropriate.
(v) Depreciation on Property, plant & equipment
• Leasehold improvements (LHI) & leasehold lands
are amortised on straight line basis over the
period of lease or useful life whichever is lower.
• Depreciation on other Property, plant & equipment
is provided on straight line basis at the rates
based on the estimated useful life of the assets.
The Company, based on management estimates,
depreciates the assets over estimated useful lives
which coincides with the useful life prescribed in
Schedule II to the Companies Act, 2013.
The Company, based on technical assessment
made by technical expert and management
estimate, depreciates certain items of plant
and equipment, furniture and fixtures and office
equipment over estimated useful lives which are
different from the useful life prescribed in Schedule
II to the Companies Act, 2013. 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.
• Depreciation on Property, plant & equipment
added/disposed off during the year is provided on
pro-rata basis with respect to date of acquisition/
disposal.
(vi) Intangible assets
Intangible assets are carried at cost less any
accumulated amortisation and accumulated
impairment losses, if any. Internally generated
intangibles, excluding capitalised development costs,
are not capitalised and the related expenditure is
reflected in profit or loss in the period in which the
expenditure is incurred.
Computer software is amortised over the estimated
useful life of 3 years.
An item of intangible assets is derecognised upon
disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss
arising on derecognition of the asset is included in
the Statement of Profit or Loss when the asset is
derecognised. The residual values, useful lives and
methods of amortisation of intangible assets are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
(vii) Asset held for sale
An item of Property, plant and equipment is classified
as asset held for sale at the time when the Management
is committed to sell/dispose off the asset as per
Memorandum of Agreement entered into with the
customer and the asset is expected to be sold/disposed
off within one year from the date of classification.
Assets classified as held for sale are measured at the
lower of their carrying amount and fair value less costs
to sell.
(viii) Research and development costs
Research and development costs of revenue nature
are charged to the Statement of Profit and Loss
when incurred. Fixed assets utilised for research
and development are capitalised and depreciated in
accordance with the rates set out in Note 1.3 (iv) above.
(ix) Revenue Recognition
• Revenue from contract with customers
Revenue from contracts with customers is
recognised when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services.
I n respect of pre-engineered building contracts,
revenue is recognised over a period of time using
the input method (equivalent to percentage-of-
completion method; POCM) of accounting with
contract costs incurred determining the degree of
completion of the performance obligation.
Revenue is measured based on the transaction
price, which is the consideration, adjusted
for volume discounts, price concessions and
incentives, if any, as specified in the contract
with the customer Revenue also excludes
taxes collected from customers on behalf of the
government.
Effective April 01, 2018, the Company has
applied Ind AS 115 "Revenue from contracts with
customers" which establishes a comprehensive
framework for determining whether, how much
and when revenue is to be recognised. Ind AS
115 replaces Ind AS 18 "Revenue" and Ind AS 11
"Construction Contracts". The effect of initially
applying this standard is recognised at the date
of initial application (i.e. April 01, 2018). The
Company has adopted Ind AS 115 using the
modified retrospective approach. Under the
modified retrospective approach, there were no
significant adjustments required to the retained
earnings at April 01, 2018. Also, the application
of Ind AS 115 did not have any significant impact
on recognition and measurement of revenue and
related items in the financial statements.
• Interest
For all debt instruments measured at amortised
cost, interest income is recorded using the
effective interest rate (EIR).
EIR is the rate that exactly discounts the estimated
future cash payments or receipts over the expected
life of the financial instrument or a shorter period,
where appropriate, to the gross carrying amount
of the financial asset or to the amortised cost of
a financial liability. Interest income is included in
finance income in the statement of profit and loss.
(x) 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.
• Financial assets
Initial recognition and measurement
On initial recognition, a financial asset except
trade receivables is recognised at fair value, in
case of financial assets which are recognised
at fair value through profit and loss (FVTPL), its
transaction cost are recognised in the statement
of profit and loss. In other cases, the transaction
cost are attributed to the acquisition value of
the financial asset. Trade Receivable that do not
contain a significant financing component are
measured at transaction price.
Subsequent measurement
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised
cost if both the following conditions are met:
a) The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and
b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
After initial measurement, such financial assets
are subsequently measured at amortised cost
using the effective interest rate (EIR) method.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The
EIR amortisation is included in other income in
the statement of profit and loss. The losses arising
from impairment are recognised in the statement
of profit and loss. This category generally applies
to trade receivables, security deposits & other
receivables.
Investments in subsidiaries
Investments in subsidiaries are carried at cost less
accumulated impairment losses, if any. Where
an indication of impairment exists, the carrying
amount of the investment is assessed and written
down immediately to its recoverable amount.
On disposal of investments in subsidiaries, the
difference between net disposal proceeds and the
carrying amounts are recognised in the statement
of profit and loss.
Derecognition
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers the
contractual rights to receive the cash flows from
the asset.
Impairment of financial assets
The Company applies expected credit loss (ECL)
model for measurement and recognition of
impairment loss on the trade receivable.
The Company uses a provision matrix to
determine impairment loss allowance on portfolio
of its trade receivables. The provision matrix is
based on its historically observed default rates
over the expected life of the trade receivables and
is adjusted for estimated losses on the current
portfolio. At every reporting date, the historical
observed default rates are updated and changes
in the forward-looking estimates are analysed.
The impairment losses and reversals are
recognised in Statement of Profit and Loss. A
previously recognised impairment loss is reversed
only if there has been a change in the assumptions
used to determine the asset's recoverable amount
since the last impairment loss was recognised.
• Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction
costs.
Subsequent measurement
Financial liabilities are subsequently measured at
amortised cost using the EIR method.
Other financial liabilities (Loans and borrowings)
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and
losses are recognised in the statement of profit
and loss when the liabilities are derecognised as
well as through the EIR amortisation process.
The EIR amortisation is included as finance costs
in the statement of profit and loss.
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.
Derivative financial instruments
The Company uses derivative financial
instruments such as foreign exchange forward
contracts, option contracts and swap contracts to
hedge its foreign currency risk.
Such derivative financial instruments are initially
recognised at fair value on the date on which
a derivative contract is entered into and are
subsequently re-measured at fair value at the end
of each reporting period.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit
or loss.
(xi) Inventories
Inventories are valued at the lower of cost and the
net realisable value after providing for obsolescence
and other losses, where considered necessary and
includes all applicable costs incurred in bringing goods
to their present location and condition. The basis for
determining cost for various categories of inventories
is as follows:
Stores and spare - Moving Weighted average
parts
Raw materials - Moving Weighted average
Materials in transit - At cost
Work in progress - Material cost determined on
and moving weighted average
basis plus appropriate share
Finished goods
of labour, manufacturing and
other overheads.
Stock in trade - Moving Weighted average
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and estimated costs necessary to make
the sale.
(xii) Retirement and other Employee Benefits
Employee benefits include provident fund,
superannuation, performance incentives, gratuity and
compensated absences.
Short-term employee benefits
The undiscounted amount of short-term employee
benefits expected to be paid in exchange of services
rendered by employees is recognised during the period
when the employee renders the services. These benefits
include compensated absences and performance
incentives.
Post-employment benefit plans
The Company has various schemes of retirement
benefits namely provident fund, superannuation
schemes and gratuity, which are administered by
trustees of independently constituted trusts recognised
by the Income-tax authorities.
Retirement benefit in the form of provident fund is a
defined contribution scheme. The Company has no
obligation, other than the contribution payable to the
provident fund. The Company recognises contribution
payable to the provident fund scheme as an expense,
when an employee renders the related service. If the
contribution payable to the scheme for service received
before the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme is
recognised as a liability after deducting the contribution
already paid. If the contribution already paid exceeds
the contribution due for services received before the
balance sheet date, then excess is recognised as an
asset.
The Company's superannuation scheme is considered
as defined contribution scheme. The Company has
no obligation, other than the contribution payable to
the superannuation fund. The Company recognises
contribution payable to the superannuation fund
scheme as an expense, when an employee renders the
related service.
The Company operates a defined benefit gratuity plan,
which requires contributions to be made to a separately
administered fund. The cost of providing benefits
under the defined benefit plan is determined using
the projected unit credit method. Remeasurements,
comprising of actuarial gains and losses, and the return
on plan assets (excluding net interest), are recognised
to OCI in the period in which they occur and are not
reclassified to profit or loss.
Benefits comprising compensated absences constitute
other employee benefits. The liability for compensated
absences is provided on the basis of an actuarial
valuation done by an independent actuary at the year
end. Actuarial gains/losses are immediately taken to
the statement of profit and loss for the period in which
they are occur
(xiii) Borrowing Costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use are capitalised as part of the cost of
the respective asset. All other borrowing costs are
expensed in the period they occur Borrowing costs
consist of interest and other costs that an entity incurs
in connection with the borrowing of funds. Borrowing
cost also includes exchange differences to the extent
regarded as an adjustment to the borrowing costs.
(xiv) Foreign Exchange Transactions and balances
The functional currency of the Company is Indian
Rupees.
Initial recognition
Transactions in foreign currencies are initially recorded
by the Company at their respective functional currency
spot rates at the date the transaction first qualifies for
recognition.
Conversion
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency
exchange rate at the reporting date.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions.
Foreign currency monetary items are retranslated
using the exchange rate prevailing at the reporting date
and exchange gains and losses arising on settlement
and restatement are recognised in the statement
of profit and loss. Non-monetary items, which are
measured in terms of historical cost denominated in a
foreign currency, are reported using the exchange rate
at the date of the transaction.
(xv) Taxation
Tax expense comprises current tax expense and
deferred tax.
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted
or substantively enacted, at the reporting date in the
countries where the Company operates and generates
taxable income.
Current income tax relating to items recognised
outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity).
Current tax items are recognised in correlation to the
underlying transaction either in OCI or directly in equity.
Management periodically evaluates positions taken
in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The
Company shall reflect the effect of uncertainty for each
uncertain tax treatment by using either most likely
method or expected value method, depending on which
method predicts better resolution of the treatment.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realised, or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in
other comprehensive income or in equity). Deferred tax
items are recognised in correlation to the underlying
transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset
if and only if the Company has a legally enforceable
right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same
taxation authority on either the same taxable entity
which intends either to settle current tax liabilities and
assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities or
assets are expected to be settled or recovered.
(xvi) Earnings Per Share
Basic earnings per share are calculated by dividing the
net profit or loss for the period attributable to equity
shareholders by the weighted average number of equity
shares outstanding during the period. The weighted
average number of equity shares outstanding during
the period is adjusted for events such as bonus issue,
bonus element in a rights issue, that have changed
the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable to
equity shareholders and the weighted average number
of shares outstanding during the period are adjusted
for the effects of all dilutive potential equity shares.
(xvii) Impairment of Non-financial Assets
The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment
testing for an asset is required, the Company estimates
the asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs of disposal or its
value in use. Recoverable amount is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from
other assets or group of assets. When the carrying
amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written
down to its recoverable amount.
I mpairment losses are recognised in the statement of
profit and loss.
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