2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Compliance with Indian Accounting Standards
(Ind AS)
The Company's Financial statements have been
prepared to comply with generally accepted
accounting principles in accordance with the
Indian Accounting Standards (herein after
referred to as "Ind AS") as notified by the Ministry
of Corporate Affairs pursuant to Section 133 of the
Companies Act 2013 ("the Act") read with Rule 3
of the Companies (Indian Accounting Standards)
Rules 2015 and Companies (Indian Accounting
Standards) Amendments Rules 2016.
2.2 Basis of Preparation and Presentation of
Financial Statement
The Financial statements are prepared on accrual
basis following the historical cost convention
except in case of certain financial instruments
which are measured at fair values. The Balance
Sheet and the Statement of Profit and Loss are
prepared and presented in the format prescribed
under Schedule III to the Act. The Statement of
Cash Flows has been prepared and presented
as per the requirements of Indian Accounting
Standard (Ind AS) - 7 on "Statement of Cash Flows".
The disclosure requirements with respect to items
in the Balance Sheet and Statement of Profit and
Loss, as prescribed in the Schedule III to the Act,
are presented by way of notes forming part of
the financial statements along with other notes
required to be disclosed under the notified Ind AS
and the Listing Agreement. Further, the guidance
notes/announcements issued by the Institute of
Chartered Accountants of India (ICAI) are also
considered, wherever applicable except to the
extent where compliance with other statutory
promulgations viz. SEBI guidelines override the
same requiring a different treatment. 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 used previously.
Fair value for measurement adopted in these
financial statements is determined on such a
basis, except leasing transactions that are within
the scope of Ind AS 116, Net Realizable value as
per Ind AS 2 or value in use in Ind AS 36. Fair value
measurements under Ind AS are categorized as
below based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair value
measurement in its entirety:
• Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or
liabilities that the entity can access at the
measurement date;
• Level 2 inputs are other than quoted prices
included with in Level 1, that are observable
for the asset or liability, either directly or
indirectly; and
• Level 3 inputs are unobservable inputs for
the Asset or Liability.
2.3 Use of Estimates
The preparation of the financial statements in
conformity with Ind AS requires the management
of the Company to make estimates and
assumptions that affect the reported amounts
of income and expenses of the period, the
reported balances of assets and liabilities and
the disclosures relating to contingent liabilities
as on the date of the financial statements.
Actual results may differ from these estimates.
The Company evaluates these estimations and
assumptions on a continuous basis based on the
historical experience and other factors including
expectation of future events believed to be
reasonable. Examples of such estimates include
the useful lives of tangible and intangible fixed
assets, allowance for doubtful debts/advances,
future obligations in respect of retirement benefit
plans, estimation of costs as a proportion to the
total costs, etc., Appropriate changes in estimates
are made as the management becomes aware
of changes in circumstances. Difference, if any,
between the actual results and estimates is
recognized in the period in which the results are
known/ materialized. Changes in estimates are
reflected in the financial statements in the period
in which changes are made and if material, are
disclosed in the Notes to Account.
2.4 Revenue Recognition
The Company recognises revenue from contracts
with customers when it satisfies a performance
obligation by transferring promised good or
service to a customer. The revenue is recognised
to the extent of transaction price allocated to the
performance obligation satisfied. Performance
obligation is satisfied over time when the transfer
of control of asset (good or service) to a customer
is done over time and in other cases, performance
obligation is satisfied at a point in time. For
performance obligation satisfied over time,
the revenue recognition is done by measuring
the progress towards complete satisfaction of
performance obligation. The progress is measured
in terms of a proportion of actual cost incurred
to-date, to the total estimated cost attributable to
the performance obligation.
Revenue is measured at the amount of
consideration which the company expects to be
entitled to in exchange for transferring distinct
goods or services to a customer as specified in
the contract, excluding amounts collected on
behalf of third parties (for example taxes and
duties collected on behalf of the government).
Consideration is generally due upon satisfaction
of performance obligations and a receivable is
recognised when the it becomes unconditional.
The management of the company has applied
significant judgement in determining the revenue
to be recognised in case of performance obligation
satisfied over a period; revenue recognition
is done by measuring the progress towards
complete satisfaction of performance obligation.
The progress is measured in terms of a proportion
of actual cost incurred to-date, to the total
estimated cost attributable to the performance
obligation and determining the expected losses,
which are recognised in the period in which such
losses become probable based on the expected
total contract cost as at the reporting date.
The specific revenue recognition policy adopted
is as follows:
A. Revenue from Operations
a. Revenue from Construction activity:
i) Income is recognized on fixed price
construction contracts in accordance with
the percentage of completion basis, which
necessarily involve technical estimates
of the percentage of completion, and
costs to completion, of each contract /
activity, on the basis of which profits and
losses are accounted. When the outcome
of the contract is ascertained reliably,
contract revenue is recognized at cost
of work performed on the contract plus
proportionate margin, using the percentage
of completion method. Percentage of
completion is the proportion of cost of
work performed up to the date, to the total
estimated contract costs.
ii) The stage of completion of contracts is
measured by reference to the proportion
that contract costs incurred for work
performed up to the reporting date bear to
the estimated total contract costs for each
contract.
iii) Price escalation and other variations in
the contract work are included in contract
revenue only when:
a) Negotiations have reached at an
advanced stage such that it is probable
that customer will accept the claim and
b) The amount that is probable will be
accepted by the customer and can be
measured reliably.
iv) Incentive payments, as per customer-
specified performance standards, are
included in contract revenue only when:
a) The contract has sufficiently advanced
such that it is probable that the
specified performance standards will
be met; and
b) The amount of the incentive payment
can be measured reliably.
v) Contract Claims raised by the company
which can be reliably measured and have
reached an advanced stage of arbitration
and claims pending in High Courts have
been recognized as income including
eligible interest thereon.
b. Contract Revenue from supply of materials:
Revenue from supply of materials is recognized
when substantial risk and rewards of ownership
are transferred to the buyer and invoice for the
same is raised.
c. Revenue receipts from Joint Venture Contracts
i) In work sharing Joint Venture arrangements,
revenues, expenses, assets and liabilities are
accounted for in the Company's books to the
extent work is executed by the Company.
ii) In Jointly Controlled Entities, the share of
profits or losses is accounted as and when
dividend/ share of profit or loss are declared
by the entities.
d. Other Operational Revenue:
i) All other revenues are recognized only when
collectability of the resulting receivable
is reasonably assured and related goods /
services are transferred to the customer.
ii) Revenue is reported net of discounts, if any.
B. Other Income
i) Interest income is accounted on accrual
basis as per applicable interest rates and on
time proportion basis taking into account
the amount outstanding.
ii) Dividend income is accounted in the year
in which the right to receive the same is
established.
iii) Insurance claims are accounted for on cash
basis.
2.5 (a) Property, Plant and Equipment
Property, Plant and Equipment are stated
at cost of acquisition, less accumulated
depreciation thereon. Expenditure which
are capital in nature are capitalized at cost,
which comprise of purchase price (net of
rebates and discounts), import duties, levies,
financing costs and all other expenditure
directly attributable to bringing the asset to
its working condition for its intended use.
Any gain/loss on the disposal of the
Property, Plant and Equipment is recognized
in the Statement of Profit &Loss account and
is determined as the difference between the
sales proceeds and the carrying amount of
the asset.
(b) Capital work in progress
Property, Plant and Equipment which are
purchased but not yet installed and not
ready for their intended use on the date of
balance sheet are disclosed as "Capital Work-
in-Progress". Cost of materials used in the
process of erection/installation of an asset
but not yet completed as on the reporting
date is also disclosed as "Capital Work-in¬
Progress".
2.6 Depreciation and amortization
In respect of Property, Plant & Equipment
(other than Land and Capital Work in Progress)
depreciation / amortization is charged on a
straight-line basis over the useful lives as specified
in Schedule II to the Companies Act, 2013.
Assets individually costing C 20,000/- or less and
temporary structures are fully depreciated in the
year of acquisition.
The residual values and useful lives are reviewed at
the end of the reporting period.
2.7 Impairment of Non-Financial Assets
As at each Balance Sheet date, the Company
assesses whether there is an indication that a non¬
financial asset may be impaired and also whether
there is an indication of reversal of impairment
loss recognized in the previous periods. If any
indication exists, or when annual impairment
testing for an asset is required, the Company
determines the recoverable amount and
impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable
amount.
Recoverable amount is determined:
- In case of an individual asset, at the higher
of the Assets' fair value less cost to sell and
value in use; and
- In case of cash generating unit (a group
of assets that generates identified,
independent cash flows), at the higher of
cash generating unit's fair value less cost to
sell and value in use.
- In assessing Value in Use, the estimated
future cash flows are discounted to their
present value using pre-tax discount rate
that reflects current market assessments of
the time value of money and risk specified
with the asset. In determining fair value less
cost to sell, recent market transactions are
taken into account. If no such transaction
can be identified, an appropriate valuation
model is used.
Impairment losses of continuing operations,
including impairment on inventories, are
recognized in the Statement of Profit and Loss,
except for properties previously revalued with
the revaluation taken to Other Comprehensive
Income (OCI). For such properties, the
impairment is recognized in OCI up to the amount
of any previous revaluation. When the Company
considers that there are no realistic prospects
of recovery of the asset, the relevant amounts
are written off. If the amount of impairment loss
subsequently decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognized, then the previously
recognized impairment loss is reversed through
the Statement of Profit and Loss.
2.8 Financial Instruments
Financial Assets and Financial Liabilities are
recognized when the Company becomes a party
to the contractual provisions of the instrument.
Financial Assets and Financial Liabilities are initially
measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue
of Financial Assets and Financial Liabilities (other
than Financial Assets and Financial Liabilities at
fair value through profit or loss) are added to
or deducted from the fair value of the Financial
Assets or Financial Liabilities, as appropriate, on
initial recognition.
2.9 Financial Assets
Financial Asset is any Asset that is -
(a) Cash
(b) Equity Instrument of another Entity,
(c) Contractual right to -
i. receive Cash / another Financial Asset
from another Entity, or
ii. exchange Financial Assets or Financial
Liabilities with another Entity under
conditions that are potentially
favorable to the Entity.
Investment in Equity Shares issued by Subsidiary,
Associate and Joint Ventures are carried at cost
less impairment.
Investment in preference shares classified as debt
instruments and carried at Amortized cost if they
are not convertible into equity instruments and
are not held to collect contractual cash flows.
Other Investment in preference shares which are
classified as Debt instruments are mandatorily
carried at Fair value through Profit & loss Account
(FVTPL).
All investments in equity instruments other than as
classified above under Financial Assets are initially
carried at fair value. The Company has adopted
to measure the fair value of equity instruments
through FVTPL Fair value changes on an equity
instrument are recognized in the Statement of
Profit & Loss.
Investments in equity instruments are classified
as at FVTPL, unless the related instruments are
not held for trading and the company irrevocably
elects on initial recognition to present subsequent
changes in fair value in Other Comprehensive
Income.
A financial asset which is not classified in any of
the above categories are subsequently fair valued
through profit or loss.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company
applies the expected credit loss (" ECL") model
for measurement and recognition of impairment
loss on financial assets and credit risk exposures.
The Company follows 'simplified approach' for
recognition of impairment loss allowance on trade
receivables. Simplified approach does not require
the Company to track changes in credit risk.
Rather, it recognizes impairment loss allowance
based on lifetime ECL at each reporting date,
right from its initial recognition. For recognition
of impairment loss on other financial assets and
risk exposure, the Company determines that
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. ECL is the difference
between all contractual cash flows that are due
to the Company in accordance with the contract
and all the cash flows that the entity expects to
receive (i.e., all cash shortfalls), discounted at the
original EIR. Lifetime ECL are the expected credit
losses resulting from all possible default events
over the expected life of a financial instrument.
The 12-month ECL is a portion of the lifetime
ECL which results from default events that are
possible within 12 months after the reporting
date. ECL impairment loss allowance (or reversal)
recognized during the period is recognized as
income/ expense in the Statement of Profit and
Loss.
Financial Liabilities
Financial liabilities are recognized at fair value net
of transaction costs and are subsequently held at
amortized cost using the effective interest rate
method. Financial liabilities carried at fair value
through profit and loss are measured at fair value
with changes in fair value recognized in the profit
and loss account. Interest bearing bank loans are
initially measured at fair value and subsequently
measured at amortized cost using the effective
interest rate method.
For trade and other payables maturing within one
year from the balance sheet date, the carrying
amounts approximate the fair value due to the
short maturity of these instruments.
De-recognition of Financial Instruments
A Financial Asset is derecognized when the right
to receive cash flows from the asset have expired
or the company has transferred substantially all
the risks and rewards or the right to receive the
cash flows under a contractual arrangement or
has transferred the asset.
A Financial Liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires. In the case where the existing
liability is replaced by another liability either from
the same lender or otherwise such an exchange is
treated as de-recognition of the original liability
and recognition of a new liability. Any change in
the carrying amount of a liability is recognized in
the Statement of Profit and Loss.
2.10 Inventories and Work in Progress
Raw Materials, Construction Materials and Stores
& Spares are valued at lower of weighted average
cost or net realizable value. Cost includes Direct
Material, Work Expenditure, Labour Cost and
appropriate overheads excluding refundable
duties and taxes.
Cost of materials utilised in the contract work,
which is not reached certain level, not quantified,
and qualified for billing is considered as work in
progress at the end of the reporting period.
2.11 Cash & Cash Equivalents
Cash and Cash Equivalents are short term highly
liquid investments that are readily convertible into
cash and which are subject to an insignificant risk
of change in value and have maturities of three
months or less.
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