SIGNIFICANT ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION
a) Compliance with Indian Accounting Standards (Ind - AS):
The financial statements have been prepared in accordance with the Indian Accounting
Standards (‘Ind AS’) notified under Companies (India Accounting Standards) Rules, 2015.
The company follows the prudential norms issued by the Reserve Bank of India for Assets
classification, Income recognition and provisioning for non-performing assets. Besides
additional amount is written/off provided for when the management, on a review, considers
it necessary.
The financial statements have been prepared on accrual and going concern basis. The
accounting policies are applied consistently to all the periods presented in the financial
statements, All the assets and liabilities have been classified as current and non-current as
per the Company’s normal operating cycle and other criteria as set out in Division II of
Schedule III to the Companies Act, 2013.
b) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for the
followings:
- Certain financial assets and liabilities that are measured at fair value.
c) Functional and presentation currency
The financial statements are prepared in Indian Rupees (‘Rs.’), which is the Company’s
functional and presentation currency.
d) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non¬
current classification.
An asset is classified as current when it is: -
- expected to be realized, or intended to be sold or consumed in normal operating cycle;
- held primarily for the purpose of trading;
- expected to be realized within 12 months after the reporting period; or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting date.
All other assets are classified as non-current.
A liability is classified as current when it is:
- expected to be settled in the normal operating cycle;
- held primarily for the purpose of trading;
- due to be settled within 12 months after the reporting date; or
- there is no unconditional right to defer the settlement of the liability for at least 12
months after the reporting date.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities:
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating Cycle:
The operating cycle is the time between acquisition of assets for processing and their
realization in cash and cash equivalent. The Company has identified twelve months as its
operating cycle.
e) Use of estimates and judgments
The preparation of the financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the accompanying disclosure and the disclosure of contingent liabilities.
Uncertainty about these estimates and assumptions could result in outcomes that requires
material adjustments to the carrying amount of the assets and liabilities in future period/s.
These estimates and assumptions are based on the facts and events that existed as at the
date of Balance Sheet, or that occurred after that date but provide additional evidence
about conditions existing as at the Balance Sheet date.
The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying values of assets and liabilities within the next financial year are
discussed below.
i Useful lives of Property Plant and Equipment
The Property, Plant and Equipment are depreciated on a written down value basis over
their respective useful lives. Management estimates the useful lives of these assets,
changes in the expected level of usage, technological developments, level of wear and
tear could impact the economic useful lives and the residual values of these assets,
therefore, future depreciation charges could be revised and could have an impact on the
profit in future years.
ii Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes
in tax laws, and the amount and timing of future taxable income. Given the wide range
of business relationships and the long term nature and complexity of existing
contractual agreements, differences arising between the actual results and the
assumptions made, or future changes to such assumptions, could necessitate future
adjustments to tax income and expense already recorded. The Company establishes
provisions, based on reasonable estimates. The amount of such provisions is based on
various factors, such as experience of previous tax audits and differing interpretations of
tax regulations by the taxable entity and the responsible tax authority. Such differences
of interpretation may arise on a wide variety of issues depending on the conditions
prevailing in the respective domicile of the companies.
iii Impairment of Financial assets
The impairment provisions of financial assets are based on assumptions about risk of
default and expected loss rates. The Company uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on
Company’s past history, existing market conditions as well as forward looking estimates
at the end of each reporting period.
iv 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 assets
recoverable amount is the higher of an assets’s fair value less cost of disposal and its
value in use. It is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or Companies of
assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset
is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are 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 asset. In determining fair value less
costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, or other fair value indicators.
v Estimation uncertainty relating to COVID-19 outbreak
The Company has considered internal and certain external sources of information
including credit reports, economic forecasts and industry reports up to the date of
approval of the financial statements in determining the impact on various elements of its
financial statements. The Company has used the principles of prudence in applying
judgments, estimates and assumptions including sensitivity analysis and based on the
current estimates, the Company expects to fully recover the carrying amount of trade
receivables including unbilled receivables, goodwill, intangible assets and investments.
The eventual outcome of impact of the global health pandemic may be different from
those estimated as on the date of approval of these financial statements.
Property, Plant & Equipment
Property, Plant & Equipment are accounted for on historical cost basis (inclusive of the cost of
installation and other incidental costs till commencement of commercial production) net of
recoverable taxes, less accumulated depreciation and impairment loss, if any. It also includes
the initial estimate of the costs of dismantling and removing the item and restoring the site on
which it is located.
Subsequent costs are added to the existing asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the Statement of Profit and Loss
during the period in which they are incurred.
Cost of leasehold land is amortized over the period of lease.
Depreciation on property, plant & equipment is provided on a pro-rate basis on written down
value basis, over the useful life of the assets estimated by the management, in the manner
prescribed in Schedule II of the Companies Act, 2013. The asset’s residual values, useful lives
and method of depreciation are reviewed at the end of each reporting period and necessary
adjustments are made accordingly, wherever required. The useful lives in the following cases
are different from those prescribed in Schedule II of the Companies Act, 2013-:
Based on usage pattern, internal assessment and technical evaluation carried out by the
technicians, the management believes that the useful lives as given above best represent the
period over which the management expects to use these assets. Hence the useful lives of these
assets is different from the lives as prescribed in Schedule II of the Companies Act, 2013.
Gains or losses arising on retirement or disposal of property, plant and equipment are
recognized in the Statement of Profit and Loss.
Property, plant and equipment which are not ready for intended use as on the date of Balance
Sheet are disclosed as “Capital work-in-progress”.
Investment
Investments that are readily realizable and intended to be held for not more than a year are
classified as current investments. All other investments are classified as long-term
investments. Current investments are carried at lower of cost and fair value determined on an
individual investment basis. Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary in the value of the
investments.
Financial Instruments
A financial instrument is a contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, balance with banks and demand deposits
with banks which are short-term (three months or less from the date of acquisition), highly
liquid investments that are readily convertible into cash and which are subject to an
insignificant risk of changes in value.
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