3. MATERIAL ACCOUNTING POLICIES
3.1 PROPERTY, PLANT & EQUIPMENT (PPE)
Recognition and initial measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost less
accumulated depreciation / amortization and impairment losses, if any.
Cost comprises of the purchase price and any attributable / allocable cost of bringing the asset to its working
condition for its intended use. The cost also includes direct cost and other related incidental expenses. Revenue
earned, if any, during trial run of assets is adjusted against cost of the assets. Cost also includes the cost of replacing
part of the plant and equipment.
Borrowing costs relating to acquisition / construction / development of tangible assets, which takes substantial
period of time to get ready for its intended use are also included to the extent they relate to the period till such assets
are ready to be put to use.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are
classified as capital advances under other non-current assets.
Subsequent measurement (depreciation and useful lives)
When significant components of property and equipment are required to be replaced at intervals, recognition is
made for such replacement of components as individual assets with specific useful life and depreciation, if these
components are initially recognized as separate assets. All other repair and maintenance costs are recognized in the
statement of profit and loss as incurred.
Depreciation is provided from the date the assets are ready to be put to use, on straight line method as per the useful
life of the assets as prescribed under Part C of Schedule II of the Companies Act, 2013 except stated otherwise.
Useful lives of site equipments (included in plant and machinery) being not specified in Schedule II are based on
internal technical evaluation which represents the best estimate of the period depending upon number of repetitions
over which such equipment is expected to be used. Hence, the useful lives for these assets are different from the
useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
Depreciation method, useful life and residual value are reviewed periodically. Leasehold land and improvements are
amortised on the basis of duration and other terms of lease.
The carrying amount of PPE is reviewed periodically for impairment based on internal / external factors. An impairment
loss is recognised wherever the carrying amount of assets exceeds its recoverable amount. The recoverable amount
is the greater of the asset's net selling price and value in use.
PPE are derecognised either when they have been disposed of or when they are permanently withdrawn from use and
no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and
the carrying amount of the asset is recognised in the statement of profit and loss in the period of de-recognition.
3.2 REVENUE RECOGNITION AND INVESTMENT INCOME
A) Revenue from real estate projects
Pursuant to the application of Ind AS 115 - 'Revenue from Contracts with Customers', the Company has applied
following accounting policy for revenue recognition:
Revenue is measured at the fair value of the consideration received / receivable, taking into account contractually
defined terms of payment and excluding taxes or duties collected on behalf of the government and is net of rebates
and discounts.
Revenue is recognised in the income statement to the extent that it is probable that the economic benefits will flow
to the Company and the revenue and costs, if applicable, can be measured reliably.
The Company has applied five step models as per Ind AS 115 'Revenue from contracts with customers' to recognize
revenue in the standalone financial statements. The Company satisfies a performance obligation and recognises
revenue over time, if one of the following criteria is met:
- The customer simultaneously receives and consumes the benefits provided by the Company's performance as
the Company performs; or
- The Company's performance creates or enhances an asset that the customer controls as the asset is created or
enhanced; or
- The Company's performance does not create an asset with an alternative use to the Company and the entity has
an enforceable right to payment for performance completed to date
For performance obligations where one of the above conditions is not met, revenue is recognised at the point in time
at which the performance obligation is satisfied.
Revenue from real-estate projects is recognised when control over the property has been transferred to the customer.
An enforceable right to payment does not arise until the development of the property is completed. Therefore, revenue
is recognised at a point in time when the legal title has passed to the customer and the development of the property
is completed.
B) Revenue from sale of power
Sales are recognized when the power is delivered by the Company at the delivery point in conformity with the
parameters and technical limits and fulfilment of other conditions specified in the Power Purchase Agreement. Sale
of power is accounted for as per tariff specified in the Power Purchase Agreement. The sale of power is accounted
for net of all local taxes and duties as may be levied on sale of electricity for all electricity made available and sold to
customers.
C) Interest Income
For all financial instruments measured at amortised cost, interest income is recognised using the effective interest
rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the
expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the
financial assets.
D) Dividend Income
Dividend Income is recognized when the Company's right to receive payment is established, which is generally when
shareholders approve the dividend.
E) Gain / (Loss) on sale / fair value of Investments
Financial assets are measured at fair value through profit or loss (FVTPL) or fair value through other comprehensive
income (FVOCI), as applicable. For instruments measured at FVTPL, gains or losses arising from fair value changes
are recognised in the Statement of Profit and Loss. For instruments measured at FVOCI with a reclassification option,
fair value gains or losses are recognised in other comprehensive income and reclassified to the Statement of Profit
and Loss on derecognition. For instruments measured at FVOCI without a reclassification option, fair value gains or
losses are recognised in other comprehensive income and are not reclassified to the Statement of Profit and Loss on
derecognition.
Income arising from transactions in securities, including Futures & Options (F&O) transactions, is recognised in
accordance with the applicable accounting principles and on the basis of the substance of the respective transactions.
Further, the term "securities” shall have the meaning ascribed to it under Section 2(h) of the Securities Contracts
(Regulation) Act, 1956, as amended from time to time.
The Company has made an irrevocable election, on an instrument-by-instrument basis, to present in other
comprehensive income the subsequent changes in fair value of certain investments in equity instruments that
are not held for trading. Amounts presented in other comprehensive income in respect of such instruments are
not subsequently reclassified to the statement of profit and loss on derecognition; the cumulative gain or loss
is transferred within equity from the Investment Revaluation Reserve to Retained Earnings. Dividends on such
investments continue to be recognised in the statement of profit and loss.
F) Share in Profits / Losses of Partnership Firm / LLP investments
The Company's share in profits / losses from a firm / LLP where the Company is a partner is recognized on the basis
of such firm's accounts, as per the terms of the partnership deed.
G) Other Income
Other income are accounted on an accrual basis, except interest on delayed payment by vendors which are accounted
on acceptance of the Company's claim.
3.3 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.
A) Financial assets
Initial measurement
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted
from the fair value measured on initial recognition of financial assets. However, trade receivable that does not contain
a significant financing component are measured at transaction price.
If the transaction price differs from fair value at initial recognition, the Company will account for such difference as
follows:
(i) if fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a
valuation technique that uses only data from observable markets, then the difference is recognised in profit or
loss on initial recognition (i.e. day 1 profit or loss);
(ii) In all other cases, the fair value will be adjusted to bring it in line with the transaction price (i.e. day 1 profit or
loss will be deferred by including it in the initial carrying amount of the asset or liability).
Subsequent measurement
(i) Financial assets at amortised cost
Financial assets are measured at the amortised cost, if both of the following criteria are met:
a) These assets are 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 EIR
method. The losses arising from impairment are recognised in the statement of profit and loss.
(ii) Financial assets at fair value through other comprehensive income (FVTOCI)
Financial assets are classified as FVTOCI if both of the following criteria are met:
a) These assets are held within a business model whose objective is achieved both by collecting contractual
cash flows and selling the financial assets; 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.
Fair value movements are recognised in the other comprehensive income (OCI). On de-recognition of the asset,
cumulative gain or loss previously recognised in OCI is reclassified from the equity to the statement of profit
and loss.
(iii) Financial assets at fair value through profit or loss (FVTPL)
Financial assets are classified as FVTPL if one of the following criteria are met:
a) If such financial assets do not meet the criteria for categorization as at amortized cost or as FVTOCI; or
b) If such financial assets are held for trading.
Gain or losses on changes in fair value of such instruments are recognised in the statement of profit and loss.
(iv) Equity instruments
All equity investments are measured at fair value, with value changes recognised in Statement of Profit and
Loss, except for those equity investments for which the Company has elected to present the value changes in
'Other Comprehensive Income'. However, dividends on such equity investments are recognized in the Statement
of Profit and loss when the Company's right to receive payment is established.
The Company de-recognises a financial asset when the contractual rights to the cash flows from the financial asset
expire or it transfers the financial asset, and the transfer qualifies for de-recognition.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks
and rewards of ownership of the financial asset. In such cases, the financial asset is de-recognised. Where the entity
has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not
de-recognised.
Impairment of financial assets
The Company follows 'simplified approach' for recognition of impairment loss allowance on Trade receivables. The
application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime Expected Credit Loss (ECL) at each reporting date, right from its initial
recognition.
For recognition of impairment loss on financial assets apart from financial assets fair valued through profit or loss
OR other comprehensive income (OCI) and trade receivables, 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 Company reverts to recognizing impairment loss allowance based on
12-month ECL.
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 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.
B) Financial liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost using the EIR method.
Initial measurement
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
Interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest
Method (EIR) method. Gains and losses are recognized in the Statement of Profit and Loss when the liabilities are
derecognized.
For trade and other payables maturing within operating cycle, the carrying amounts approximate the fair value due to
the short maturity of these instruments.
Amortised cost is calculated by taking into account any discount or premium on acquisition and transaction cost.
The EIR amortization is included as finance costs in the statement of Profit and Loss.
A financial liability (or a part of a financial liability) is de-recognised from the Company's balance sheet when the
obligation specified in the contract 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 De-recognition of the original liability and
the recognition of a new liability. The difference between the carrying amount of the financial liability derecognized
and the consideration paid is recognized in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the Balance Sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
C) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Company measures financial instruments at fair value
on initial recognition & at each balance sheet date.
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, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized 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 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis
of nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
D) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand, fixed deposit and short-term
deposits, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash
flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank
overdrafts as they are considered an integral part of the Company's cash management process.
E) Derivative financial instruments
The Company enters into exchange-traded equity derivative contracts (futures and options) in connection with its
treasury activities. Such contracts are not designated in any hedging relationship. Derivative financial instruments
are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at fair
value at each reporting date, with changes in fair value recognised in the statement of profit and loss. Margin money
placed with the exchange or broker in respect of such contracts is presented within other financial assets. Gains and
losses on such contracts are presented within Income from Investments and Loans, consistent with the Company's
financial services activity.
3.4 INVESTMENT IN SUBSIDIARIES & JOINT VENTURES
Investments in subsidiaries & joint ventures are carried at cost less provision for impairment, if any. Investments in
subsidiaries & joint ventures 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 carrying
amount of investment exceeds its recoverable amount.
3.5 INCOME TAXES
A) Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities using the tax rates and tax laws that are in force at the reporting date.
Current income tax relating to items recognised outside the statement of profit and loss is recognized outside the
statement of profit and 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.
The Company offsets current tax assets and current tax liabilities where it has a legally enforceable right to set off the
recognised amounts and where it intends either to settle on a net basis, or to realize the assets and settle the liability
simultaneously. The management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
B) Deferred tax
Deferred income tax is recognised using the balance sheet approach.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
a) When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the transaction affects neither the accounting profit nor
taxable profit or loss.
b) In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future..
Deferred tax assets are recognised for all deductible temporary differences, except:
a) When the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit
or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be
utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority
and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax relating to items recognized outside the statement of profit and loss is recognised outside the statement
of profit and loss. Such deferred tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable
income in the years in which the temporary differences are expected to be received or settled.
3.6 IMPAIRMENT OF NON-FINANCIAL ASSETS
An entity 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 cash-generating unit's (CGU) fair value
less costs of disposal and 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 groups 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.
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, quoted market prices or other available fair value indicators.
3.7 INVENTORIES
Inventories are classified as construction raw material, construction work in progress and finished stock of completed
projects and are valued as set out below. Inventories are carried at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
A) Construction raw material
The construction raw materials are valued at lower of cost or net realisable value. The construction raw materials
purchased for construction work issued to the construction work in progress are treated as consumed. The cost is
computed on Weighted Average Cost basis.
B) Construction work in progress
The construction work in progress is valued at lower of cost or net realisable value. Cost includes cost of land,
development rights, rates and taxes, construction costs, borrowing costs, other direct expenditure, allocated
overheads and other incidental expenses.
C) Finished stock of completed projects
Finished stock of completed projects and stock in trade of units is valued at lower of cost or net realisable value.
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