2 MATERIAL ACCOUNTING POLICIES
2.1 Statement of Compliance
This separate financial statements have been prepared
in accordance with Indian Accounting Standard (Ind
AS) as prescribed under section 133 of the Companies
Act 2013 ("the Act") ("to the extent notified") and the
Regulations issued from time to time by "West Bengal
Electricity Regulatory Commission" (WBERC) under
the Electricity Act, 2003 (Tariff Regulations). Ind AS
are prescribed under section 133 of the Act read with
rule 3 of the Companies ( Indian Accounting Standard )
Rules 2015 and the relevant amendment rules issued
there after.
Accounting Policy has been consistently applied
except where a newly introduced Accounting
Standard is initially adopted or a revision to an existing
accounting standard requires a change in accounting
policy hitherto in use.
2.2 Basis of Preparation
The financial statements have been prepared on
historical cost convention on accrual basis except for
certain financial instruments, that are measured in
terms of relevant Ind AS at fair value/amortised cost
at the end of each reporting period, as explained in
accounting policy below. Historical cost convention is
generally based on fair value of the consideration given
in exchange for goods and services. 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.
As the operating cycle cannot be identified in
normal course, the same has been assumed to have
duration of 12 months. All Assets and Liabilities have
been classified as current or non-current as per the
operating cycle and other criteria set out in Ind AS-1
'Presentation of Financial Statements' and Schedule
III to the Companies Act, 2013.
The Standalone Financial Statements are presented
in Indian Rupees and all values are rounded off to the
nearest two decimal lakhs except otherwise stated.
2.3 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 under current market conditions.
The Company categorizes assets and liabilities
measured at fair value into one of three levels
depending on the ability to observe inputs employed
for such measurement:
(a) Level 1 : quoted prices (unadjusted) in active
markets for identical assets or liabilities.
(b) Level 2 : inputs other than quoted prices included
within level 1 that are observable either directly or
indirectly for the asset or liability
(c) Level 3 : inputs for the asset or liability which are
not based on observable market data.
2.4 Property, Plant and Equipment (PPE)
(i) PPE except land are stated at their cost of acquisition
or construction and is net of accumulated depreciation.
Carrying value of PPE on the date of transition has been
considered to be deemed cost. The cost comprises
purchase price, borrowing cost if capitalization criteria
are met and directly attributable cost of bringing the
asset to its working condition for the intended use.
When significant parts of plant and equipment are
required to be replaced at intervals, the Company
depreciates them separately based on their specific
useful lives. All other repair and maintenance costs
are recognised in Statement of Profit and Loss as
incurred. The land assets of the Company are stated
as per revaluation model.
(ii) All project related expenses viz civil works, machinery
under erection, construction and erection materials,
pre-operative expenditure net of revenue incidental /
attributable to the construction of project, borrowing
cost incurred prior to the date of commercial operations
are shown under Capital Work -In-Progress (CWIP).
(iii) Depreciation on property plant and equipment
commences when the assets are ready for their
intended use.
(iv) Depreciation on PPE is provided on the straight-line
method at the rates specified in the Tariff Regulation
for regulated assets and for others on the basis of
useful lives prescribed in Schedule II to the Companies
Act, 2013. The useful life of assets considered for
depreciation as above are as follows:
(v) The residual values, useful lives and method of
depreciation are reviewed at each financial year end
and adjusted prospectively, if appropriate.
(vi) Cost of leasehold lands including revaluation are
amortised under the straight line method over the
related lease period.
2.5 Intangible Assets
Recognition and initial measurement
I ntangible assets are stated at cost comprising of
purchase price inclusive of duties and taxes less
accumulated amount of amortization and impairment
losses. Such assets are amortised over the useful life
using straight line method and assessed for impairment
whenever there is an indication of the same.
Depreciation on Intangible assets is provided on the
straight-line method at the rates specified in the Tariff
Regulation considering useful life of 7 years.
2.6 Derecognition of Tangible and Intangible Assets
An item of PPE is de-recognised upon disposal or when
no future economic benefits are expected to arise from
its use or disposal. Gain or loss arising on the disposal
of an item of PPE is determined as the difference
between the sale proceeds and the carrying amount of
the asset and is recognised in the Statement of Profit
and Loss.
2.7 Impairment of Tangible and Intangible Assets
Tangible and Intangible assets are reviewed at each
balance sheet date for impairment. In case events and
circumstances indicate any impairment, recoverable
amount of assets is determined. An impairment
loss is recognized in the Statement of Profit and
Loss, whenever the carrying amount of assets either
belonging to Cash Generating Unit (CGU) or otherwise
exceeds recoverable amount. The recoverable amount
is the higher of assets fair value less cost of disposal
and its value in use. In assessing value in use, the
estimated future cash flows from the use of the assets
are discounted to their present value at appropriate
rate.
I mpairment losses recognized earlier may no longer
exist or may have come down. Based on such
assessment at each reporting period the impairment
loss is reversed and recognized in the Statement of
Profit and Loss. In such cases the carrying amount of
the asset is increased to the lower of its recoverable
amount and the carrying amount that have been
determined, net of depreciation, had no impairment
loss been recognized for the asset in prior years.
2.8 Leases
The Company recognises right-of-use asset
representing its right to use the underlying asset for the
lease term at the lease commencement date. The cost
of the right-of-use assets measured at inception shall
comprise of the amount of the initial measurement
of the lease liability adjusted for any lease payments
made at or before the commencement date less any
lease incentives received, plus any initial direct costs
incurred and an estimate of costs to be incurred by
the lessee in dismantling and removing the underlying
asset or restoring the underlying asset or site on which
it is located. The right-of-use assets is subsequently
measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted
for any remeasurement of the lease liability. The
right-of-use assets is depreciated using the straight¬
line method from the commencement date over the
shorter of lease term or useful life of right-of-use asset.
The estimated useful lives of right-of-use assets are
determined on the same basis as those of property,
plant and equipment.
Right-of-use assets are tested for impairment whenever
there is any indication that their carrying amounts
may not be recoverable. Impairment loss, if any, is
recognised in the Statement of Profit and Loss.
The Company measures the lease liability at the present
value of the lease payments that are not paid at the
commencement date of the lease. The lease payments
are discounted using the interest rate implicit in the
lease, if that rate can be readily determined. If that
rate cannot be readily determined, the Company
uses incremental borrowing rate. For leases with
reasonably similar characteristics, the Company, on a
lease by lease basis, may adopt either the incremental
borrowing rate specific to the lease or the incremental
borrowing rate for the portfolio as a whole. The lease
payments shall include fixed payments, variable lease
payments, residual value guarantees, exercise price of
a purchase option where the Company is reasonably
certain to exercise that option and payments of
penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the
lease. The lease liability is subsequently remeasured
by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount
to reflect the lease payments made and remeasuring
the carrying amount to reflect any reassessment or
lease modifications or to reflect revised in-substance
fixed lease payments. The company recognises the
amount of the re-measurement of lease liability due to
modification as an adjustment to the right-of-use asset
and statement of profit and loss depending upon the
nature of modification. Where the carrying amount of
the right-of-use asset is reduced to zero and there is
a further reduction in the measurement of the lease
liability, the Company recognises any remaining amount
of the re-measurement in statement of profit and loss.
The Company has elected to use the recognition
exemptions for short term leases as well as low value
assets.
2.9 Financial Assets and Financial Liabilities
Financial assets and financial liabilities (together
known as financial instruments) are recognized
when Company becomes a party to the contractual
provisions of the instruments.
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. Transaction costs
directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit
or loss are recognized immediately in the Statement of
Profit and Loss.
The financial assets and financial liabilities are
classified as current if they are expected to be realised
or settled within operating cycle of the Company or
otherwise these are classified as non current.
The financial instruments are classified to be measured
at Amortized Cost, at Fair Value Through Profit and Loss
(FVTPL) or at Fair Value Through Other Comprehensive
Income (FVTOCI) and such classification depends on
the objective and contractual terms to which they
relate. Classification of financial instruments are
determined on initial recognition.
(i) Cash and cash equivalents
All highly liquid financial instruments, which are readily
convertible into known amounts of cash and which
are subject to an insignificant risk of change in value
and are having original maturities of three months
or less from the date of purchase, are considered as
cash equivalents. Cash and cash equivalents includes
balances with banks which are unrestricted for
withdrawal and usage.
(ii) Financial Assets and Financial Liabilities measured at
amortized cost
Financial Assets held within a business whose
objective is to hold these assets in order to collect
contractual cash flows and the contractual terms of
the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding are measured at
amortized cost.
The above Financial Assets and Financial Liabilities
subsequent to initial recognition are measured at
amortized cost using Effective Interest Rate (EIR)
method.
The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts
(including all fees and points paid or received,
transaction costs and other premiums or discounts)
through the expected life of the Financial Asset or
Financial Liability to the gross carrying amount of the
financial asset or to the amortised cost of financial
liability, or, where appropriate, a shorter period, to the
net carrying amount on initial recognition.
(iii) Financial Asset at Fair Value through Other
Comprehensive Income (FVTOCI)
Financial assets are measured at fair value through
other comprehensive income if these financial assets
are held within a business whose objective is achieved
by both collecting contractual cash flows and selling
financial assets and the contractual terms of the
financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding. Subsequent to
initial recognition, they are measured at fair value
and changes therein are recognised directly in other
comprehensive income.
(iv) For the purpose of para (ii) and (iii) above, the principal
is considered to be fair value of the financial asset at
initial recognition and interest consists of consideration
for the time value of money and associated credit risk.
(v) Financial Assets or Liabilities at Fair value through
profit or loss (FVTPL)
Financial Instruments which do not meet the
criteria of amortized cost or fair value through other
comprehensive income are classified as Fair Value
through Profit or loss. These are recognised at fair
value and changes therein are recognized in the
Statement of Profit and Loss.
2.10 Financial Guarantee Contracts
Financial guarantee contracts other than those which
are in the nature of Insurance are those contracts
that require a payment to be made to reimburse the
holder for a loss it incurs because the specified party
fails to make a payment when due in accordance with
the terms of a debt instrument. Financial guarantee
contracts are recognised initially as a liability at
fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher
of the amount of expected loss allowance determined
as per impairment requirements of Ind-AS 109 and the
amount recognised less cumulative amortization.
2.11 Impairment of Financial Assets
A financial asset is assessed for impairment at each
reporting date. A financial asset is considered to be
impaired if objective evidence indicates that one or
more events have a negative effect on the estimated
future cash flows of that asset.
The Company measures the loss allowance for a
financial instrument at an amount equal to the lifetime
expected credit losses if the credit risk on that financial
instrument has increased significantly since initial
recognition. If the credit risk on a financial instrument
has not increased significantly since initial recognition,
the Company measures the loss allowance for that
financial instrument.
However, for trade receivables or contract assets
that result in relation to revenue from contracts with
customers, the Company measures the loss allowance
at an amount equal to lifetime expected credit losses.
For the purpose of classification of financial asset
including trade receivable as credit impaired, a period
of three years is considered by the Management.
2.12 De-recognition of Financial Instruments
The Company derecognizes a financial asset or a group
of financial assets when the contractual rights to the
cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and
rewards of ownership of the asset to another party.
On derecognition of a financial asset (except for equity
instruments designated as FVTOCI), the difference
between the asset's carrying amount and the sum
of the consideration received and receivable are
recognized in Statement of Profit and Loss.
On derecognition of assets measured at FVTOCI
the cumulative gain or loss previously recognised
in other comprehensive income is reclassified from
OCI to statement of profit or loss as a reclassification
adjustment unless the asset represents an equity
investment, in which case the cumulative fair value
adjustments previously recognised in OCI are
reclassified with equity .
Financial liabilities are derecognized if the Company's
obligations specified in the contract expire or are
discharged or cancelled. The difference between the
carrying amount of the financial liability derecognized
and the consideration paid and payable is recognized
in Statement of Profit and Loss.
2.13 Inventories
Inventories are valued at lower of cost or net realisable
value
Cost is calculated on weighted average basis and
includes expenditure incurred for bringing such
inventories to their present location and condition.
Adjustments in the carrying amount of obsolete,
defective and slow moving items as may be identified
at the time of physical verification is made where
appropriate, to cover any eventual loss on their ultimate
realisation.
2.14 Foreign Currency Transactions
Presentation currency:
These financial statements are presented in Indian
Rupee, the national currency of India, which is the
functional currency of the Company.
Transactions and balances:
Transactions in foreign currencies are translated
into the functional currency at the exchange rates
prevailing on the date of the transactions. Foreign
currency monetary assets and liabilities at the year-
end are translated at the year-end exchange rates. Non¬
monetary items which are carried in terms of historical
cost denominated in a foreign currency are reported
using the exchange rate at the date of transaction.
The loss or gain thereon and also on the exchange
differences on settlement of the foreign currency
transactions during the year are recognized as income
or expense in the Statement of Profit and Loss. Foreign
exchange gain/loss to the extent considered as an
adjustment to interest cost are considered as part of
borrowing cost.
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