Note 3: Significant Accounting Policies
3.1 Inventories (Ind AS 2)
Inventories are carried at the lower of cost and net realizable value. Cost includes cost of purchase and other
costs incurred in bringing the inventories to their present location and condition. Costs are determined on
weighted average method. In respect of work in progress and finished goods, the applicable overheads are
included in the valuation.
Net realizable 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.
3.2 Cash flow Statement (Ind AS 7)
Cash flows are presented using indirect method, whereby profit / (loss) before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
Bank borrowings are generally considered to be financing activities. However, where bank overdrafts which are
repayable on demand form an integral part of an entity's cash management, bank overdrafts are included as a
component of cash and cash equivalents for the purpose of Cash flow statement.
3.3 Accounting Policies, Changes in Accounting Estimates and Errors (Ind AS 8)
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS)
notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.
The Company selects and applies its accounting policies consistently for similar transactions, events, and
conditions, unless Ind AS specifically requires or permits categorization and application of different policies for
different transactions.
Changes in accounting policies are made only if:
• Required by an Ind AS; or
• Such a change results in the financial statements providing more reliable and relevant information.
When a change in accounting policy is applied:
• It is accounted for retrospectively unless otherwise stated.
• The comparative figures for prior periods are restated, and
• The cumulative effect, if any, is adjusted in the opening balance of retained earnings.
Changes in accounting estimates (e.g., useful lives, bad debt provisions) are recognized
prospectively:
• In the period of the change, if the change affects only that period; or
• In the period of the change and future periods, if the change affects both.
Prior Period Errors
Material prior period errors are corrected retrospectively in the first set of financial statements approved after
their discovery by:
• Restating the comparative amounts for the prior period(s) presented; or
• If the error occurred before the earliest prior period presented, restating the opening balances of assets,
liabilities, and equity for the earliest period presented.
The nature of the error and the amount of the correction are disclosed in the notes to accounts.
3.4 Provision for Current Tax and Deferred Tax (Ind AS 12)
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. 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
establishes provisions where-appropriate.
Deferred Tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
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. Where there is deferred tax assets arising from carry forward of unused tax losses and unused
tax created, they are recognised to the extent of deferred tax liability.
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. Unrecognised deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
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 a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
3.5 Property, Plant & Equipment (Ind AS 16)
Deemed cost option for first time adopter of Ind AS
Under the previous GAAP (Indian GAAP), the Company carried Property, Plant and Equipment (PPE) at
historical cost less accumulated depreciation and impairment losses, if any.
Upon transition to Ind AS on 1 April 2016, the Company has elected to apply the exemption available under
Ind AS 101 - First-time Adoption of Indian Accounting Standards, and has accordingly adopted the following
approach:
• For Plant and Equipment, the Company has opted to consider the carrying amounts under previous GAAP as
deemed cost as at the transition date. This ensures continuity and avoids retrospective restatement.
• For Land, the Company has opted to measure it at its fair value (mark-to-market) as on the date of
transition, and such fair value has been considered as the deemed cost under Ind AS. The revaluation surplus
arising from this adjustment has been credited to Other Equity.
This combination of methods is in accordance with the transitional provisions of Ind AS 101 and reflects a fair
and representative presentation of the Company's assets.
Presentation
Property, plant and equipment are stated at acquisition cost net of accumulated depreciation and accumulated
impairment losses, if any. Subsequent costs are included in the 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.
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".
Depreciation is provided on a pro-rata basis on the straight-line method based on estimated useful life
prescribed under Schedule II to the Companies Act, 2013.
Freehold land is not depreciable, hence no depreciation charged to statement of profit and loss.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if appropriate.
Revenue expenses and revenue receipts incurred in connection with project implementation in so far as such
expense relate to the period prior to the commencement of commercial production are treated as part of
project cost and capitalised.
Component Cost
The Company has identified all material and significant components of its plant and machinery assets and has
accounted for them separately in accordance with the requirements of Ind AS 16 - Property, Plant and
Equipment. The useful life of each component is assessed independently, and where a component has a
different useful life than the asset it forms part of, such component's useful life is considered separately for the
purpose of computing depreciation.
The cost of replacing a part of an item of PPE is recognised in the carrying amount of the asset when:
• It is probable that future economic benefits associated with the replacement will flow to the Company, and
• The cost of the replacement part can be measured reliably.
All other routine repairs and maintenance are recognised in the Statement of Profit and Loss as incurred.
Machinery spares that are specific to particular fixed assets and are expected to be used irregularly are
capitalised as part of PPE. The cost of replacement of such capitalised spares is charged to the Statement of
Profit and Loss upon replacement.
Other general-purpose spares and consumables are charged to the Statement of Profit and Loss as revenue
expenditure when consumed.
Derecognition
Gains or losses arising from derecognition of property, plant and equipment are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement
of profit and loss when the asset is derecognized.
Depreciation on property, plant and equipment
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life on a
Straight -line method. The depreciable amount for assets is the cost of an asset or other amount
substituted for cost, less 5% being its residual value.
Depreciation is provided on straight line method, over the useful lives specified in Schedule II to the
Companies Act, 2013.
Depreciation for PPE on additions is calculated on pro-rata basis from the date of such additions. For
deletion/disposals, the depreciation is calculated on pro-rata basis up to the date on which such assets have
been discarded / sold. Additions to fixed assets, costing Rs. 5000 each or less are fully depreciated retaining its
residual value.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if appropriate.
3.6 Employee Benefits (Ind AS 19)
Short-term Employee Benefits
A liability is recognised for short-term employee benefit in the period the related service is rendered at the
undiscounted amount of the benefits expected to be paid in exchange for that service. The entity is operating
through Indowind Energy Gratuity Fund for all payments related to gratuity and the related trust accounts is
yet to be maintained.
Defined contribution plans
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 and superannuation fund. The Company
recognizes 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 recognized 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 recognized as an asset to the extent that the
pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined benefit plans
The Company operates a defined benefit gratuity plan in India, 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.
Other long term employee benefits
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the
estimated future cash outflows expected to be made by the Company in respect of services provided by the
employees up to the reporting date. Liability for un-availed leave considered to be long-term is carried based
on an actuarial valuation carried out at the end of each financial year.
3.7 Foreign Currency Transaction (Ind AS 21)
a) Transactions in foreign currencies are initially recorded by the Company at the functional currency spot
rates at the date at which the transaction first qualifies for recognition. However, for practical reasons, the
Company uses an average rate, if the average approximates the actual rate at the date of the transaction.
b) Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or
translation of monetary items are recognised in profit or loss.
c) 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. Non-monetary items measured at fair value in
a foreign currency are translated using the exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the
recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items
whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss,
respectively).
3.8 Borrowing cost (Ind AS 23)
Borrowing cost include interest computed using Effective Interest Rate method, amortisation of ancillary costs
incurred and exchange differences from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset
are capitalised as part of the cost of that asset which takes substantial period of time to get ready for its
intended use. The Company determines the amount of borrowing cost eligible for capitalisation by applying
capitalisation rate to the expenditure incurred on such cost. The capitalisation rate is determined based on the
weighted average rate of borrowing cost applicable to the borrowings of the Company which are outstanding
during the period, other than borrowings made specifically towards purchase of the qualifying asset. The
amount of borrowing cost that the Company capitalises during the period does not exceed the amount of
borrowing cost incurred during that period. All other borrowings costs are expensed in the period in which they
occur.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are
incurred.
3.9 Earnings per Share (Ind AS 33)
The basic earnings per share are computed by dividing the net profit for the period attributable to equity
shareholders by the weighted average number of equity shares outstanding during the period.
Diluted EPS is computed by dividing the net profit after tax by the weighted average number of equity shares
considered for deriving basic EPS and also weighted average number of equity shares that could have been
issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed
converted as of the beginning of the period, unless issued later. Dilutive potential equity shares are determined
independently for each period presented. The number of equity shares and potentially dilutive equity shares
are adjusted for bonus shares, as appropriate.
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