2. SIGNIFICANT ACCOUNTING POLICIES:
a) BASIS OF PREPARATION OF FINANCIAL
STATEMENTS:
These financial statements have been prepared
in accordance with the Generally Accepted
Accounting Principles in India ("Indian GAAP")
to comply with Accounting Standards ("AS")
specified under Section 133 of the Companies Act,
2013 read with Rule 3 of the Companies (Indian
Accounting Standards) Rules as amended from
time to time. The financial statements have been
prepared under the historical cost convention
on the accrual basis except for certain financial
instruments which are measured at fair values, the
provisions of the Companies Act, 2013 ('the Act’)
(to the extent notified) and guidelines issued by
the Securities and Exchange Board of India (SEBI)
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 hitherto in use.
b) USE OF ESTIMATES:
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management of the Company
to make estimates and assumptions that affect
certain reported balances of assets and liabilities,
disclosures relating to the contingent liabilities
as at the date of the financial statements and
reported amounts of income and expense during
the year. Accordingly, future results could differ
due to changes in these estimates and the
difference between the actual result and the
estimate are recognized in the period in which the
results are known / materialize.
c) PROPERTY, PLANT AND EQUIPMENT:
(i) Tangible assets:
Property Plant and Equipment (PPE) and other
tangible assets are stated at cost of acquisition
inclusive of freight, duties, taxes and incidental
expenses relating to the acquisition, installation,
erection and commissioning less depreciation.
Internally manufactured assets are valued at
works cost. Subsequent expenditure related to
PPE is capitalized only when it is probable that
future economic benefits associated with these
will flow to the Company and the cost of item can
be measured reliably. Other repairs and
maintenance costs are recognized in the
Statement of Profit & Loss while incurred. Spare
parts whose life has more than 12 month has
been considered as PPE and capitalized by the
company.
(ii) Intangible assets:
Intangible assets are accounted at cost of
acquisition less depreciation /amortization
(iii) Depreciation & Amortization:
a. Depreciation on PPE bought/sold during the
year is charged on straight line method as per
the useful life in Schedule II of Act, depending
upon the month of the financial year in which
the assets are installed/sold. For the assets
acquired prior to April 1, 2014 the carrying
amount as on April 1, 2014 is depreciated on
over the remaining useful life as defined in
Schedule II of the Act.
b. Intangible assets are amortized over a period
of 2-5 years.
(iv) Investment Property:
Properties that are held for long-term rental
yields or for capital appreciation or both, and that
are not occupied by the Company, are classified
as investment property. Investment property is
measured initially at cost, including transaction
costs. Subsequent to initial recognition,
investment properties are stated at cost less
accumulated depreciation and accumulated
impairment loss, if any. Subsequent expenditure
related to investment properties are added to its
book value 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. Investment properties are
depreciated using the straight line method over
the useful lives and is recognised in the statement
of profit and loss. Depreciable investment
properties have been ascribed a useful life in the
range of 30 years.
d) INVESTMENTS:
(i) Investments unless otherwise stated are
considered as long term in nature and are
valued at acquisition cost less provision for
diminution, if any other than those which are
considered as temporary in nature.
(ii) Current investments are carried in the
financial statements at lower of cost and fair
value determined on an individual investment
basis.
e) INVENTORIES:
(i) Inventories does not include spare parts,
servicing equipment and stand by equipment
which meet definition of PPE as per AS-10
(revised).
(ii) Raw materials, stores, spare parts and
components are valued at cost on weighted
average basis or net realizable value whichever
is lower.
(iii) Work in progress is valued at works cost or net
realizable value whichever is lower.
(iv) Finished goods are valued at works cost or net
realizable value whichever is lower.
(v) Material cost of work in progress and finished
goods are computed on weighted average
basis.
f) REVENUE RECOGNITION:
Revenue is recognized to an extent that is probable
that the economic benefits will flow to the
Company and the revenue can be reliably
measured.
(i) Revenue from Contract with Customer:
Revenue from contract with customers is
recognised when the Company satisfies
performance obligation by transferring promised
goods and services to the customer. Performance
obligations maybe satisfied at a point of time or
over a period of time. Performance obligations
satisfied over a period of time are recognised as
per the terms of relevant contractual agreements/
arrangements. Performance obligations are
said to be satisfied at a point of time when
the customer obtains controls of the asset.
Revenue is measured based on transaction
price, which is the fair value of the consideration
received or receivable, stated net of discounts,
returns and value added tax. Transaction price
is recognised based on the price specified in the
contract, net of the estimated sales incentives/
discounts. Accumulated experience is used to
estimate and provide for the discounts/ right of
return, using the expected value method.
A liability is recognised for expected sale returns
and corresponding assets are recognised
for the products expected to be returned.
The Company recognises as an asset, the
incremental costs of obtaining a contract with
a customer, if the Company expects to recover
those costs. The said asset is amortised on a
systematic basis consistent with the transfer of
goods or services to the customer.
(ii) Interest income is recognized on time proportion
basis.
(iii) Dividend income is recognized, when the right to
receive the dividend is established.
(iv) Rental income is recognized on time proportion
basis.
g) EMPLOYEE BENEFITS:
(i) Short term employee benefits:
Employee benefits payable wholly within
twelve months of rendering the service are
classified as short term. Benefits such as
salaries, bonus, leave travel allowance etc. are
recognized in the period in which the employee
renders the related service.
(ii) Post employment benefits:
a. Defined contribution plans:
The Company has contributed to provident
and pension which are defined contribution
plans. The contributions paid/ payable
under the scheme are recognized during
the year in which employee renders the
related service.
b. Defined benefit plans:
Employees’ gratuity is defined benefit plan.
The present value of the obligation under
such plan is determined based on actuarial
valuation using the Projected Unit Credit
Method which considers each year of
service as giving rise to an additional unit of
benefit entitlement and measures each unit
separately to build up the final obligation.
Actuarial gains and losses are recognized
in the statement of other comprehensive
income in the year they arise. Obligation is
measured at the present value of estimated
future cash flows using a discounted rate
that is determined by reference to market
yields as at the balance sheet date on
Government bonds where the currency
and terms of the Government bonds are
consistent with the currency and estimated
terms that matches to the defined benefit
obligation.
c. Compensated Absences:
Accumulated compensated absences,
which are expected to be availed or
encashed within 12 months from the
end of the year are treated as short term
employee benefits. The obligation towards
the same is measured at the expected cost
of accumulating compensated absences
as the additional amount expected to be
paid as a result of the unused entitlement
as at the year end.
Accumulated compensated absences,
which are expected to be availed or
encashed beyond 12 months from the
end of the year are treated as other long
term employee benefits. The Company’s
liability is actuarially determined (using the
Projected Unit Credit method) at the end
of each year. Actuarial losses/ gains are
recognized in the statement of profit and
loss in the year in which they arise.
(iii) Share Based Payments:
Share-based compensation benefits are
provided to employees via the IZMO Limited
Employee Stock Option Plan The fair value
of options granted under the Employees’
Stock Option Scheme is recognised as
an employee benefits expense with a
corresponding increase in equity. The total
amount to be expensed is determined by
reference to the fair value of the options
granted:
- including any market performance
conditions (e.g., the entity’s share price)
- excluding the impact of any service and non¬
market performance vesting conditions
(e.g. profitability, sales growth targets and
remaining an employee of the entity over a
specified time period), and
- including the impact of any non-vesting
conditions (e.g. the requirement for
employees to save or holdings shares for a
specific period of time).
The total expense is recognised over the
vesting period, which is the period over
which all of the specified vesting conditions
are to be satisfied. At the end of each
period, the entity revises its estimates of
the number of options that are expected
to vest based on the non-market vesting
and service conditions. It recognises the
impact of the revision to original estimates,
if any, in profit or loss, with a corresponding
adjustment to equity.
h) FOREIGN CURRENCY TRANSACTIONS:
(i) Foreign currency transactions are
translated into rupees at the exchange rate
prevailing on the date of the transaction /
rates that approximate the actual rates as
at that date.
(ii) Monetary foreign currency assets and
liabilities outstanding as at the year-end are
restated at the exchange rates prevailing
as at the close of the financial year. All
exchange differences are accounted for in
the statement of profit and loss.
(iii) Non monetary items denominated in foreign
currency, are valued at the exchange rate
prevailing on the date of transaction.
i) TAXES ON INCOME:
Current Income Tax is measured at the amount
expected to be paid to the tax authorities
in accordance with local laws of various
jurisdiction where the Company operates.
Deferred tax is provided using the Balance Sheet
approach 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 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 tax rates and tax
laws used to compute the tax are those that are
enacted or substantively enacted at the reporting
date. Current and Deferred Tax are recognised in
the Statement of Profit and Loss except to items
recognised directly in Other Comprehensive
income or equity in which case the deferred tax
is recognised in other comprehensive income and
equity respectively.
j) BORROWING COSTS:
Interest and other borrowing costs on specific
borrowings relatable to qualifying assets are
capitalized up to the date such assets are ready
for use / intended to use. Other interest and
borrowing costs are charged to the statement of
profit and loss.
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