2.2 Summary of material accounting policies:
(a) Property, plant and equipment (PPE):
All items of PPE are stated at cost net of accumulated
depreciation and accumulated impairment losses, if
any. The initial cost of property, plant and equipment
comprises its purchase price, including import duties
and non-refundable purchase taxes, and any directly
attributable costs of bringing an asset to working
condition and location for its intended use. It also
includes the initial estimate of the costs of dismantling
and removing the item and restoring the site on
which it is located. The initial cost also includes the
cost of replacing part of the plant and equipment and
borrowing costs for long-term construction projects
if the recognition criteria are met. The Company
follows cost model for subsequent measurement for
all classes of PPE.
Depreciation is provided on Straight Line Method on
the basis of estimated useful life of assets specified
in Part C of Schedule II of the Companies Act, 2013.
Where cost of a part of the asset ("asset component")
is significant to total cost of the asset and useful life
of that part is different from the useful life of the
remaining asset, useful life of that significant part is
determined separately and such asset component is
depreciated over its separate useful life. In the case
of qualifying assets, cost also includes applicable
borrowing costs vide policy relating to borrowing costs.
An item of property, plant and equipment and any
significant part initially recognized is de-recognized
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on de-recognition of the asset is included in
the statement of profit and loss when the property,
plant and equipment is de-recognized.
Capital work-in-progress comprises the cost of fixed
assets that are not yet ready for their intended use at
the year end. Such a cost includes indirect expenses
incurred during construction period if the recognition
criteria are met.
(b) Investment property:
Property that is held for long-term rental yields or for
capital appreciation or both, and that which is not
in use by the Company, is classified as investment
property. Land held for a currently undetermined
future use is also classified as an investment property.
Investment property is measured initially at its
acquisition cost, including related transaction costs
and borrowing costs for qualifying assets and are
carried at cost less accumulated impairment losses.
(c) Impairment of 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 asset's recoverable amount is the higher of an
asset's or 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. Impairment
losses are recognised in Statement of Profit and Loss.
(d) Inventories:
Raw materials, stores and spares & Finished
Goods
Raw materials, stores and spares are valued at lower
of cost and net realisable value. Cost is determined on
First in First out (FIFO) basis and includes all applicable
duties and taxes.
The cost of inventories comprises of all cost of
purchases, cost of conversion and other related costs
incurred in bringing the inventories to their present
location and condition. Goods and materials in transit
are valued at actual cost incurred upto the date of the
Balance Sheet.
(e) Foreign currency transactions:
The functional currency and presentation currency of
the Company is Indian Rupee (INR). Foreign currency
transactions are translated into the functional
currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions
and from the translation of monetary assets and
liabilities denominated in foreign currencies at year
end exchange rates are recognised in Statement of
Profit and Loss.
(f) Revenue recognition:
The Company earns revenue primarily from Transport
Engineering, Civil Construction, Irrigation Projects,
Piling, etc.
Transport Engineering comprises roads, metro
(underground & elevated), bridges, flyovers, subways,
road over bridges, skywalks, railway terminus/stations
etc. The Company designs and constructs these
projects as per client's specifications on turnkey
basis. Civil Construction includes both commercial
and residential buildings. Commercial buildings
include office buildings, sports complexes, swimming
pools, etc. while residential buildings include housing
societies, etc.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for, service level
credits, performance bonuses, price concessions and
incentives, if any, as specified in the contract with
the customer. Revenue also excludes taxes collected
from customers.
Contracts are subject to modification to account for
changes in contract specification and requirements.
The Company reviews modification to contract in
conjunction with the original contract, basis which
the transaction price could be allocated to a new
performance obligation, or transaction price of
an existing obligation could undergo a change. In
the event transaction price is revised for existing
obligation, a cumulative adjustment is accounted for.
Unbilled Revenue
Unbilled revenue represents value of services
perfomed in accordance with the contract terms but
not billed.
Significant judgements in recognizing Revenue
The Company assesses the products / services
promised in a contract and identifies distinct
performance obligations in the contract. Identification
of distinct performance obligation involves judgement
to determine the deliverables and the ability
of the customer to benefit independently from
such deliverables.
Judgement is also required to determine the
transaction price for the contract. The transaction
price could be either a fixed amount of customer
consideration or variable consideration with elements
such as service level credits, performance bonuses,
price concessions and incentives. The transaction
price is also adjusted for the effects of the time
value of money if the contract includes a significant
financing component.
Any consideration payable to the customer is adjusted
to the transaction price, unless it is a payment for
a distinct product or service from the customer.
The estimated amount of variable consideration is
adjusted in the transaction price only to the extent
that it is highly probable that a significant reversal in
the amount of cumulative revenue recognised will not
occur and is reassessed at the end of each reporting
period. The Company allocates the elements of
variable considerations to all the performance
obligations of the contract unless there is observable
evidence that they pertain to one or more distinct
performance obligations.
Revenue for fixed-price contracts is recognised
using percentage-of-completion method. The
Company uses judgement to estimate the future
cost-to-completion of the contracts which is used
to determine the degree of the completion of the
performance obligation. The customer pays the fixed
amount based on a payment schedule. If the services
rendered by the Company exceed the payment,
a contract asset is recognised. If the payments by
customer exceeds the services rendered, a contract
liability is recognised.
Interest income
Interest income is recognised on a time proportion
basis taking into account the amount outstanding
using the effective interest rate method.
(g) Leases:
As a Lessee
The Company recognises a right-of-use asset and a
lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or before
the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less
any lease incentives received.
The right-of-use asset is subsequently depreciated
using the straight-line method from the
commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the
lease term. The estimated useful lives of right-of-use
assets are determined on the same basis as those of
PPE. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for
certain re-measurements of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be
readily determined, Company's incremental borrowing
rate. Generally, the Company uses its incremental
borrowing rate as the discount rate.
Lease payments included in the measurement of the
lease liability comprise the following:
- Fixed payments, including in-substance
fixed payments;
- Variable lease payments that depend on an index
or a rate, initially measured using the index or
rate as at the commencement date;
- Amounts expected to be payable under a
residual value guarantee; and
- The exercise price under a purchase option that
the Company is reasonably certain to exercise,
lease payments in an optional renewal period if
the Company is reasonably certain to exercise
an extension option, and penalties for early
termination of a lease unless the Company is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when
there is a change in future lease payments arising
from a change in an index or rate, if there is a change
in the Company's estimate of the amount expected
to be payable under a residual value guarantee, or if
Company changes its assessment of whether it will
exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-
use assets and lease liabilities for short term leases
that have a lease term of 12 months. The Company
recognises the lease payments associated with these
leases as an expense on a straight-line basis over the
lease term.
As a Lessor
The Company has elected not to recognise right-of-
use assets and lease liabilities for short term leases
that have a lease term of 12 months. It also applies
the lease of low-value assets recognition exemption
to leases of assets that are considered to be low
value. The Company recognises the lease payments
associated with these leases as an expense on a
straight-line basis over the lease term.
(h) Employee Benefits:
(i) Short term employee benefits:
All employee benefits that are expected to
be settled wholly within twelve months of
rendering the service are classified as short term
employee benefits and they are recognized in
the period in which the employee renders the
related service. The Company recognizes the
undiscounted amount of short term employee
benefits expected to be paid in exchange for
services rendered as a liability (accrued expense)
after deducting any amount already paid.
(ii) Post-Employment Benefits:
The Company operates the following post¬
employment schemes:
(i) defined benefit plans and
(ii) defined contribution plans
Defined benefit plans - Gratuity obligations
The liability or asset recognised in the Balance
Sheet in respect of defined benefit pension
and gratuity plans is the present value of the
defined benefit obligation at the end of the
reporting period less the fair value of plan assets.
The defined benefit obligation is calculated
annually by actuaries using the projected unit
credit method.
The present value of the defined benefit
obligation is determined by discounting the
estimated future cash outflows by reference
to market yields at the end of the reporting
period on government bonds that have
terms approximating to the terms of the
related obligation.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined
benefit obligation and the fair value of plan
assets. This cost is included in employee benefit
expense in the Statement of Profit and Loss.
Remeasurement gains and losses arising
from experience adjustments and changes in
actuarial assumptions are recognised in the
period in which they occur, directly in Other
Comprehensive Income (OCI). They are included
in retained earnings in the Statement of Changes
in Equity and in the Balance Sheet.
Changes in the present value of the defined
benefit obligation resulting from plan
amendments or curtailments are recognised
immediately as profit or loss as past service cost.
Defined contribution plans - Provident fund
The Company pays provident fund contributions
to publicly administered provident funds as per
local regulations. The Company has no further
payment obligations once the contributions
have been paid. The contributions are accounted
for as defined contribution plans and the
contributions are recognised as employee
benefit expense when they are due. Prepaid
contributions are recognised as an asset to the
extent that a cash refund or a reduction in the
future payments is available.
(i) Borrowing Costs:
Borrowing costs consist of interest and other cost that
an entity incurs in connection with the borrowing of
funds. Borrowing cost includes exchange differences
to the extent regarded as an adjustment to the
borrowing costs.
Borrowing costs attributable to the acquisition or
construction of qualifying assets are capitalized as
part of the cost of such asset up to the date when
the asset is ready for its intended use.
All other borrowing costs are expensed as incurred.
(j) Earnings Per Share:
Basic earnings per share is calculated by dividing
the net profit or loss for the year attributable to
equity shareholders by the weighted average
number of equity shares outstanding during the
year. The weighted average number of equity shares
outstanding during the year is adjusted for events of
bonus issue; bonus element in a rights issue, share
split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable
to equity shareholders and the weighted average
number of shares outstanding during the period
are adjusted for the effects of all dilutive potential
equity shares.
(k) Taxes on Income:
Income tax expense comprises current and deferred
tax. It is recognised in the Statement of Profit and
Loss except to the extent that it relates to a business
combination, or items recognised directly in equity
or in OCI.
(i) 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 either in OCI or in equity.
(ii) Deferred tax:
Deferred tax is provided using the balancesheet
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 assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and any unused
tax losses. 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.
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 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.
Deferred tax relating to items recognised outside
profit or loss is recognised in OCI.
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