2 Material Accounting Policies:
2.1 Basis of preparation of Financial Statements:
Financial Statements of the Company have been prepared in accordance with the accounting principles generally accepted in India including
Indian Accounting Standards (hereinafter referred to as the 'Ind AS') prescribed under Section 133 of the Companies Act, 2013 read with
the Companies (Indian Accounting Standards) Rules, 2015, as amended and presentation requirement of Division II of schedule III to the
Companies Act, 2013 (Ind AS compliant schedule III) as applicable to the Financial Statements.
The Financial Statements have been prepared on accrual basis under the historical cost basis except for certain financial instruments that are
measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The functional currency of the Company is Indian Rupee. These Financial Statements are presented in Indian Rupee and all values are
rounded to the nearest lakhs, except when otherwise indicated.
Summary of Material Accounting Policies:
2.2 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
--> Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the
measurement date,
--> Level 2 Inputs are inputs other than quoted prices included within Level 1, that are observable for the asset or liability either directly or
indirectly, and
--> Level 3 Inputs are unobservable inputs for the asset or liability.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.3 Revenue from contracts with customers:
Revenue is recognised when control of the goods or services is transferred to the customer at an amount of transaction price (net of variable
consideration) and exclude amount collected on behalf of third party, that reflects the consideration to which the Company expects to
be entitled in exchange for those goods or services. The Company has concluded that it is the principal in its revenue arrangements, as it
controls the goods or services before transferring them to the customer.
Revenue from construction contracts:
In case of construction contracts where performance obligation is satisfied over a period of time, 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 Company has an enforceable right to payment for performance completed to
date. Revenue from such construction contracts, where the outcome can be estimated reliably, is recognised under the percentage of
completion method by reference to the stage of completion of the contract activity. The stage of completion is measured by input method
i.e. the proportion that costs incurred to date bear to the estimated total costs of a contract. The total cost of the contracts are estimated
based on technical and other estimates. In the event that a loss is anticipated on a particular contract, provision is made for the estimated
loss. Contract revenue earned in excess of billing is reflected under "contract asset” and billing in excess of contract revenue is reflected
under "contract liabilities”.
Changes to total estimated contract cost or losses, if any are recognized in the period in which they are determined as assessed at the
contract level. Costs to obtain a contract are recognised as an expense when incurred.
Retention money receivable from project customers does not contain any significant financing component and is retained for satisfactory
performance of contract.
In case of construction contracts, payment is generally due upon completion of milestones as per terms of contract. In certain contracts short
term advances are received before satisfaction of performance obligations.
Variable consideration:
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled
in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until
it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated
uncertainty with the variable consideration is subsequently resolved. The Company adopted the most likely method to recognise revenue for
variable consideration.
Warranty:
The Company generally provides limited warranties for work performed under its construction contracts. The warranty periods typically
extend for a limited duration following substantial completion of the Company's work on a project.
The Company provides its clients with a fixed-period warranty on contracts as per stipulated terms. These assurance-type warranties are
accounted for under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Refer to the accounting policy on warranty provisions
in Note 2.15 below.
Contract balances:
Contract assets:
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by
transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised
for the earned consideration that is conditional. Upon completion of the installation and acceptance by the customer, the amount recognised
as contract assets is reclassified to trade receivables. Contract assets are subject to impairment assessment, refer to Accounting policies of
financial Instruments in Note 2.16 below.
Trade receivables:
A receivable represents the Company's right to an amount of consideration that is unconditional (i.e. only the passage of time is required
before payment of the consideration is due), refer to accounting policies of financial instruments in Note 2.16 below for initial recognition and
subsequent measurement.
Contract liabilities:
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an
amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to
the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are
recognised as revenue when the Company performs under the contract.
Sale of goods:
Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery
of the goods. The normal credit term is 30 - 360 days.
Sale of services:
In case of long-term maintenance contracts, revenue is recognised over the period of time based on input method where the extent of
progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of
performance obligation. Income from other services are recognised at a point in time.
Duty drawback and other export incentives:
Export benefits under Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS) and Duty drawback
Scheme are accounted as revenue on accrual basis as and when export of goods or services take place and when the Company has
reasonable assurance that it will comply with the conditions of the grant and that grant will be received. Where as Remission of Duties and
Taxes on Export Products (RoDTEP) is accounted on the basis of credit appearing in our credit ledger of this scheme, appearing on ICEGATE
portal.
Interest and dividend:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount
of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to that asset's net carrying amount on initial recognition. Dividend income from investments is recognised when the right to receive dividend
is established.
2.4 Leases:
The Company assesses at contract inception whether the Contract is, or contains, a lease. That is, if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration.
As a lessee:
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value
assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying
assets.
i) Right-of-use assets:
The Company recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-
of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, lease payments made at or before the
commencement date less any lease incentives received and estimate of costs to dismantle. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
--> Land - 49 to 66 years
--> Office premise - 1 to 5 years
--> Vehicles - 4 years
The Right-of-use assets are also subject to impairment. Refer to the accounting policies on Impairment in Note 2.16.
ii) Lease liabilities:
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to
be made over the lease term. In calculating the present value of lease payments, the Company generally uses its incremental borrowing
rate at the lease commencement date if the discount rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. The carrying amount is remeasured when there is a change in future lease payments arising from a change in index or
rate. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in
the lease payments or a change in the assessment of an option to purchase the underlying asset.
Lease liability and right-to-use assets have been separately presented in the Balance Sheet and lease payments have been classified
as financing cash flows.
iii) Short term leases and leases of low value assets:
The Company applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets
recognition exemption that are considered to be low value. Lease payments on short-term leases and leases of low value assets are
recognised as expense on a straight-line basis over the lease term.
As a lessor:
Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards incidental to
ownership to the lessee. All other leases are classified as operating lease. The Company recognizes lease payments received under
operating leases as income on a straight-line basis over the lease term as part of other income.
2.5 Foreign currency transactions:
Initial recognition:
Foreign currency transactions are recorded in the reporting currency by applying the periodic average exchange rate.
Translation:
At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms of historic cost in a foreign currency are not retranslated.
Exchange differences:
Exchange differences on monetary items are recognised in the Statement of Profit and Loss in the period in which they arise, except for
exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting
in Note 2.16).
2.6 Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.7 Employee benefits:
Defined contribution plan:
The Company's contribution to provident fund, superannuation fund and employee state insurance scheme are considered as defined
contribution plans and are recognised as an expense based on the amount of contribution required to be made and when services are
rendered by the employees.
All eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan in which both the
employees and employer (at a determined rate) contribute monthly. Contributions are made to provident fund in India for employees at the
rate of 12% of basic salary as per regulation. The contributions are made to registered provident fund administered by the government. The
obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.
Defined benefit plan:
The Company's liabilities towards gratuity is determined as at the end of the reporting date by an independent actuary using the Projected
Unit Credit method.
Remeasurements, comprising of actuarial gains and losses, experience adjustments and the return on plan assets (excluding amounts
included in net interest on the net defined benefit liability) are recognised immediately in the Balance Sheet with a corresponding debit or
credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurement are not reclassified to
the Statement of Profit and Loss in subsequent periods. Past service cost is recognised in the Statement of Profit and Loss in the period of a
plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or
asset. Defined benefit costs are categorised as follows:
--> service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements)
--> net interest expenses or income and
--> remeasurement
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item 'Employee benefits
expense'. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the Balance Sheet represents the actual deficit or surplus in the Company's defined benefit
plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from
the plans or reduction in future contributions to the plans.
Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to the
market yields at the Balance Sheet date on the Government Securities where the currency and terms of the Government Securities are
consistent with the currency and estimated terms of the defined benefit obligation.
Short-term and other long-term employee benefits:
Benefits accruing to employees in respect of wages, salaries and compensated absences and which are expected to be availed within twelve
months immediately following the year end are reported as expenses during the year in which the employee performs the service that the
benefit covers and the liabilities are reported at the undiscounted amount of the benefit expected to be paid in exchange of related service.
Where the availment or encashment is otherwise not expected to wholly occur within the next twelve months, the liability on account of the
benefit is actuarially determined using the projected unit credit method at the present value of the estimated future cash flow expected to be
made by the Company in respect of services provided by employees up to the reporting date.
2.8 Taxation:
Income tax expense represents the sum of the income tax currently payable and deferred tax.
Current tax:
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and
the provisions of the Income Tax Act, 1961 and other applicable tax laws.
Current income tax relating to items recognised outside Statement of Profit and 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 recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements
and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that is probable
that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the
asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax relating to items recognised outside Statement of Profit and 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.
2.9 Property, plant and equipment:
Initial recognition:
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment
losses, if any. Cost comprises of purchase/acquisition price net of any trade discounts and rebates, including any import duties and other
taxes (other than those subsequently recoverable from the tax authorities) and any directly attributable cost of bringing the asset to its
working condition for its intended use, including relevant borrowing costs for qualifying assets and any expected cost of decommissioning.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Property, plant and equipment except freehold land held for use in the production, supply or administrative purposes, are stated in the
Balance Sheet at cost less accumulated depreciation and accumulated impairment losses, if any.
At the date of transition to Ind AS, the Company had elected to continue with the carrying value for all of its property, plant and equipment
recognised as of April 1,2016 (transition date) measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Depreciation:
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is
recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over
their useful lives, using straight-line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013.
Derecognition:
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the assets. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in Statement of Profit and Loss.
Property, plant and equipment retired from active use and held for sale are stated at the lower of their net book value and net realisable value
and are disclosed separately.
2.10 Investment properties:
Properties held to earn rentals and/or capital appreciation are classified as invetment property and are measured and reported at cost in
accordance with the Company's accounting policy. Policies with respect to depreciation, useful life and derecognition are folloed on the
same basis as stated for Property, plant and equipment vide 2.9 above.
2.11 Intangible assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives.
Useful lives of intangible assets:
Estimated useful lives of intangible assets are as follows:
Computer software 3 years
Designs and drawings 3 years
At the date of transition to Ind AS, the Company had elected to continue with the carrying value for all of its Intangible assets recognised as of
April 1, 2016 (transition date) measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Derecognition:
An intangible asset is derecognised upon disposal or when no future economic benefits are expected from use or disposal. Gain or loss
arising from derecognition of an Intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of
the asset, are recognised in profit or loss when the asset is derecognised.
2.12 Impairment of property, plant and equipment and intangible assets other than goodwill:
At the end of each reporting period, the Company reviews the carrying amount of its tangible, investment properties and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss, if any Where it is not possible to estimate the
recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset
belongs. Where a reasonable and consistent basis of allocation can be identified, the corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit
and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in the Statement of Profit and Loss.
2.13 Asset held for sale:
An item of Property, plant and equipment is classified as asset held for sale at the time when the management is commited to sell/dispose off
the asset and the asset is expected to be sold/disposed off within one year from the date of classification.
Assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
2.14 Inventories:
Inventories are valued at lower of cost and net realisable value. However items held for use in the production are not valued below cost if the
finished goods in which these will be incorporated are expected to be sold at or above cost.
Cost of raw materials comprises all costs of purchases (net of Input tax credit) and other costs incurred in bringing the inventories to their
present location and condition. Cost is determined by moving weighted average method.
Cost is arrived at on a moving weighted average method and includes, where appropriate, manufacturing overheads. Work-in-progress and
finished goods inventories are valued as aforesaid based on estimated value of work completed on each project.
Material procured for a specific project is immediately expensed out to the project and is not considered as inventory.
Inventories include goods lying with vendors for job work and goods-in-transit.
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.
|