Material Accounting Policies
5. CURRENT VERSUS NON-CURRENT
CLASSIFICATION
"The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification. An asset is treated as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle*
• Held primarily for the purpose of trading
• Expected to be realised within twelve months
after the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating
cycle*
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after
the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period. The Company
classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
6. REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Company
and the revenue can be reliably measured, regardless
of when the payment is being made. Revenue is
measured at fair value of the consideration received
or receivable, after deduction of any trade discounts,
volume rebates and any taxes or duties collected on
behalf of the government which are levied on sales
such as goods and services tax and other applicable
taxes etc.
The Company applies the revenue recognition criteria
to each separately identifiable component of the sales
transaction as set out below:
Sale of goods
Revenue from sale of goods is recognised when all
the significant risks and rewards of ownership in the
goods are transferred to the buyer as per the terms of
the contract, there is neither continuing managerial
involvement with the goods nor effective control
over the goods sold, it is probable that economic
benefits will flow to the Company, the costs incurred
or to be incurred in respect of the transaction can be
measured reliably and the amount of revenue can be
measured reliably.
Sale of power
Revenue from sale of power is recognized when there
is actual transmission of power and considerable
certainty for recoverability of the revenue exists once
the actual transmission of power is confirmed from
the regulatory authorities. The company recognises
the revenue from sale of power as unbilled revenue
on monthly basis and the same is settled after the
company receives the confirmation from regulatory
authorities and the customer in respect of the actual
units transmitted and thereafter the actual Invoice
is raised to the customer and the same is settled
against the unbilled revenue recognised for the said
customer. Revenue from the end of the last billing
to the Balance Sheet date is recognized as unbilled
revenues.
Revenue from Infrastructure development
and work contract income
Revenue on time-and-material contracts are
recognized as the related services are performed and
revenue from the end of the last billing to the Balance
Sheet date is recognized as unbilled revenues.
Revenue from fixed-price, fixed-timeframe contracts,
where there is no uncertainty as to measurement or
collectability of consideration, is recognized as per
the percentage-of-completion method. When there
is uncertainty as to the measurement or ultimate
collectability, revenue recognition is postponed until
such uncertainty is resolved. Efforts or costs expended
have been used to measure progress towards
completion as there is a direct relationship between
input and productivity. Provisions for estimated
losses, if any, on uncompleted contracts are recorded
in the period in which such losses become probable
based on the current contract estimates. Costs and
earnings in excess of billings are classified as unbilled
revenue while billings in excess of costs and earnings
are classified as unearned revenue. Deferred contract
costs are amortized over the term of the contract.
Maintenance revenue is recognized rateably over the
term of the underlying maintenance arrangement.
Interest Income
Interest income is recognised on time proportion
basis taking into account the amount outstanding
and rate applicable. Interest income is recognised
using the effective interest rate (EIR) method.
For all Financial Assets measured at amortized
cost, interest income is recorded using the effective
interest rate (EIR) i.e. the rate that exactly discounts
estimated future cash receipts through the expected
life of the financial asset to the net carrying amount of
the financial assets. The future cash flows include all
other transaction costs paid or received, premiums or
discounts if any, etc.
Dividend income
Dividend income is recognised at the time when
right to receive the payment is established, which
is generally when the shareholders approve the
dividend.
7. INVENTORY
Inventories are valued as follows:
Raw materials, stores and spares
Raw materials, components, stores and spares are
valued at lower of cost and net realisable value. Cost
of raw materials, components and stores and spares is
determined on a "First-in, First-out” basis and includes
interest on raw materials as a carrying cost of materials
where such materials are stored for a substantial
period of time. Stores and spares having useful life of
more than twelve months are capitalised as tangible
assets under "Property, plant and equipment” and are
depreciated prospectively over their remaining useful
lives in accordance with Ind AS 16.
Work in progress
Lower of cost and net realisable value. Cost includes raw
material cost and a proportion of direct and indirect
overheads up to estimated stage of completion.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment, if any.
Costs directly attributable to acquisition are capitalized
until the property, plant and equipment are ready for
use, as intended by the Management. The Company
depreciates property, plant and equipment over their
estimated useful lives using the Straight Line method.
Depreciation methods, useful lives and residual values
are reviewed periodically, including at each financial
year end.
Building (Temporary structure) | 3 years (1)
Building (Permanent structure) | 60 years (1)
Computer equipment | 3 years (1)
Electrical installation and equipment | 10 years (1)
Furniture and fixtures | 10 years (1)
Vehicles (Heavy) | 8 years (1)
Vehicles (Others) | 10 years (1)
Office equipment | 5 years (1)
Plant and machinery | 15 years (1)
Wind power generation plant | 22 years (1)
Freehold land is not depreciated.
(1) Based on technical evaluation, the Management
believes that the useful lives as given above
best represent the period over which the
Management expects to use these assets. Hence,
the useful lives for these assets may be different
from the useful lives as prescribed under Part
C of Schedule II of the Companies Act, 2013.
Depreciation methods, useful lives and residual
values are reviewed periodically, including at
each financial year end.
Advances paid towards the acquisition of
property, plant and equipment outstanding at
each Balance Sheet date is classified as capital
advances under other non-current assets and
the cost of assets not put to use before such
date are disclosed under ‘Capital work-in¬
progress’. Subsequent expenditures relating to
property, plant and equipment are capitalized
only when it is probable that future economic
benefits associated with these will flow to
the Company and the cost of the item can be
measured reliably. Repairs and maintenance
costs are recognized in the Statement of Profit
and Loss when incurred. The cost and related
accumulated depreciation are eliminated from
the financial statements upon sale or retirement
of the asset and the resultant gains or losses are
recognized in the Statement of Profit and Loss.
Assets to be disposed of are reported at the
lower of the carrying value or the fair value less
cost to sell.
9. INTANGIBLE ASSETS
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets are
amortized over their respective individual estimated
useful lives on a straight-line basis, from the date that
they are available for use. The estimated useful life of
an identifiable intangible asset is based on a number
of factors including the effects of obsolescence,
demand, competition, and other economic factors
(such as the stability of the industry and known
technological advances), and the level of maintenance
expenditures required to obtain the expected future
cash flows from the asset. Amortization methods and
useful lives are reviewed periodically including at each
financial year end.
10. INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES
Investments in Subsidiaries, Associates and Joint
Ventures are carried at cost less accumulated
impairment losses, if any. Where an indication of
impairment exists, the carrying amount of the
investment is assessed and written down immediately
to its recoverable amount. On disposal of investments
in subsidiaries, associates and joint venture, the
difference between net disposal proceeds and the
carrying amounts are recognised in the Statement of
Profit and Loss.
11. BORROWING COST
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 capitalized 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 calculated using the effective interest rate
(EIR) and other costs like finance charges in respect
of the finance leases recognised in accordance with
Ind AS 17, that an entity incurs in connection with
held within a business model whose objective is
achieved by both collecting contractual cash flows
and selling financial asset give rise on specified dates
to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Further, in cases where the Company has made an
irrevocable election based on its business model,
for its investments which are classified as equity
instruments, the subsequent changes in fair value are
recognized in other comprehensive income.
12. FINANCIAL INSTRUMENTS
12.1. Initial recognition
The Company recognizes financial assets and
financial liabilities when it becomes a party to the
contractual provisions of the instrument. All financial
assets and liabilities are recognized at fair value on
initial recognition, except for trade receivables which
are initially measured at transaction price. Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities that are
not at fair value through profit or loss, are added to the
fair value on initial recognition. Regular way purchase
and sale of financial assets are accounted for at trade
date.
If the Company determines that the fair value at initial
recognition differs from the transaction price, the
Company accounts for that instrument at that date
as follows:
• at the measurement basis mentioned above if
that fair value is evidenced by a quoted price in
an active market for an identical asset or liability
(i.e. a Level 1 input) or based on a valuation
technique that uses only data from observable
markets. The Company recognises the difference
between the fair value at initial recognition and
the transaction price as a gain or loss.
• in all other cases, at the measurement basis
mentioned above, adjusted to defer the
difference between the fair value at initial
recognition and the transaction price. After
initial recognition, the Company recognises that
deferred difference as a gain or loss only to the
extent that it arises from a change in a factor
(including time) that market participants would
take into account when pricing the asset or
liability.
12.2. Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at
amortized cost if it is held within a business model
whose objective is to hold the asset 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.
(ii) Financial assets at fair value through other
comprehensive income
A financial asset is subsequently measured at fair
value through other comprehensive income if it is
held within a business model whose objective is
achieved by both collecting contractual cash flows
and selling financial asset give rise on specified dates
to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Further, in cases where the Company has made an
irrevocable election based on its business model,
for its investments which are classified as equity
instruments, the subsequent changes in fair value are
recognized in other comprehensive income.
(iii) Financial assets at fair value through profit
or loss
A financial asset which is not classified in any of the
above categories is subsequently fair valued through
profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at
amortized cost using the effective interest method,
except for contingent consideration recognized
in a business combination which is subsequently
measured at fair value through profit or loss. For trade
and other payables maturing within one year from
the Balance Sheet date, the carrying amounts being
approximate fair value due to the short maturity of
these instruments.
(v) Investment in subsidiaries
Investment in subsidiaries is carried at cost in
accordance with IND AS 27- separate financial
statements.
b. Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issuance of new
ordinary shares and share options are recognized as
deduction from equity, net of any tax effects.
Derecognition of financial instruments
The Company derecognizes a financial asset when
the contractual rights to the cash flow from the
financial asset expire or it transfers the financial asset
and the transfer qualifies for derecognition under
Ind AS 109. A financial liability(or a part of financial
liability) is derecognized from the Company's Balance
Sheet when the obligation specified in the contract is
discharged or cancelled or expires.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
In determining the fair value of its financial
instruments, the Company uses a variety of methods
and assumptions that are based on market conditions
and risks existing at each reporting date. The methods
used to determine fair value include discounted cash
flow analysis, available quoted market prices and
dealer quotes. All methods of assessing fair value
result in general approximation of value, and such
value may never actually be realized.
For financial assets and liabilities maturing within
one year from the Balance Sheet date and which are
not carried at fair value, the carrying amounts being
approximate fair value due to the short maturity of
these instruments.
14. 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. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest. All assets and liabilities
for which fair value is measured or disclosed in
the financial statements are categorized within
the fair value hierarchy, described as follows,
based on the lowest level input that is significant
to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active
markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest
level input that is significant to the fair
value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable.
15. ASSETS HELD FOR SALE
Non-current assets or disposal groups comprising
of assets and liabilities are classified as ‘held for sale’
when all the following criteria are met: (i) decision
has been made to sell, (ii) the assets are available for
immediate sale in its present condition, (iii) the assets
are being actively marketed and (iv) sale has been
agreed or is expected to be concluded within 12
months of the Balance Sheet date.
Subsequently, such non-current assets and disposal
groups classified as ‘held for sale’ are measured at
the lower of its carrying value and fair value less
costs to sell. Non-current assets held for sale are not
depreciated or amortised.
16. IMPAIRMENT
a. Financial assets
The Company recognizes loss allowances using the
expected credit loss (ECL) model for the financial
assets which are not fair valued through profit or
loss. Loss allowance for trade receivables with no
significant financing component is measured at an
amount equal to lifetime ECL. For all other financial
assets, ECLs are measured at an amount equal to the
12-month ECL, unless there has been a significant
increase in credit risk from initial recognition in which
case those are measured at lifetime ECL. The amount
of ECLs (or reversal) that is required to adjust the
loss allowance at the reporting date to the amount
that is required to be recognized is recognized as an
impairment gain or loss in profit or loss.
b. Non-financial assets
(i) Intangible assets and property, plant and
equipment
Intangible assets and property, plant and equipment
are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying
amounts may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the
higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that
are largely independent of those from other assets. In
such cases, the recoverable amount is determined for
the CGU to which the asset belongs.
If such assets are considered to be impaired, the
impairment to be recognized in the Statement of
Profit and Loss is measured by the amount by which
the carrying value of the assets exceeds the estimated
recoverable amount of the asset. An impairment loss
is reversed in the Statement of Profit and Loss if there
has been a change in the estimates used to determine
the recoverable amount. The carrying amount of the
asset is increased to its revised recoverable amount,
provided that this amount does not exceed the
carrying amount that would have been determined
(net of any accumulated amortization or depreciation)
had no impairment loss been recognized for the asset
in prior years.
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