2 (b) SIGNIFICANT ACCOUNTING POLICIES
2.1 Revenue Recognition
SALES AND SERVICES
A. In case of sale of goods performance obligation is satisfied when control is transferred to customer and
recoverability of amount is probable. T ransaction price is same as invoice value excluding taxes. Revenue
is recognized as and when performance obligation is satisfied.
B. In case of sale of service performance obligation is satisfied when work is executed, customer approves
the work performed and recoverability of amount is probable. Transaction price is same as invoice value
excluding taxes. Revenue is recognized as and when performance obligation is satisfied.
C. Revenue is adjusted for variable consideration such as discounts, rebates, refunds, credits, price
concessions, incentives, or other similar items in supply and service when they are highly probable to be
provided. The amount of revenue excludes any amount collected on behalf of third parties.
D. Goods and Service Tax (GST) is not received by the company on its own account. Rather it is tax collected
on value added to the goods/ services by the seller on behalf of the Government. Accordingly, it is
excluded from revenue. However such tax expenses are included in cost where Company is not availing
tax credit of the same.
INTEREST AND DIVIDEND INCOME
Interest income from a financial asset is recognized 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, 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 recognized when the shareholder's right to receive payment has been
established (provided that it is probable that the economic benefits will flow to the Company and the amount of
income can be measured reliably).
2.2 Leases
The Company assesses at contract inception whether a 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.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or
for a portfolio of leases with similar characteristics. The Company has taken discount rate @12%.
The Company 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 recognizes lease liabilities to make lease payments and right-of-use
assets representing the right to use the underlying assets.
At the date of commencement of the lease, the Company recognizes a right-of-use (ROU) asset and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12
months or less (short-term leases) and low value leases. For these short-term and low-value leases, the Company
recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease
term and useful life of the underlying asset. ROU assets 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 Cash
Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The
lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with
a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will
exercise an extension or a termination option.
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been
classified as financing cash flows.
The Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the
lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
The Company recognizes lease income as and when due as per terms of agreements. The respective leased assets
are included in the financial statements based on their nature. The Company did not need to make any
adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard.
2.3 Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use, are added to the
carrying cost of those assets, until such time as the assets are substantially ready for their intended use.
All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which they are
incurred.
The Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs
incurred on that borrowing during the period less any interest income earned on temporary investment of
specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds
specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the
funds for obtaining a qualifying asset, borrowing costs eligible for capitalization are determined by applying a
capitalization rate to the expenditures on that asset.
2.4 Retirement and other employee benefits:
The Company participates in various employee benefit plans. These benefit plans are classified as either defined
contribution plans or defined benefit plans. Under a defined contribution plan, the company's only obligation is
to pay a fixed amount with no obligation to pay further contributions if the fund does not hold sufficient assets to
pay all employee benefits. The related actuarial and investment risks fall on the employee.
Under a defined benefit plan, it is the Company's obligation to provide agreed benefits to the employees. The
related actuarial & investment risks fall on the Company.
Defined Contribution plan
Company's contributions paid/ payable during the year to Provident Fund, Employee state insurance are
recognized in the statement of Profit and Loss Account.
The company is depositing P.F. & ESI contribution only for eligible employees within statutory limits. The
employees whose income is above the statutory limits have opted not to subscribe and accordingly, the company
is not required to make the contribution.
Defined Benefit Obligation Plans
Gratuity
The liability recognized in respect of gratuity is the present value of defined benefit obligation at the end of the
reporting period less the fair value of plan assets, where applicable. The Company makes contribution to the LIC
for Employees Gratuity Scheme in respect of employees of the company. The defined benefit obligation is
calculated annually by the actuary using the Projected Unit Credit Method by the Actuarial Valuer. Re¬
measurement comprising actuarial gains and losses are recognized in the other comprehensive income for the
period in which they occur and is not reclassified to profit or loss.
All other expenses related to defined benefit plans are recognized in Statement of Profit and Loss as Employee
benefit expenses.
Compensated absences
The Company has a policy on compensated absences which are non-accumulating in nature neither company
provides encashment of leaves.
2.5 TAXATION:
Tax expense comprises of current tax, deferred tax and Dividend Tax which are described as follows -:
(a) Current Tax
Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates.
Current tax is calculated using tax rates that have been enacted or substantively enacted by the end of reporting
period. Current T ax is generally charged to profit & loss except when they relate to items which are recognized in
other comprehensive income or equity.
(b) Deferred Tax
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the Balance
sheet and the corresponding tax bases used in the computation of taxable profit and are accounted for using the
liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and
deferred tax assets are generally recognized for all deductible temporary differences, carry forward tax losses
and allowances to the extent that it is probable that in future taxable profits will be available to set off such
deductible temporary differences. Deferred tax assets and liabilities are measured at the applicable tax rates.
Deferred tax assets and deferred tax liabilities are off set, and presented as net. The carrying amount of deferred
tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available against which the temporary differences can be utilised.
2.6 Property, Plant and Equipment
PROPERTY, PLANT & EQUIPMENT is recognized when it is probable that future economic benefits associated
with the items will flow to the company and the cost of the item can be measured reliably.
PROPERTY, PLANT & EQUIPMENTS are stated at cost net of Cenvat less accumulated depreciation and
impairment losses, if any. Cost of acquisition is inclusive of freight, duties, attributable overheads, taxes and
incidental/preoperative expenses and interest on loans attributable to the acquisition of assets upto the date of
commissioning of assets.
Assets in the course of construction are capitalized in the assets under construction account. At the point when
the asset is operating at management's intended use, the cost of construction is transferred to the appropriate
category of the PROPERTY, PLANT & EQUIPMENT and depreciation commences.
Free hold land is carried at historical cost.
Leasehold land is not amortized as all leasehold land is on 99 years lease with local authority.
All other items of property plant and equipment are stated at historical cost. Historical cost includes expenditure
that is directly attributable to the acquisition of items.
Subsequent costs are included in assets carrying amount or recognized as a separate asset, as the case may be,
only when it is probable that future economic benefits with the PROPERTY, PLANT & EQUIPMENT will flow to the
entity and cost of the item will be measured reliably.
Carrying amount of component is recognized as a separate asset. Such component is derecognized when replaced.
Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost.
Otherwise, such items are classified as inventories.
Repairs and maintenance are charged to profit and loss account as and when they are incurred.
An item of PROPERTY, PLANT & EQUIPMENT is derecognized upon disposal or when no future economic benefits
are expected to arise from the continued use of asset. Any gain or loss arising on the disposal or retirement of an
item of PROPERTY, PLANT & EQUIPMENT is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognized in statement of profit & loss.
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 written down value method
as per the useful life prescribed in Schedule II to the Companies Act, 2013.
2.7 Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the
group, is classified as investment property. Investment property is measured initially at its cost, including related
transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset's
carrying amount only when it is probable that future economic benefits associated with the expenditure will flow
to the group and the cost of the item can be measured reliably. All other repairs and maintenance costs are
expensed when incurred. Leasehold land is stated at historical cost. Leasehold land is not amortised over the
period of lease as all leasehold land is on 99 years lease with local authority. Though the Company measures
investment property using cost-based measurement, the fair value of investment property is disclosed in the
notes. Fair values are determined based on annual evaluation performed by an external independent
valuer/Internal assessment.
2.8 Intangible Assets (Software)
Identifiable intangible assets are recognized a) when the Company controls the asset, b) it is probable that future
economic benefits attributed to the asset will flow to the Company and c) the cost of the asset can be reliably
measured.
“Computer softwares are capitalized at the amounts paid to acquire the respective license for use and are
amortized over the period of license, generally not exceeding six years on straight line basis. The assets useful
lives are reviewed at each financial year end. Software is amortized over an estimated useful life of 3 years.”
2.9 Capital Work in Progress
Capital work in progress are stated at cost and inclusive of preoperative expenses, project development expenses
etc.
2.10 Impairment of Assets:
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment
based on internal/external factors.
An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of an asset
or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where
applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling
price and its value in use. A previously recognized impairment loss is increased or reversed depending on changes
in circumstances.
However the carrying value after reversal is not increased beyond the carrying value that would have prevailed
by charging usual depreciation if there was no impairment.
2.11 INVENTORIES
Inventories, are valued at lower of cost (determined on FIFO Method and Specific identification method for
Vehicles) and net realisable value. The bases for determining cost for different categories of inventory are as
under:
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