3. Summary of material accounting policies
3.01 Statement of compliance
The financial statements have been prepared
in accordance with Ind ASs notified under
the Companies (Indian Accounting Standard)
Rules, 2015, as amended, and the relevant
provisions of the Companies Act, 2013 (‘the
Act’), as applicable.
3.02 Use of Estimates
The preparation of separate financial
statements in conformity with the recognition
and measurement principles of Ind AS
requires the management of the Company to
make estimates and assumptions that affect
the reported balances of assets and liabilities,
disclosures relating to contingent liabilities as
at the date of the separate financial statements
and the reported amounts of income and
expense for the periods presented.
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the
period in which the estimates are revised and
future periods are affected.
3.02.01 Construction activities
Construction activities includes long¬
term contracts for construction of
infrastructure facilities or projects priced
on a time and material basis etc. Revenues
from construction activities are recognised
over time using percentage of completion
method. Such percentage of completion
is determined as a proportion of the cost
incurred for work performed to date
relative to the total estimated contract costs.
The Company follows the policy ofrecognizing
the contract revenue as soon as the work is
completed, irrespective of the certification.
However, whenever the work gets certified,
the Company takes the certified portion of the
previously uncertified revenue and deducts the
same amount from the uncertified portion of
the revenue of the respective financial year.
Foreseeable losses on such contracts are
recognized when probable using the most
likely outcome or expected value method, as
the case may be, in the particular circumstance.
3.02.02 Hotel Operations
Revenue is recognised at the transaction price
that is allocated to the performance obligation.
Revenue includes room revenue, food and
beverage sale and other services which is
recognised once the rooms are occupied, food
and beverages are sold and other services have
been provided as per the contract with the
customer.
3.02.03 Other services / activities
Revenues from agricultural activities is
recognized at a point in time when the
agricultural produce is sold to the customers.
Revenue from trading activities is recognised
at a point in time when the goods is sold to the
customers.
3.02.04 Other Income
Interest: Interest income is recognized on
time proportion basis taking into account the
amount outstanding and the effective interest
rate applicable.
3.03 Employee Benefits
3.03.01 Short-term benefits
Short term employee benefits are recognised
as an expense at the undiscounted amount in
the Statement of Profit and Loss of the year in
which the related service is rendered.
3.03.02 Defined retirement benefits
The cost ofproviding defined benefit retirement
benefits are determined using the projected
unit credit method. The Company provides
gratuity benefits to its employees. Gratuity
liabilities are not funded. Remeasurements,
comprising actuarial gains and losses, return on
plan assets excluding amounts included in net
interest on the net benefit liability (asset) and
any change in the effect of the asset ceiling (if
applicable) are recognised in the balance sheet
with a charge or credit recognised in other
comprehensive income in the period in which
they occur. Remeasurement recognised in the
comprehensive income are not reclassified
to profit and loss but recognised directly in
the retained earnings. Past service costs are
recognised in profit and loss in the period in
which the amendment to plan occurs. Net
interest is calculated by applying the discount
rate to the net defined liability or asset at the
beginning of the period, taking into account
of any changes in the net defined benefit
liability(asset) during the period as a result of
contribution and benefit payments.
Defined benefit costs which are recognised in
profit and loss are categorised as follows:
- service cost (including current service
cost, past service cost, as well as
gains and losses on curtailments and
settlements); and
- net interest expense or income; and
The retirement benefit obligation recognised
in the separate financial statements 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.
The liability for termination benefit is
recognised at the earlier of when the entity can
no longer withdraw the offer of the termination
benefit and when the entity recognises any
related restructuring costs.
3.04 Taxation
i) Current tax
Current tax is the amount of tax
payable on the taxable profit for the
year as determined in accordance with
the provisions of the Income Tax Act,
1961. Taxable profit differs from ‘Profit
Before Tax’ as reported in the Statement
of Profit and Loss because of items of
income or expense that are taxable or
deductible in other years and items that
are never taxable or deductible. The
current tax is calculated using tax rates
that have been enacted or substantively
enacted by the end of the reporting
period.
ii) Deferred tax
Deferred tax is recognised on temporary
differences between the carrying
amounts of assets and liabilities in
the separate financial statements and
the corresponding tax bases used in
the computation of taxable profits.
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. Such deferred tax assets
and liabilities are not recognised if
the temporary difference arises from
the initial recognition (other than in a
business combination) of assets and
liabilities in a transaction that affects
neither the taxable profit nor the
accounting profit. In addition, deferred
tax liabilities are not recognised if the
temporary difference arises from the
initial recognition of goodwill.
The carrying amount of deferred tax
assets is reviewed at the end of each
reporting period and reduced to the
extent that 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 liabilities and assets
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
substantially enacted by the end of the
reporting period.
iii) Minimum alternate tax
Minimum Alternate Tax (MAT) paid
in accordance with the tax laws, which
gives future economic benefits in the
form of adjustment to future income tax
liability, is recognised as an asset in the
balance sheet when there is convincing
evidence that the Company will pay
normal income tax during the specified
period and it is probable that future
economic benefit associated with it will
flow to the Company.
iv) Current tax and deferred tax
Current tax and deferred tax are
recognised in Statement of Profit
and Loss, except when they relate
to items that are recognised in Other
Comprehensive Income or directly in
equity, in which case, the current and
deferred tax are also recognised in Other
Comprehensive Income or directly in
equity respectively. The current and
deferred tax arising from the initial
accounting for business combination,
are included in the accounting for the
business combination.
3.05 Property, Plant and equipment
Land, buildings, Plant and equipment,
Furniture and Fixtures, Vehicles, Office
equipments held for use in the operations,
or for administrative purposes are stated
at cost less accumulated depreciation and
accumulated impairment losses. Freehold land
is not depreciated. Cost includes purchase cost
of materials, including import duties and non¬
refundable taxes, any directly attributable
costs of bringing an asset to the location and
condition of its intended use and borrowing
costs capitalised in accordance with the
Company’s accounting policy.
Depreciation is recognised so as to write
off the cost of assets (other than freehold
land) less their residual values over the
useful lives, using the straight-line method.
Depreciation of assets commences when the
assets are ready for their intended use. The
estimated useful lives, residual values and
depreciation method are reviewed at the end
of each reporting period, with the effect of any
changes is accounted as change in estimate on
a prospective basis.
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 asset. Any gain or loss
arising on the disposal or retirement of an item
of property, plant and equipment is recognised
in Statement of Profit and Loss.
Upto March 31, 2019, assets acquired under
finance leases are depreciated over their
expected useful lives on the same basis as
owned asset. When there is no reasonable
certainty that ownership will be obtained by
the end of the lease term, assets are depreciated
over the shorter of the lease term and their
useful lives.
Estimated useful lives of the assets are as
follows:
Buildings : 30 to 60 years
Plant and equipment : 3 to 15 years
Furniture and Fixtures : 10 years
Office Equipments : 3 to 5 years
Computers : 3 years
Motor Vehicles : 5 to 8 years
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 asset. Any gain or loss
arising on the disposal or retirement of an item
of property, plant and equipment is recognised
in profit and loss.
The Company has elected to continue with
the carrying value of all of its property, plant
and equipment recognized as of April 1, 2016
measured as per the previous GAAP and use
that carrying value as its deemed cost as of the
transition date.
3.06 Borrowing Costs
Borrowing cost attributable to the acquisition
of qualifying assets is added to the cost up
to the date when such assets are ready for
their intended use. Other borrowing costs are
recognized as expenses in the period in which
these are incurred.
3.07 Impairment of tangible and intangible
assets other than goodwill
At the end of each reporting period, the
Company reviews the carrying amounts of
its tangible and intangible assets (Other than
goodwill) to determine whether there is any
indication that those assets have suffered
any 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). When 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.
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 risks specific to the asset for
which the estimates of future cash flows have
not be adjusted.
If the recoverable amount of an asset or cash
generating unit is estimated to be less than the
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 profit and loss.
When an impairment loss subsequently
reverses, the carrying value 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. Any reversal of an impairment
loss is recognised immediately in profit and
loss.
3.08 Inventories
Raw materials, stores and spares, finished
goods, other construction materials and fuel
are valued at lower of cost and net realisable
value after providing for obsolescence and
other losses, where considered necessary. Cost
includes purchase price, non-refundable taxes
and duties and other directly attributable costs
incurred in bringing the goods/services to the
point of sale. Work-in-progress is valued at
cost.
Value of inventories are generally ascertained
on the “FIFO” basis.
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