1.2 Significant Accounting Policies
1.2.1 Revenue recognition:
The Company's contracts with customers include promises to transfer multiple products and
services to a customer. Revenues from customer contracts are considered for recognition
and measurement when the contract has been approved, in writing, by the parties to the
contract, the parties to the contract are committed to perform their respective obligations
under the contract, and the contract is legally enforceable. The Company assesses the services
promised in the contract and identifies distinct performance obligations in the contract.
Identification of distinct performance obligations to determine the deliverables and the ability
of the customer to benefit independently from such deliverables, and allocation of transaction
price to these distinct performance obligations involves significant judgment.
1.2.2Contract balances
i) Contract assets
A contract asset is recognised for amount of work done but pending billing/acknowledgement
by customer or amounts billed but payment is due on completion of future performance obligation,
since it is conditionally receivable.
ii) 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 assets in section financial instruments - initial recognition
and subsequent measurement.
iii) Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the
Company has received advance payments 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 consideration received.
Interest
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 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
Dividend income from Investments is recognized when the shareholder's right to receive payment
has been established.
1.2.3Property, plant and equipment:
(i) Property, plant and equipment is carried at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase price, freight, duties
and taxes and any directly attributable cost of bringing the asset to its working condition for its
intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Such cost includes the cost of decommissioning, restoring and similar liabilities as part of the
plant and equipment.
(ii) Borrowing costs relating to acquisition of property, plant and equipment which take substantial
period of time to get ready for use are included to the extent they relate to the period till such
assets are ready for intended use.
(iii) When significant parts of plant and equipment are required to be replaced at intervals, the
Company depreciates them separately based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognised in profit or loss as incurred.
(iv) Items of stores and spares that meet the definition of property, plant and equipment are capitalized
at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
(v) The Company identifies and determines cost of each component/ part of the asset separately,
if the component/ part has a cost which is significant to the total cost of the asset and has
useful life that is materially different from that of the remaining asset.
(vi) Assets retired from active use and held for disposal are stated at their estimated net realizable
values or net book values, whichever is lower
(vii) Gains or losses arising from derecognition of property, plant and equipment are measured as
the difference between the net disposal proceeds and the carrying amount of the asset and
are recognized in the statement of profit and loss when the asset is derecognized.
(viii) Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with the expenditure will flow to the Company.
(ix) Capital work in progress includes the cost of property, plant and equipment's that are not
ready for their intended use at the balance sheet date
1.2.4Depreciation on property, plant and equipment
(i) Depreciation on property, plant and equipment are calculated on straight-line basis using the
rates arrived at, based on useful lives estimated by the management which coincides with
rates prescribed under Schedule II of the Companies Act, 2013.
(ii) The residual values, useful lives and methods of depreciation of property, plant and equipment
are reviewed at each financial year end and adjusted prospectively, if appropriate.
1.2.5Intangible assets:
Identifiable intangible assets are recognised when the Company controls the asset, it is probable
that future economic benefits attributed to the asset will flow to the Company and the cost of
the asset can be reliably measured. At initial recognition, the separately acquired intangible
assets are recognised at cost. Following initial recognition, the intangible assets are carried at
cost less any accumulated amortization and accumulated impairment losses, if any. The
estimated useful life and amortization method is reviewed at the end of each reporting period,
with the effect of any changes in estimate being accounted for on a prospective basis.
Software - Computer software license cost is expensed in the year of purchase as there is no
expected future economic benefit, except for enterprise wide/project based software license
cost which is amortized over the period of license or six years, whichever is lower.
1.2.6Employee benefits
Short-term employee benefits
All employee benefits falling due wholly within twelve months of rendering the services are
classified as short-term employee benefits, which include benefits like salaries, wages and
short-term compensated absences and are recognised as expenses in the period in which the
employee renders the related service at the undiscounted amount of the benefits expected to
be paid.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay
further amounts. The Company makes specified monthly contributions towards the government
administered provident fund scheme. Obligations for contributions to defined contribution plans
are recognised as an employee benefit expense in profit or loss in the periods during which
the related services are rendered by employees.
1.2.7Income taxes:
Income tax comprises current and deferred tax. It is recognised in statement of profit or loss
except to the extent that it relates to a business combination or to an item recognised directly in
equity or in other comprehensive income.
(i) 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 that have been enacted or substantively enacted by the end of the
reporting period in the countries where the Company operates and generates taxable income.
(ii) 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 it 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 differences arise 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 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 realised, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax is measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on the laws that have been enacted or
substantively enacted by the reporting date.
Current and deferred tax for the year
Current and deferred taxes are recognised in profit or 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. 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.
1.2.8Foreign currency transactions and translations:
Transactions in foreign currencies are initially recorded by the Company at their functional
currency spot rates at the date of the transaction. Monetary assets and liabilities denominated
in foreign currency are translated at the functional currency spot rates of exchange at the
reporting date. Exchange differences that arise on settlement of monetary items or on reporting
at each balance sheet date of the Company's monetary items at the closing rates are recognised
as income or expenses in the period in which they arise. Non-monetary items which are
carried at historical cost denominated in a foreign currency are reported using the exchange
rates at the date of transaction. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value is determined.
1.2.9Leases:
Where the Company is a Lessee
The Company's lease asset primarily consist of leases for buildings. The Company assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. To assess whether a contract conveys the right to control
the use of an identified asset, the Company assesses whether:
(i) The contract involves the use of an identified asset
(ii) The Company has substantially all of the economic benefits from use of the asset through
the period of the lease and
(iii) The Company has the right to direct the use of the asset.
1.2.10 Borrowing Costs:
Borrowing costs include interest and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in
connection with the borrowing of funds to the extent not directly related to the acquisition of
qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.
Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from
commencement of activities relating to construction / development of the qualifying asset up to
the date of capitalisation of such asset are included in the cost of the assets. Capitalisation of
borrowing costs is suspended and charged to the Statement of Profit and Loss during extended
periods when active development activity on the qualifying assets is interrupted.
1.2.11 Impairment:
(i) Financial assets
The Company recognises loss allowances for expected credit losses on financial assets which
are not measured at fair value through profit or loss. At each reporting date, the Company
assesses whether financial assets which are not measured at fair value through profit or loss,
is credit impaired. A financial asset is ‘credit impaired' when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer.
• a breach of contract such as a default or being significantly past due.
• the restructuring of a loan or advance by the Company on terms that the Company would
not consider otherwise; or
• it is probable that the borrower will enter bankruptcy or other financial reorganization.
The Company measures loss allowances at an amount equal to lifetime expected credit losses
(ECL), except for financial assets for which credit risk (i.e. the risk of default occurring over
the expected life of the financial instrument) has not increased significantly since initial
recognition, which are measured as 12 month expected credit losses.
Loss allowances for trade receivables are always measured at an amount equal to lifetime
expected credit losses. The Company follows ‘simplified approach' for recognition of impairment
loss allowance on trade receivables or contract revenue receivables. Under the simplified
approach, the Company is not required to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime ECLs together with appropriate management
estimates for credit loss at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the group of
trade receivables. The provision matrix is based on its historically observed default rates over
the expected life of the trade receivable and is adjusted for forward looking estimates. At every
reporting date, the historical observed default rates are updated and changes in the forward¬
looking estimates are analysed.
Measurement of expected credit losses
Expected credit losses are a probability weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference between the cash flows
due to the Company in accordance with the contract and the cash flows that the Company
expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowances for financial assets measured at amortised cost are deducted from the gross
carrying amount of the assets.
Write off
The gross carrying amount of a financial asset is written off (either partially or in full) to the
extent that there is no realistic prospect of recovery. This is generally the case when the
Company determines that the debtor does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write off. However, financial
assets that are written off could still be subject to enforcement activities in order to comply with
the Company's procedures for recovery of amounts due.
(ii) Impairment of non-financial assets
The Company's non-financial assets, other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped
together into cash-generating units (CGUs). Each CGU represents the smallest group of assets
that generates cash inflows that are largely independent of the cash inflows of other assets or
CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and
its fair value less costs to sell. Value in use is based on the estimated future cash flows,
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 CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its
estimated recoverable amount. Impairment losses are recognised in the statement of profit
and loss. Impairment loss recognised in respect of a CGU is allocated to reduce the carrying
amounts of the other assets of the CGU (or group of CGUs) on a pro rata basis.
Assets (other than goodwill) for which impairment loss has been recognised in prior periods,
the Company reviews at each reporting date whether there is any indication that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. Such a reversal is made only to the
extent that the asset's carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
1.2.12 Financial instruments:
Financial assets and financial liabilities are recognised when the Company becomes a party
to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in statement of profit and loss.
Financial assets - classification and subsequent measurement
Financial asset is
1. Cash / Equity Instrument of another Entity,
2. Contractual right to - a) receive Cash / another Financial Asset from another Entity, or
b) exchange Financial Assets or Financial Liabilities with another Entity under conditions
that are potentially favourable to the Entity.
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised 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 assets 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. Further, in case where the company has
made an irrevocable selection 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 are subsequently
fair valued through profit and loss.
Financial liabilities - classification and subsequent measurement
Financial liability is Contractual Obligation to
a) deliver Cash or another Financial Asset to another Entity, or
b) exchange Financial Assets or Financial Liabilities with another Entity under conditions
that are potentially unfavorable to the Entity.
c) The company's financial liabilities include trade and other payables, loans and borrowings.
Subsequent measurement of the financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest rate
method. For trade and other payables maturing within one year from the balance sheet date,
the carrying amounts approximate the fair value due to the short maturity of these instruments.
Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows
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 a financial liability) is
derecognized from the Company's balance sheet when the obligation specified in the contract
is discharged or cancelled or expires.
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