3. Summary of Material Accounting Policies
a. Property, Plant and Equipments
Property, plant and equipment are stated at their cost of
acquisition, installation or construction less accumulated
depreciation and impairment losses, if any, except freehold land
which is stated at cost less impairment losses if any.
The cost of property, plant and equipment comprises its
purchase price, and any cost directly attributable to bringing the
asset to working condition and location for its intended use. It
also includes the initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is located.
Stores and spare parts are capitalised when they meet the
definition of property, plant and equipment. The corresponding
old spares are decapitalised on such date with consequent
impact in the statement of profit & loss.
Subsequent expenditures on major maintenance or repairs
includes the cost of the replacement of parts of assets and
overhaul costs are included in the asset's carrying amount or
recognized as separate asset, as appropriate, only when it is
probable that future economic benefits associated with the
item will flow to the Company and the cost of the item can be
measured reliably. All other expenses on existing property,
plant and equipment, including day-to-day repair and
maintenance expenditure are charged to the statement of
profit and loss for the period during which such expenses are
incurred.
If significant parts of an item of property, plant and equipment
have different useful life, then they are accounted for as
separate items (major components) of property, plant and
equipment. Likewise, expenditure towards major inspections
and overhauls are identified as a separate component and
depreciated over the expected period till the next overhaul
expenditure.
An item of PPE is de-recognised 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 the
disposal or retirement of an item of PPE, 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.
Major inspection and overhaul expenditure is capitalized, if the
recognition criteria are met.
Capital work in progress comprises expenditure for acquisition
and construction of tangible assets that are not yet ready for
their intended use. Costs, net of income, associated with the
commissioning of the asset are capitalized until the period of
commissioning has been completed and the asset is ready for
its intended use. At the point when the asset is capable of
operating in the manner intended by the management, the cost
of construction is transferred to the appropriate category of
property, plant and equipment. Such items are classified to the
appropriate category of property, plant and equipment when
completed and ready for their intended use. Advances given
towards acquisition/construction of property, plant and
equipment outstanding at each balance sheet date are
disclosed as Capital Advances under "Other non-current
assets".
b. Depreciation
Depreciation on property, plant and equipment is provided on
straight line method (SLM), except on Building and Plant &
Machineries of Ferro Alloys Unit at Byrnihat and Kalyaneshwari
on which depreciation has been provided on written down
value (WDV) method.
Depreciation commences when the assets are ready for their
intended use. Depreciated assets and accumulated
depreciation amounts are retained fully until they are
removed/retired from active use.
Depreciation is provided to allocate the costs of property, plant
and equipment, net of their residual values, over their useful life
as specified in Schedule II of the Companies Act, 2013, other
than in case of factory building and plant & machinery in
Visakhapatnam Unit where useful life has been considered by
the management to be of 20 years.
The assets residual values, useful lives and methods of
depreciation of property, plant and equipment are reviewed
during each financial year and adjusted prospectively, if
appropriate. In respect of an asset for which impairment loss is
recognized, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c. Leases
The Company has applied Ind AS 116 "Leases" with effect from
1st April 2019. The Company assesses whether a contract
contains a lease, at the inception of the 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
• the contract involves the use of identified asset;
• the Company has substantially all of the economic benefits
from the use of the asset through the period of lease; and
• the Company has the right to direct the use of the asset.
4s 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.
The Company recognizes right-of-use assets at the
commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are initially
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any re-measurement of
lease liabilities. The cost of right-of-use assets includes the
initial amount of lease liabilities recognized, initial direct costs
incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-
of-use assets are subsequently depreciated on a straight-line
basis over the shorter of the lease term and the estimated
useful lives of the assets. The estimated useful lives of right of-
use assets are determined on the same basis as those of
property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted
for certain re-measurements of the lease liability.
At the commencement date of the lease, the Company
recognizes lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the company
uses its incremental borrowing rate at the lease
commencement date because the interest 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.
In addition, the carrying amount of lease liabilities is re¬
measured if there is a modification, a change in the lease term, a
change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine
such lease payments) or a change in the assessment of an
option to purchase the underlying asset.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an
index or rate, if there is a change in the Company's estimate of
the amount expected to be payable under a residual value
guarantee, or if Company changes its assessment of whether it
will exercise a purchase, extension or termination option. When
the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use
asset or is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets
and lease liabilities for short-term leases that have a lease term
of 12 months or lower and leases of low value assets. The
Company recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
d. Intangible Assets and Amortization
Intangible assets acquired separately are, on initial recognition,
measured at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortization and
accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as either finite
or indefinite.
Intangible assets with finite lives are amortized over the useful
economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortization period and the amortization method for
intangible asset with a finite useful life are reviewed at the end
each reporting period.
Intangible assets with infinite useful lives are not amortized, but
are tested for impairment annually, either individually or at the
cash generating unit level. The assessment of infinite life is
reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life
from indefinite to finite is made on a prospective basis.
A Summary of the policies applied to the Company's intangible
assets is, as follows:
The amortisation period and the amortisation method are
reviewed at each financial year end, if the expected useful life of
the asset is different from previous estimates; the change is
accounted for prospectively as a change in accounting estimate.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are
recognised in the statement of profit and loss when the asset is
derecognised.
e. Goodwill
Subsequent to the initial recognition, goodwill is measured at
cost, less accumulated impairment losses, if any.
For the purpose of impairment testing, goodwill is allocated to
the cash-generating units or groups of cash- generating units
that are expected to benefit from the synergies of the
combination. Cash generating units to which goodwill has been
allocated are tested for impairment annually, or more
frequently when there is an indication that the unit's value may
be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying value of the unit, the impairment
loss is allocated first to reduce the carrying value of any goodwill
allocated to the unit and then to the other assets of the unit in
proportion to the carrying value of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
f. Impairment of Non- Financial Assets
The Company assesses at the end of each reporting period the
carrying amounts of non-financial assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, then an
impairment review is undertaken and an impairment loss, if any,
is recognized in the statement of profit and loss wherever the
carrying amount of an asset exceeds its recoverable amount.
The recoverable amount is the higher of the asset's fair value
less costs of disposal and the asset's value in use. In case, where
it is not possible to estimate the recoverable amount of an
individual non-financial asset, the Company estimates the
recoverable amount for the smallest cash generating unit to
which the non-financial asset belongs.
Fair value less costs of disposal is the price that would be
received to sell the asset in an orderly transaction between
market participants and does not reflect the effect of factors
that may be specific to the entity and not applicable to entities
in general. Value in use is determined as the present value of the
estimated future cash flows expected to arise from the
continued use of the asset in its present form and its eventual
disposal.
Impairment charges and reversals are assessed at the level of
cash-generating unit (CGU). A cash-generating unit (CGU) is the
smallest identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from other
assets or group of assets.
A cash generating unit is treated as impaired when the carrying
amount of the assets or cash generating unit exceeds its
recoverable value. An impairment loss is charged to the
Statement of Profit and Loss in the period in which asset or cash
generating unit is identified as impaired.
Impairment loss recognised in prior accounting period(s) is
reversed when there is an indication that the impairment losses
recognised no longer exist or have decreased. 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. Post impairment,
depreciation is provided on the revised carrying value of the
impaired asset over its remaining useful life. A reversal of an
impairment loss is recognised immediately in the Statement of
Profit and Loss, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
g. Government Grants and Subsidies
Grants and subsidies from the Government are recognized
when there is reasonable assurance that the grant/subsidy will
be received and the Company will comply with the conditions
attached to them. When the grant relates to an expense item, it
is recognised in the Statement of Profit and Loss by way of a
deduction to the related expense on a systematic basis over the
periods that the related costs, for which it is intended to
compensate, are expensed. When the grant or subsidy relates
to revenue, it is recognized as income on a systematic basis in
profit or loss over the periods necessary to match them with the
related costs, which they are intended to compensate. When
the grant relates to an asset, it is recognized as deferred income
and released to income in equal amounts over the expected
useful life of the related assets and presented within other
income.
In the unlikely event that a grant previously recognized is
ultimately not received, it is treated as a change in estimate and
the amount cumulatively recognised is expensed in the
Statement of Profit and Loss. When the Company receives
grants of non-monetary assets, the asset and the grant are
recorded at fair value amounts and released to profit or loss
over the expected useful life in a pattern of consumption of the
benefit of the underlying asset. The benefit of a government
loan at a below-market rate of interest is treated as a
government grant, measured as the difference between
proceeds received and the fair value of the loan based on
prevailing market interest rates and is being recognised in the
Statement of Profit and Loss. The loan is subsequently
measured as per the accounting policy applicable to financial
liabilities.
h. Foreign Currency Translation
Foreign currency transactions are translated into the functional
currency at the exchange rates that approximates the rate as at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies outstanding at the end of the
reporting period are translated into the functional currency at
the exchange rates prevailing on the reporting date. Non¬
monetary items are translated using the exchange rates
prevailing on the transaction date, subsequently measured at
historical cost and not retranslated at period end.
All exchange differences on monetary items are recognized in
the Statement of Profit and Loss.
i. Financial Instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. 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 the
statement of profit and loss) are added 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 the statement of profit and loss
are recognized immediately in the statement of profit and loss.
(i) Financial Assets
The Company's financial assets comprise:
a. Current financial assets mainly consist of trade receivables,
investments in liquid equity shares, mutual funds, non¬
convertible debenture, alternate investment fund, portfolio
management service, cash and bank balances, fixed
deposits with banks and financial institutions and other
current receivables.
b. Non-current financial assets mainly consist of financial
investments in equity, bond, alternate investment fund,
fixed deposits, non-current receivables from related party
and employees and non-current deposits.
- Recognition and Initial Measurement
All financial assets are recognised initially at fair value plus,
in the case of financial assets not recorded at fair value
through profit or loss, transaction costs that are attributable
to the acquisition of the financial asset are added to fair
value. Transaction costs directly attributable to the
acquisition of financial assets at fair value through profit or
loss are recognised immediately in the Statement of Profit
and Loss.
- Subsequent Measurement
For purposes of subsequent measurement, financial assets
are classified in four categories:
• Financial assets at Amortized Cost;
• Financial assets at Fair Value Through Other Comprehensive
Income (FVOCI);
• Financial assets at Fair Value Through Profit or Loss (FVTPL);
and
Financial assets are not reclassified subsequent to their initial
recognition, except if and in the period the Company changes its
business model for managing financial assets.
o Financial assets at Amortized Cost: A 'financial assets' is
measured at the amortized cost if both the following conditions
are met:
• The asset is held within a business model whose objective is
to hold assets for collecting 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 (SPPI) on the principal amount
outstanding.
Financial assets comprises of current financial assets such as
trade receivables, cash and bank balances, fixed deposits with
bank and financial institutions, other current receivables and
non-current financial assets such as financial investments -
fixed deposits. After initial measurement, such financial assets
are subsequently measured at amortized cost using the
effective interest rate (EIR) method. The EIR amortisation is
included in other income in the statement of profit and loss. The
losses arising from impairment, if any are recognised in the
statement of profit and loss.
o Financial assets at FVOCI: A 'financial assets' is measured at the
FVOCI if both of the following conditions are met:
• The objective of the business model is achieved by collecting
contractual cash flows and selling the 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 (SPPI) on the principal amount
outstanding.
Debt instruments meeting these criteria are measured initially
at fair value plus transaction costs. They are subsequently
measured at fair value with any gains or losses arising on
remeasurement recognized in Other Comprehensive Income.
However, the interest income, impairment losses & reversals,
and foreign exchange gains and losses are recognised in the
Statement of Profit and Loss. On derecognition of the asset,
cumulative gain or loss previously recognised in other
comprehensive income is reclassified from the equity to
statement of profit and loss. Interest earned whilst holding fair
value through other comprehensive income debt instrument is
reported as interest income using the EIR method.
For equity instruments, the Company may make an irrevocable
election to present subsequent changes in the fair value in OCI.
If the Company decides to classify an equity instrument as at
FVOCI, then all fair value changes on the instrument, excluding
dividends, are recognized in the OCI. There is no recycling of the
amounts from OCI to the statement of profit and loss, even on
sale of investment. However, the Company may transfer the
cumulative gain or loss within equity.
o Financial assets at FVTPL: FVTPL is a residual category for debt
instruments. Any debt instrument, which does not meet the
criteria for categorization as at amortized cost or as FVOCI, is
classified as FVTPL.
In addition, the Company may elect to designate a debt
instrument, which otherwise meets amortized cost or FVOCI
criteria, as at FVTPL, if such designation reduces or eliminates a
measurement or recognition inconsistency (referred to as
'accounting mismatch').
Debt instruments included within the FVTPL category are
measured at fair value with any gains and losses arising on re¬
measurement are recognized in the Statement of Profit and
Loss.
o Equity Instruments: Any equity investments instruments in the
scope of Ind AS 109 "Financial Instruments" are measured at fair
value. Equity instruments which are held for trading and
contingent consideration recognised by an acquirer in a
business combination to which Ind AS 103 applies are classified
at cost.
For equity instruments which are classified as FVTPL, all
subsequent fair value changes are recognised in the statement
of profit and loss.
- Financial Assets-derecognition
The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire, or
when it transfers the rights to receive the contractual cash flows
on the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are
transferred and the Company recognises its retained interest in
the asset and an associated liability for amounts it may have to
pay. On de-recognition of a financial asset, the difference
between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain
or loss that had been recognised in Other Comprehensive
Income and accumulated in other equity is recognised in
Standalone Statement of Profit and Loss.
- Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
In case of financial assets, the Company follows the simplified
approach permitted by Ind AS 109 - Financial Instruments - for
recognition of impairment loss allowance. The application of
simplified approach does not require the Company to track
changes in credit risk of trade receivable. The Company
calculates the expected credit losses on trade receivables using
a provision matrix on the basis of its historical credit loss
experience.
(ii) Financial Liabilities
- Recognition And Initial Measurement
The Company recognises a financial liability in its balance sheet
when it becomes party to the contractual provisions of the
instrument. All financial liabilities are recognised initially at fair
value and, in the case of financial liabilities at amortised cost,
net of directly attributable transaction costs.
The Company's financial liabilities include trade and other
payables and borrowings including bank overdrafts and
derivative financial instruments.
- Subsequent Measurement
Financial liabilities are measured subsequently at amortized
cost or FVTPL.
Financial liabilities at FVTPL
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or
loss. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered into
by the Company that are not designated as hedging instruments in
hedge relationships as defined by Ind AS 109. Separated embedded
derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109 are satisfied. These
gains/ losses are not subsequently transferred to the statement of
profit and loss. However, the Company may transfer the cumulative
gain or loss within equity. All other changes in fair value of such
liability are recognised in the statement of profit and loss. The
Company has not designated any financial liability as at fair value
through profit or loss.
Further, the provisionally priced trade payables are marked to
market using the relevant forward prices for the future period
specified in the contract and is adjusted in costs.
Financial liabilities at amortised cost (Borrowings and Trade and
Other payables)
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR (Effective
Rate Interest) method. Gains and losses are recognised in profit or
loss when the liabilities are derecognised as well as through the EIR
(Effective Rate Interest) amortisation process. Amortised cost is
calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The
EIR amortisation is included as finance costs in profit or loss.
- Financial Liabilities- derecognition
A financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement
of profit and loss.
- Equity Instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
- Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount
reported in the Balance Sheet when there is a legally
enforceable right to offset the recognized amounts and there is
an intention to settle on a net basis or realize the asset and
settle the liability simultaneously. The legally enforceable right
must not be contingent on future events and must be
enforceable in the normal course of business and in the event of
default, insolvency or bankruptcy of the counterparty.
(iii) Derivative Financial Instruments
The Company enters into forward contracts to mitigate the risk
of changes in exchange rates. The Company does not hold
derivative financial instruments for speculative purposes. Such
derivative financial instruments are initially recognized at fair
value on the date on which a derivative contract is entered into
and are subsequently re-measured at fair value with changes in
fair value recognized in the Statement of Profit and Loss in the
period when they arise. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities
when the fair value is negative.
j. Inventories
Inventories are valued after providing for obsolescence, as
follows:
1. Raw materials, stores and spare parts, fuel and packing
material:
These are considered to be realisable at cost, if the finished
products, in which they will be used, are expected to be sold at
or above cost. Cost is determined on weighted average basis
and includes purchase price, other costs incurred in bringing
the inventories to their present location and condition, and
taxes for which credit is not available. However, materials and
other items held for use in production of inventories are not
written down below cost if the finished products in which they
will be incorporated are expected to be sold at or above cost.
2. Work-in-progress, finished goods and stock in trade:
These are valued at the lower of cost and net realisable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and
estimated costs necessary to make the sale. Cost of finished
goods and Work-in-progress includes direct materials and
labour and a proportion of manufacturing overheads based on
normal operating capacity, but excluding borrowing costs. Cost
of Stock-in-trade is determined on weighted average basis and
includes cost of purchase and other cost incurred in bringing
the inventories in the present location and condition.
Obsolete, defective, slow moving and unserviceable
inventories, if any, are identified at the time of physical
verification and where necessary, they are duly provided for.
3. Inventories are valued as under: Land Bank- It consists of asset
purchased by the Company that it intends to develop later on
into residential / commercial project but on which no
construction has commenced. Land is initially recognized at
cost which is generally the cost or net realizable value
whichever is less. However, it is discounted to present value
when payment terms are deferred for a period of more than
one year.
k. Revenue Recognition
The Company is primarily engaged in the manufacturing of
Ferro Alloys and generate revenue from the sale of the product.
(i) Revenue from Operation
Revenue from sale of product is recognised at the point in time
when control of the goods is transferred to the customer,
generally on delivery of the product.
At contract inception, the Company assess the goods promised
in a contract with a customer and identifies as a performance
obligation of each promise to transfer to the customer. Revenue
from contracts with customers is recognized when control of
goods is transferred to customers and the Company retains
neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over
the goods sold.
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 towards satisfaction of a performance
obligation is measured at the amount of transaction price (net
of variable consideration) allocated to that performance
obligation. The transaction price of goods sold is net of variable
consideration and excluding taxes or duties collected on behalf
of the Government.
For Certain Contracts
Certain of the Company's sales contracts provide for provisional
pricing based on the price on the Commodity Research Unit (CRU),
as specified in the contract. Revenue in respect of such contracts is
recognised when control passes to the customer and is measured at
the amount the entity expects to be entitled - being the estimate of
the price expected to be received at the end of the measurement
period. Post transfer of control. of goods, provisional pricing
features are accounted in accordance with Ind AS 109 'Financial
Instruments' rather than Ind AS 115 'Revenue from contracts with
customers' and therefore the Ind AS 115 rules on variable
consideration do not apply. These 'provisional pricing' adjustments
i.e. the consideration adjusted post transfer of control are included
in total revenue from operations. Final settlement of the price is
based on the applicable price for a specified future period. The
Company's provisionally priced sales are marked to market using
the relevant forward prices for the relevant period specified in the
contract and is adjusted in revenue.
a. Sale of Goods
Sale of goods is recognised at the point in time when control of
the goods is transferred to the customer. The revenue is
measured on the basis of the consideration defined in the
contract with a customer, including variable consideration, such
as discounts, volume rebates, or other contractual reductions.
As the period between the date on which the Company
transfers the promised goods to the customer and the date on
which the customer pays for these goods is generally one year
or less, no financing components are taken into account.
b. Revenue Recognition of Real Estate segment
In real estate development contracts, individual items are sold
separately in market and add value to the customer on an
individual basis. Therefore, these services are considered as
separate performance obligations.
Revenue for 'sale of property' is recognized when control over
the property has been transferred to the customer. Revenue is
recognized at a point in time when the possession is handed
over to the customer including deemed possession.
Where, the Company enters into a contract for sale of
undeveloped/developed land revenue for which is recognised
when possession is handed over and the control is transferred
to the customer
c. Other Operating Revenue
Export incentive and subsidies are recognised when there is
reasonable assurance that the Company will comply with the
conditions and the incentive will be received. Insurance & other
claims, where quantum of accruals cannot be ascertained with
reasonable certainty are recognised as income only when
revenue is virtually certain which generally coincides with
receipt/acceptance.
(ii) Other Income
a) Interest income is recognized using the effective interest
rate method. For all financial instruments measured at
amortised cost, interest income is recorded using the
effective interest rate (EIR), which is the rate that exactly
discounts the estimated future cash payments or receipts
through the expected life of the financial instrument to the
gross carrying amount of the financial asset.
b) Dividend Income is recognised only when the right to receive
payment is established.
l. Employee Benefits
a) Short-Term Benefits
Short term employee benefits that are expected to be settled
wholly within 12 months after the end of the period in which
the employees render the related service are recognized as an
expense at the undiscounted amount in the statement of profit
and loss of the period in which the related service is rendered.
Accumulated compensated absences, which are expected to be
settled wholly within 12 months after the end of the period in
which the employees render the related service, are treated as
short term employee benefits. The Company measure the
expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlements that has
accumulated at the reporting date.
b) Defined Contribution Plans
Employee benefits in the form of contribution Provident Fund
managed by Government Authorities and Employee State
Insurance Corporation are considered as defined contribution
plans and the same are charged to the statement of profit and
loss for the period in which the employee renders the related
services.
c) Defined Benefit Plans
The Company's gratuity fund scheme and post-employment
benefits scheme are considered as defined benefit plans. The
Company's liability is determined on the basis of actuarial
valuation using the projected unit credit method as at the
balance sheet date.
Past service costs are recognized in the statement of profit and
loss on the earlier of:
• The date of plan amendment or curtailment, and
• The date that the company recognizes related restructuring
costs
The net interest cost is calculated by applying the discount rate
to the net balance of the defined benefit obligation. The
Company recognizes the following changes in the statement of
profit and loss:
• Service costs comprising current service costs, past service
costs, gains and losses on curtailments and non-routine
settlements; and
• Net interest expense or income
Re-measurements comprising actuarial gains and losses, the
effect of asset ceiling (if any), and the return on the plan assets
(excluding net interest), are recognized immediately in the
balance sheet with a corresponding debit or credit to retained
earnings through OCI in the period in which they occur. Re¬
measurements are not reclassified to the statement of profit
and loss in subsequent periods.
d) Compensated absences
The Company provides for the encashment of leave or leave
with pay subject to certain rules. The employees are entitled to
accumulate leave subject to certain limits, for future
encashment. The liability is provided based on the number of
days of unutilised leave at each balance sheet date on the basis
of an independent actuarial valuation.
Actuarial gains and losses relating to long-term and short-term
employee benefits are recognised in the statement of Profit and
Loss in the period in which they arise.
m. Taxation
Income tax expense represents the sum of current tax and
deferred tax and includes any adjustments related to past
periods in current and/or deferred tax adjustments that may
become necessary due to certain developments or reviews
during the relevant period. Tax is recognised in the Statement of
Profit and Loss, except to the extent that it relates to items
recognised directly in Equity or Other Comprehensive Income.
a) Current Tax
Current income tax is measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates
and the tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Interest expenses and penalties, if any, related to income tax are
included in finance cost and other expenses respectively.
Interest Income, if any, related to income tax is included in other
income.
Current tax relating to the items recognized outside the
statement of profit and loss is recognized in correlation to the
underlying transaction either in OCI or directly in other 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.
Current tax assets and current tax liabilities are offset when
there is a legally enforceable right to set off the recognized
amounts and there is an intention to settle the asset and the
liability on a net basis.
b) Deferred Tax
Deferred tax is recognized on all temporary differences
between the tax bases of assets and liabilities and their carrying
amounts in the Company's financial statements except when
the deferred tax arises from the initial recognition of goodwill or
initial recognition of an asset or liability in a transaction that is
not a business combination and affects neither the accounting
nor taxable profits or loss at the time of transaction. 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 Balance Sheet
date.
Deferred tax assets are recognized for deductible temporary
differences, the carry forward of unused tax credits and unused
tax losses to the extent it is probable that future taxable profits
will be available against which the deductible temporary
difference, the carry forward of unused tax credits and unused
tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and is adjusted 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 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.
Current and deferred tax are recognised in the Statement of
Profit and Loss, except when the same relate to items that are
recognised in Other Comprehensive Income or directly in
Equity, in which case, the current and deferred tax relating to
such items are also recognised in Other Comprehensive Income
or directly in Equity respectively.
n. Borrowing Costs
Borrowing costs, if any, 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, if any. All other borrowing costs are
expensed in the period in which they occur.
o. Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, cash at
banks, fixed deposits and short-term highly liquid investments
with an original maturity of three months or less.
For the purpose of presentation in the statement of cash flows,
cash and cash equivalent includes cash on hand, highly liquid
investments with original maturities of three months or less
that are readily convertible to known amounts of cash, cash at
bank and bank overdraft which are subject to an insignificant
risk of changes in value. Bank overdrafts are shown within
borrowings in current liabilities in the Balance Sheet.
p. Cash Flow Statement
Cash flows are reported using the indirect method, whereby
profit before tax is adjusted for the effects of transactions of a
non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments and item of income or
expenses associated with investing or financing cash flows. The
cash flows are segregated into operating, investing and
financing activities.
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