1.C MATERIAL ACCOUNTING POLICIES
1.C.1 STATEMENT OF COMPLIANCE AND BASIS OF
PREPARATION
The financial statements have been prepared under the
historical cost convention with the exception of certain
assets and liabilities that are required to be measured at
fair value at the end of each reporting period by Ind ASs.
The financial statements of the Company have been
prepared to comply with the Indian Accounting
Standards ('Ind ASs'), including the rules notified under
the relevant provisions of the Companies Act 2013.
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date, regardless of whether that price is
directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a
liability, the Company takes into account the
characteristics of the asset or liability if market
participants would take those characteristics into
account when pricing the asset or liability at the
measurement date.
Functional Currency and Presentation Currency
The financial statements are prepared in Indian Rupees
(?) which is the Company's functional currency for all its
operations. All financial information presented in Indian
Rupees (?) has been rounded to the nearest Lakh, unless
otherwise stated.
Current and Non-Current Classification
The Company presents assets and liabilities in the
balance sheet based on current/ non-current
classification. All assets and liabilities have been
classified as current or non-current as per the
Company's normal operating cycle and other criteria set
out in the schedule III to the Companies Act, 2013 and Ind
AS 1 - 'Presentation of Financial Statements'.
The operating cycle is the time between the acquisition
of assets for processing and their realisation in cash and
cash equivalents. The Company has identified twelve
months as its operating cycle.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
Use of estimates and critical judgements
The preparation of accounts in accordance with Ind ASs
requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and
liabilities at the date of the accounts and reported
amounts of income and expenses during the period.
Actual results could differ from those estimates. The most
significant techniques for estimation are described in the
accounting policies below. Critical accounting
judgements and the key sources of estimation or
uncertainty in applying the Company's accounting
policies arise in relation to property, plant and
equipment, current asset provisions, deferred tax,
retirement benefits. The detailed accounting policies,
including underlying judgements and methods of
estimations for each of these items are discussed below.
All of these key factors are reviewed on a continuous
basis. Revisions to accounting estimates are recognised
in the period in which estimates are revised and any
future periods affected.
1.C.2 FOREIGN CURRENCY TRANSLATION
In preparing the financial statements of the Company,
transactions in currencies other than the functional
currency are recorded at the rates of exchange
prevailing on the date of the transaction. At the end of
each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates
prevailing at the end of the reporting period. Non¬
monetary items carried at fair value that are
denominated in foreign currencies are retranslated at
the rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not
translated.
Exchange differences arising on the settlement of
monetary items, and on retranslation of monetary items
are included in the Statement of Profit and Loss for the
period. Exchange differences arising on retranslation on
non-monetary items carried at fair value are included in
statement of profit and loss for the period except for
differences arising on the retranslation of non-monetary
items in respect of which gains and losses are
recognised directly in other comprehensive income.
Wherever foreign exchange fluctuations are to be borne
by the customers as per agreement with them, foreign
exchange gain/ loss are not recognised in the books of
the Company.
1.C.3 (a) PROPERTY, PLANT AND EQUIPMENT
An item of property, plant and equipment is recognised
as an asset if it is probable that future economic benefits
associated with the item will flow to the company and its
cost can be measured reliably. This recognition principle
is applied to the costs incurred initially to acquire an item
of property, plant and equipment and also to costs
incurred subsequently to add to, replace part of, or
service it. All other repair and maintenance costs,
including regular servicing, are recognised in the
Statement of Profit and Loss as incurred. When a
replacement occurs, the carrying amount of the
replaced part is derecognised.
Property, plant and equipment are stated at cost, less
accumulated depreciation and impairment losses. Cost
includes all direct costs and expenditures incurred to
bring the asset to its working condition and location for its
intended use.
The gain or loss arising on disposal of an asset is
determined as the difference between the sale proceeds
and the carrying amount of the asset, and is recognised
in the Statement of Profit and Loss.
Land has an indefinite ecomomic life. The Company can
enjoy the part of the life restricted to years of lease. The
lease rent paid in advance is being amortised over the
period of lease.
1.C.3 (b) Depreciation of property, plant and equipment
Depreciation is provided so as to write off, on a straight¬
line basis, the cost of property, plant and equipment to
their residual value. These charges are commenced
from the date the assets are available for their intended
use and are spread over their estimated useful lives. The
estimated useful lives of assets and residual values are
reviewed regularly and, when necessary, revised. No
further charge is provided in respect of assets that are
fully written down but are still in use.
Depreciation on assets under construction commences
only when the assets are ready for their intended 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. The estimated useful lives for the
main categories of property, plant and equipment are:
Assets in the course of construction are included under
capital work in progress and are carried at cost, less any
recognized impairment loss. Such capital work-in¬
progress, on completion, is transferred to the appropriate
category of property, plant and equipment.
1.C.3 (c) Intangible Assets
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated
amortization and accumulated impairment losses.
Amortization is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and
amortization method are reviewed at the end of each
reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
An intangible asset is de-recognised on disposal, or
when no future economic benefits are expected from use
or disposal. Further, the management estimates that the
intangible assets are having zero carrying cost at the end
of its useful life i.e. zero residual value.
Softwares acquired separately are capitalised as
software. These are amortized over a period of their
license. In case of perpetual licences the cost is
amortized over a period of five years.
1.C.4 Impairment of Non-Financial Assets
At the end of each reporting period, the Company
reviews the carrying amounts of its property, plant and
equipment and intangible assets to determine whether
there is any indication that the carrying amount of those
assets may not be recoverable through continuing use. If
any such indication exists, the recoverable amount of the
asset is reviewed in order to determine the extent of
impairment loss (if any). Where the asset does not
generate cash flows that are independent from other
assets, the Company estimates the recoverable amount
of the cash generating unit to which the asset belongs.
Intangible assets with an indefinite useful life are tested
for impairment annually and whenever there is an
indication, the asset may be impaired.
Recoverable amount is the higher of fair value less costs
to sell 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 the risks specific to the asset for which the estimates
of future cash flows have not been adjusted. An
impairment loss is recognised in the Statement of Profit
and Loss as and when the carrying amount of an asset
exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the
carrying amount 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. A
reversal of an impairment loss is recognised in profit and
loss immediately.
1.C.5 Investment in Subsidiaries and Joint venture
Investment in subsidiaries and Joint venture are carried
at cost in terms of Ind AS 28. Where an indication of
impairment exists, the carrying amount of the
investment is assessed and written down immediately to
its recoverable amount. On disposal of investments in
subsidiaries and joint venture, the difference between
net disposal proceeds and carrying amounts are
recognised in Statement of Profit and Loss.
1.C.6 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
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 and loss) are added to or deducted from
the fair value measured on initial recognition of financial
asset or financial liability. The transaction costs directly
attributable to the acquisition of financial assets and
financial liabilities at fair value through profit or loss are
immediately recognised in the Statement of Profit and
Loss. However trade receivables that do not contain a
significant financing component are measured at
transaction cost.
a) Financial assets
I. Financial assets at amortised cost
Financial assets are subsequently measured at
amortised cost if these financial assets are held
within a business model whose objective is to hold
these assets 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.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
Effective Interest Rate (EIR) method.
The Effective Interest Rate method is a method of
calculating the amortised cost of a financial
instrument and of allocating interest income or
expense over the relevant period. The Effective
Interest Rate is the rate that exactly discounts future
cash receipts or payments through the expected life
of the financial instrument, or where appropriate, a
shorter period.
II. Financial assets measured at fair value through
Other comprehensive income
Financial assets are measured at fair value through
other comprehensive income if these financial assets
are held within a business model whose objective is
to hold these assets in order to collect contractual
cash flows or to sell these 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.
Financial assets 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 recognised in
other comprehensive income. However, the interest
income, losses and reversals, and foreign exchange
gains and losses are recognised in the Statement of
Profit and Loss.
III. Financial assets measured at fair value through
profit and loss
Financial assets not measured at amortised cost or
at fair value through other comprehensive income is
carried at fair value through profit and loss.
Impairment of financial assets
Loss allowance for expected credit losses is recognised
for financial assets measured at amortised cost and fair
value through other comprehensive income.
Loss allowance equal to the lifetime expected credit
losses is recognised if the credit risk on the financial
instruments has significantly increased since initial
recognition. For financial instruments whose credit risk
has not significantly increased since initial recognition,
loss allowance equal to twelve months expected credit
losses is recognised.
Derecognition of financial assets
The Company derecognizes a financial asset only when
the contractual rights to the cash flows from the asset
expire, or it transfers the financial asset and substantially
all risks and rewards of ownership of the asset to another
entity. If the Company neither transfers nor retains
substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Company
recognizes its retained interest in the assets and an
associated liability for amounts it may have to pay. If the
Company retains substantially all the risks and rewards
of ownership of a transferred financial asset, the
Company continues to recognize the financial asset and
also recognizes a collateralised borrowing of the
proceeds received.
b) Financial liabilities and equity instruments
Classification
Financial liabilities and equity instruments issued by the
Company are classified according to the substance of
the contractual arrangements entered into and the
definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of the Company after
deducting all of its liabilities. Transaction costs of an
equity transaction are being accounted as a deduction
from equity.
Financial Liabilities
The Company's financial liabilities include Trade and
other payables and borrowings including bank
overdrafts are initially measured at fair value, net of
transaction costs, and are subsequently measured at
amortised cost, using the effective interest rate method.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when,
and only when, the Company's obligations are
discharged, cancelled or they expire.
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 recognised
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.
1.C.7 CASH AND CASH EQUIVALENTS
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 and
which are subject to an insignificant risk of changes in
value. Bank overdrafts are shown within borrowings in
current liabilities in the Balance Sheet.
1.C.8 INVENTORIES
Stock in trade including material-in-transit is valued at
cost or estimated net realisable value whichever is less.
1.C.9 REVENUE RECOGNITION
Revenue is recognized when the performance obligation
towards transfer of goods and services to a customer is
satisfied.
SERVICE CHARGES
Remuneration for transaction in Marketing Department
through facilitator mode and for conducting sales/
procurement on behalf of Principals, by way of auctions,
tenders, or any other means, are accounted for as
service charges.
(a) Service charges are accounted for as income at
contracted rates on:
i. Tender/Auction sale on behalf of Public Sector
Undertakings, Defence and other Government
Departments/ other clients on issuance of sale
orders / delivery orders.
ii. On satisfactory completion of e-sales.
In respect of (i) & (ii), service charges are
accounted for on bid price of auction with
adjustments, if any, on the basis of actual
delivery by the Principals, in case service charges
are payable on percentage basis.
iii. On occurrence of event, in case of service
contract on event basis including development,
maintenance of e-portal and software.
iv. In case of E-Procurement Service charges are
booked, where service charges are collectable
from the Principal, on completion of event.
(b) Transaction fees collected from bidders are
accounted on successful conduct of event.
(c) Service charges accrued in respect of purchase as
facilitator are accounted for at the contracted rate
on the basis of date of bill of lading / railway receipt /
lorry receipt as the case may be. For imported
materials, value is ascertained either at forward
cover rate or at FEDAI spot rate prevailing on the last
date of the Financial Year. Final adjustment is made
on actual payment. In case of indigenous materials,
value is ascertained on the basis of actual payment
at contracted rate.
E-AUCTION REGISTRATION
E-auction Registration fees collected from buyers is
considered as income of the current year if the validity of
registration is upto one year. In case of lifelong
registration, the amount so collected is distributed in five
years equally.
OTHER INCOME
Revenue is recognised on accrual basis except in the
following items which are accounted on actual
realization since realizability of such items is uncertain in
accordance with the provisions of the accounting
standards:
i) Decrees pending for execution/contested dues and
interest thereon, if any.
ii) Interest on overdue recoverables where realizability
is uncertain.
iii) Liquidated damages on suppliers or contractors.
iv) Refund of Income-Tax/Sales Tax/VAT and interest
thereon.
v) Dividend income is recognised when right to receive
payment is established
1.C.10 BORROWING COST
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 or sale, are added to
the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Other income earned on the temporary investment of
specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
All other borrowing costs are recognised in profit and loss
in the period in which they are incurred.
1.C.11 EMPLOYEE BENEFITS
(a) Short term benefits
Short term employee benefits are accounted for at their
undiscounted amount in the accounting period in which
the services are rendered by the employees are
recognised as an expense in the Statement of Profit and
Loss during the period in which the employee renders the
related service.
(b) Leave encashment
The liabilities for earned leave and commuted leave are
not expected to be settled wholly within 12 month after
the end of the period in which the employees render
related service. They are therefore measured as the
present value of expected future payments to be made
in respect of services provided by employees up to the
end of the reporting period based on actuarial valuation
using the projected unit credit method.
The benefits are discounted using the market yield at the
end of the reporting period that have terms of
approximating to the terms of related obligations.
Remeasurement as a result of experience adjustments
and changes in actuarial assumptions are recognised in
profit and loss. The facility is funded through LIC of India.
(c) Post-employment obligation
Defined Contribution Plan -
i. Provident Fund
Provident Fund is administered by a Trust recognised by
Income Tax Authorities and contribution to this Fund is
charged to revenue. Pensioner's Benefits are secured
through Employees' Pension Scheme 1995.
Defined Contribution Plan -
ii. Pension
The pension plan is administered through an
independent trust, and contributions to this fund are
charged to revenue. The fund is managed through the
LIC of India / NPS. The contribution amount is governed by
directives from the Ministry of Steel, in accordance with
Department of Public Enterprises (DPE) guidelines.
Defined Benefit Plan -
i. Service Gratuity
The liabilities or assets recognised in the Balance Sheet in
respect of defined gratuity plan is the present value of the
defined benefits obligation at the end of the reporting
period less the fair value of plan assets. The defined
benefits obligations are calculated annually by actuaries
using projected unit credit method. The present value of
defined benefits obligations is determined by
discounting the estimated future cash outflows by
reference to market yields at the end of the reporting
period on Government bonds that are terms
approximating to the terms of the related obligations.
The net interest cost is calculated by applying the
discounted rate to the net balance of defined benefit
obligation and the fair value of plan assets. This cost is
included in employee benefit expense in the statement
of profit and loss.
Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in which they
occur, directly in other comprehensive income. They are
included in retained earnings in the statement of
changes in equity.
Changes in the present value of defined benefit
obligation resulting from amendments and curtailments
are recognised immediately in profit or loss as past
service cost. The Gratuity obligation is funded through
Group Gratuity Life Assurance Scheme of Life Insurance
Corporation of India and is administered through a
separate irrevocable trust created by the Company for
this purpose.
ii. Post Retirement medical benefit
The Company provides post retirement healthcare
benefits to their retirees. The entitlement to these benefits
is usually conditional on the employee remaining in
service up to the retirement age and the completion of
minimum service period. The expected cost of these
benefits is accrued over the period of employment using
the same accounting methodology as used for defined
benefit plans. Re-measurement gains and losses arising
from experience adjustments and changes in actuarial
assumptions are charged or credited in other
comprehensive income in the period in which they arise.
The fund is administered through a separate trust
created for this purpose.
1.C.12 TAXATION
Tax expense for the year comprises current and deferred
tax.
(i) Current tax
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from profit before tax for
the year as reported in the Statement of Profit and Loss
because it excludes items of income or expense that are
taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax
rates and tax laws that have been enacted or
substantively enacted in the country where the
Company operates by the end of the reporting period.
(ii) Deferred tax
Deferred tax liabilities are the amount of income taxes
payable in future periods in respect of taxable temporary
differences. Deferred tax assets are the amount of
income tax recoverable in in future in respect of
deductible temporary differences, carry forward of
unused tax losses and carry forward of unused tax
credits. Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will be
available against which the deferred tax assets can be
utilised.
Minimum Alternate Tax credit is recognised as deferred
tax asset only when and to the extent there is convincing
evidence that the Company will pay normal income tax
during the specified period. Such asset is reviewed at
each Balance Sheet date and the carrying amount of the
MAT credit asset is written down to the extent there is no
longer a convincing evidence to the effect that the
Company will pay normal income tax during the
specified period.
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 deferred
tax asset to be utilised.
Deferred tax assets and liabilities are offset to the extent
that they relate to taxes levied by the same tax authority
and there are legally enforceable rights to set off current
tax assets and current tax liabilities within that
jurisdiction.
Current and deferred tax are recognised as an expense
or income in the Statement of Profit and Loss, except
when they relate to items credited or debited either in
other comprehensive income or directly in equity, in
which case the tax is also recognised in other
comprehensive income or directly in equity.
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