B. Material Accounting Policies
Summary of Material accounting policies mentioned below
B.1 Use of Estimates
The preparation of financial statements are in conformity with the recognition and measurement principles
of Ind AS which requires management to make critical judgments, estimates and assumptions that affect the
reporting of assets, liabilities, income and expenditure.
Estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to the estimates
are recognised in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of financial statements, which may cause material
adjustment to the carrying amount of assets and liabilities within the next financial year, is in respect of:
1. Useful lives of property, plant and equipment (refer note no.B.6)
2. Impairment of property, plant and equipment as well as intangible assets (refer note no.B.8)
3. Employee benefits (refer note no.B.4)
4. Expense Provisions & contingent liabilities (refer note no.B.10)
5. Valuation of deferred tax assets (refer note no.B.5)
B.2 Revenue recognition
The Company has adopted Ind AS 115 “Revenue from Contracts with Customers” which sets forth a single
comprehensive model for recognising and reporting revenues.
Revenue is recognised upon transfer of control of promised services to customers in an amount that reflects
the consideration the Company expects to receive in exchange for those services in the normal course of
business.
To recognise revenues, we apply the following five step approach:
(1) identify the contract with a customer,
(2) identify the performance obligations in the contract,
(3) determine the transaction price,
(4) allocate the transaction price to the performance obligations in the contract, and
(5) recognise revenues when a performance obligation is satisfied.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is
the unit of accounting in Ind AS 115.
The performance obligations of the Company are satisfied over time as services are rendered.
Determination of transaction price
Revenue is measured based on transaction price which includes variable consideration only to the extent it
is probable that a significant reversal of revenues recognised will not occur when the uncertainty associated
with the variable consideration is resolved. Revenues also exclude taxes collected from customers.
Allocation of transaction price
A contract's transaction price is allocated to each distinct performance obligation and recognised as revenue
when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we
allocate the contract's transaction price to each performance obligation based on the relative standalone
selling price. The primary method used to estimate standalone selling price is the adjusted market assessment
approach, under which the Company evaluates the price in that market that a customer is willing to pay for
those services. While determining relative standalone selling price and identifying separate performance
obligations require judgment, generally relative standalone selling prices and the separate performance
obligations are readily identifiable as we sell those performance obligations unaccompanied by other
performance obligations.
Rendering of other services
Revenue from services is recognised when the services are rendered in accordance with the specific terms
of contract and when collectability of the resulting receivable is reasonably assured.
Interest Income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable (provided that it is probable that the economic benefits will flow to the Company and
the amount of income can be measured reliably).
Dividend Income
Dividend income from investments is recognised when the Company's right to receive payment has been
established (provided that it is probable that the economic benefits will flow to the Company and the amount
of income can be measured reliably).
Other Income
Other income comprises of income from ancillary activities incidental to the operations of the Company and
is recognised when the right to receive the income is established as per the terms of the contract.
Accounting treatment of assets and liabilities arising in course of sale of goods and services is set out below:
Trade receivable
Trade 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)
Contract balances
Contract Asset
A contract asset is right to consideration in exchange of services that the company has rendered to a customer
when that right is conditioned on something other than passage of time. Contract assets are recognised
when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled
receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only
passage of time is required, as per contractual terms.
Contract Liability
A contract liability is the obligation to render services to a customer for which the company has received
consideration from the customer. If a customer pays consideration before the company renders services to
the customer, a contract liability is recognised when the payment is made. Contract liabilities are recognised
as revenue when the Company renders services as per the contract.
B.3 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get ready for their intended use 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.
All other borrowing costs are recognised in statement of profit or loss in the period in which they are incurred.
B.4 Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary 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 recognised
in respect of employees' services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave that are not expected to be settled wholly within 12 months
are 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 using the projected unit credit method. The benefits are
discounted using the Government Securities (G-Sec) at the end of the reporting period that have terms
approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments
and changes in actuarial assumptions are recognised in the Statement of Profit and Loss.
Defined Contribution Plans
The company has a Defined Contribution Plans namely Provident Fund. Under the provident fund plan, the
company contribute to a government administered provided fund on behalf of its employee and has no further
obligation beyond making its contribution. The company contribution are charged as an expense based on
the amount of contribution required to be made and when services are rendered by the employee.
Gratuity
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present
value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The
defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation 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 have terms
approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the 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 and in the balance
sheet.
The Company presents the first two components of defined benefit costs in profit or loss in the line item
'Employee benefits expense'. Curtailment gains and losses are accounted for as past service costs.
Re-measurement of net defined benefit liability/ asset pertaining to gratuity comprise of actuarial gains/
losses (i.e. changes in the present value resulting from experience adjustments and effects of changes in
actuarial assumptions) and is reflected immediately in the balance sheet with a charge or credit recognised
in other comprehensive income in the period in which they occur. Re-measurement recognised in other
comprehensive income is reflected immediately in retained earnings and is not reclassified to statement of
profit or loss. Past service cost is recognised in statement of profit or loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in respect of salaries, performance incentives,
annual leave, medical benefits and other short term benefits in the period the related service is rendered, at
the undiscounted amount of the benefits expected to be paid in exchange for that service.
Long-term employee benefits
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of
the estimated future cash outflows expected to be made by the Company in respect of services provided by
employees up to the reporting date.
B.5 Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred
tax for the year 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.
Current tax
Current tax is determined on taxable profits for the year chargeable to tax in accordance with the applicable
tax rates and the provisions of the Income Tax Act, 1961 including other applicable tax laws that have been
enacted or substantively enacted.
Provisions for current income taxes and advance taxes paid in respect of the same jurisdiction are presented
in the balance sheet after offsetting these balances on an assessment year basis.
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 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.
Deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the
extent that it is probable that future taxable profit will be available against which the unused tax losses and
unused tax credits can be utilised.
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 realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
B.6 Property, plant and equipment
Cost
Property, plant and equipment held for use in the supply of goods or services, or for administrative purposes,
are stated in the balance sheet at cost (net of duty / tax credit availed) less accumulated depreciation /
amortisation and accumulated impairment loss, if any. Cost includes freight, duties, taxes, professional fees
and, for qualifying assets, borrowing costs capitalised in accordance with the Company's accounting policy.
Such properties are classified to the appropriate categories of property, plant and equipment when completed
and ready for intended use. Depreciation of these assets, on the same basis as other property assets,
commences when the assets are ready for their intended use.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
The residual values and useful lives of property, plant and equipment are reviewed at each financial year end,
and changes, if any, are accounted prospectively.
Subsequent expenditure
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is possible that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are
charged to the Statement of profit or loss during the reporting period in which they are incurred.
Depreciation / amortisation
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful
lives of the assets specified in Schedule II of the Companies Act, 2013, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
When significant parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of Property, Plant and Equipment.
De-recognition
An item of property, plant and equipment is derecognized upon disposal or retired from active use 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 determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognized in Statement of profit or loss in the
year of occurrence.
B.7 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately is capitalised and carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line
basis over their estimated useful lives. The estimated useful life and amortisation 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.
Useful lives of intangible asset
Estimated useful lives of the intangible asset is carried out by the management based on technical assessment
De-recognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use
or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying amount of the asset, is recognised in profit or loss when
the asset is derecognised.
B.8 Impairment of tangible and intangible assets
At the end of each reporting period, the Company determines whether there is any indication that its assets
have suffered an impairment loss with reference to their carrying amounts. If any indication of impairment
exists, the recoverable amount (i.e. higher of the fair value less costs of disposal and value in use) of such
assets is estimated and impairment is recognized, if the carrying amount exceeds the recoverable amount. 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.
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.
When 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 immediately
in statement of Profit or loss.
B.9 Inventory
Real Estate (Land) inventories are stated at lower of cost and net realisable value. Cost includes cost of land,
registration charges, stamp duty, brokerage costs and incidental expenses. Net realisable value represents
the estimated selling price for inventories less all estimated costs necessary to make the sale.
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