1. MATERIAL ACCOUNTING POLICIES
1.1 Basis of preparation and presentation of Financial Statements
The financial statement of the Company has been prepared in accordance with Indian Accounting
Standard (IND AS) and the provision of the Companies Act, 2013 (the Act) to the extent notified read
with the Rules made hereunder. It has also followed RBI guidelines and announcements issued by
the Institute of Chartered Accountants of India.
1.1.1 Presentation of True and Fair View and compliance with IND AS
Financial statements present a true and fair view of the financial position, financial performance and
cash flows of the company. Presentation of true and fair view requires the faithful representation of
the effects of transactions, other events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set out in the Framework. The
application of IND AS, with additional disclosure when necessary, is presumed to result in financial
statements that present a true and fair view.
Financial statements comply with IND AS explicitly and without any reservation.
1.1.2 Going concern
The Company prepares its financial statements on a going concern basis.
1.1.3 Accrual basis of accounting
The Financial Statements have been prepared under the historical cost convention on accrual basis,
except for:
i. Certain financial assets and liabilities that are measured at fair values at the end of each
reporting period; and
ii. Defined benefit plans - plan assets are measured at fair value.
1.1.4 Materiality and aggregation
The Company presents separately each material class of similar items. It presents separately items
of a dissimilar nature or function unless they are immaterial except when required by law.
1.1.5 Offsetting
The Company do not offset assets and liabilities or income and expenses, unless required or
permitted by an IND AS.
1.1.6 Minimum comparative information
Except when IND AS permit or require otherwise, the company presents comparative information in
respect of the preceding period for all amounts reported in the current period's financial statements.
It also includes comparative information for narrative and descriptive information if it is relevant to
understanding the current period's financial statements.
1.1.7 Other comprehensive income
Other Comprehensive Income comprises items of income and expenses (including reclassification
adjustments) that are not recognised in profit or loss as required or permitted by IND AS. The
components of other comprehensive income include: (a) changes in revaluation surplus; (b)
reameasurements of defined benefit plans; gains and losses from investments in equity instruments
designated at fair value.
1.2 Accounting Policies, Changes in Accounting Estimates and Errors
The preparation of financial statements in accordance with IND AS requires use of estimates and
assumptions for some items, which might have an effect on their recognition and measurement in
the balance sheet and statement of profit and loss. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. The actual
results may differ from these estimates. The Company's management believes that the estimates
used in preparation of the financial statements are prudent and reasonable. Any revision to the
accounting estimates is recognized prospectively in the current and future periods.
1.2.1 Changes in accounting policies
The Company will change an accounting policy only if the change: (a) is required by an IND AS; or (b)
results in the financial statements providing reliable and more relevant information about the effects
of transactions, other events or conditions on the entity's financial position, financial performance or
cash flows.
1.3 Events after the Reporting Period
The Company will adjust the amounts recognised in its financial statements to reflect adjusting
events after the reporting period. The Company will not adjust the amounts recognised in its
financial statements to reflect non-adjusting events after the reporting period. If the company
declares dividends to holders of equity instruments after the reporting period, it will not recognise
those dividends as a liability at the end of the reporting period. If the company receives information
after the reporting period about conditions that existed at the end of the reporting period, it shall
update disclosures that relate to those conditions, in the light of the new information. If non¬
adjusting events after the reporting period are material, non-disclosure could influence the
economic decisions that users make on the basis of the financial statements. Accordingly, it will
disclose the following for each material category of non-adjusting event after the reporting period:
(a) the nature of the event; and (b) an estimate of its financial effect, or a statement that such an
estimate cannot be made.
1.4 Related Party Disclosures
To enable users of financial statements to form a view about the effects of related party
relationships with the company, it is appropriate to disclose the related party relationship when
director(s) exercise significant influence, irrespective of whether there have been transactions
between the related parties.
1.5 Operating Segments
The Company discloses information to enable users of its financial statements to evaluate the nature
and financial effects of the business activities in which it engages and the economic environments in
which it operates.
An operating segment is a component of a company:(a) that engages in business activities from
which it may earn revenues and incur expenses, (b) whose operating results are regularly reviewed
by the entity's chief operating decision maker to make decisions about resources to be allocated to
the segment and assess its performance, and (c) for which discrete financial information is
available.
The Company shall report separately information about an operating segment that meets any of the
following quantitative thresholds: (a) its reported revenue, including sales to external customers is
10 per cent or more of the combined revenue of all operating segments. (b) The absolute amount of
its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the
combined reported profit of all operating segments that did not report a loss and (ii) the combined
reported loss of all operating segments that reported a loss. (c) Its assets are 10 per cent or more of
the combined assets of all operating segments. Operating segments that do not meet any of the
quantitative thresholds may be considered reportable, and separately disclosed, if management
believes that information about the segment would be useful to users of the financial statements.
1.6 Cash Flow Statement
The statement of cash flows is reported during the period classified by operating, investing and
financing activities. Cash flows from operating activities are reported using the indirect method,
whereby profit or loss 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 items of income or expense
associated with investing or financing cash flows. Major classes of gross cash receipts and gross
cash payments arising from investing and financing activities are reported separately. Cash flows
arising from interest paid and interest and dividends received is classified as cash flows arising
from operating activities.
Dividends paid are classified as cash flows from financing activities. Cash flows arising from taxes
on income is separately disclosed and is classified as cash flows from operating activities unless
they can be specifically identified with financing and investing activities.
1.7 Measurement of Fair Values.
Fair value is defined as 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.
Disclosure is given for assets and liabilities that are measured at fair value on a recurring or non¬
recurring basis in the balance sheet after initial recognition, the valuation techniques and inputs
used to develop those measurements and for recurring fair value measurements using significant
unobservable inputs, the effect of the measurements on profit or loss or other comprehensive
income for the period.
1.8 Inventories
Inventories shall be measured at the lower of cost and net realisable value. The cost of inventories
shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO). Same cost formula for
all inventories having a similar nature and use to the entity has been used.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in
the period in which the related revenue is recognised. The amount of any write-down of inventories
to net realisable value and all losses of inventories is recognised as an expense in the period the
write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising
from an increase in net realisable value, is recognised as a reduction in the amount of inventories
recognised as an expense in the period in which the reversal occurs.
1.9 Revenue Recognition
Revenue will be recognised when the parties to the contract have approved the contract (in writing,
orally or in accordance with other customary business practices) and are committed to perform
their respective obligations; each party's rights regarding the goods or services to be transferred is
identified ;payment terms for the goods or services to be transferred is identified; the contract has
commercial substance; and it is probable that the company will collect the consideration to which it
will be entitled in exchange for the goods or services that will be transferred to the customer. In
evaluating whether collectability of an amount of consideration is probable, company shall consider
only the customer's ability and intention to pay that amount of consideration when it is due. The
amount of consideration to which company will be entitled may be less than the price stated in the
contract if the consideration is variable because the company may offer the customer a price
concession.
The company shall recognise revenue when it satisfies a performance obligation by transferring a
promised good or service (i.e. an asset) to a customer. An asset is transferred when the customer
obtains control of that asset.
When a performance obligation is satisfied, company shall recognise as revenue the amount of the
transaction price that is allocated to that performance obligation.
The company shall consider the terms of the contract and its customary business practices to
determine the transaction price. The transaction price is the amount of consideration to which
company expects to be entitled in exchange for transferring promised goods or services to a
customer. The consideration promised in a contract with a customer may include fixed amounts,
variable amounts, or both.
Effective interest method: Interest revenue shall be calculated by using the effective interest method
This shall be calculated by applying the effective interest rate to the gross carrying amount of a
financial asset except for:(a) purchased or originated credit-impaired financial assets: For those
financial assets, the company shall apply the credit-adjusted effective interest rate to the amortised
cost of the financial asset from initial recognition.(b) financial assets that are not purchased or
originated credit-impaired financial assets but subsequently have become credit-impaired financial
assets. For those financial assets, the company shall apply the effective interest rate to the
amortised cost of the financial asset in subsequent reporting periods.
A gain or loss on a financial asset or financial liability that is measured at fair value shall be
recognised in profit or loss.
Dividends are recognised in profit or loss only when; (a) the company's right to receive payment of
the dividend is established; (b) it is probable that the economic benefits associated with the dividend
will flow to the company; and (c) The amount of the dividend can be measured reliably.
1.10 Property, Plant and Equipment (PPE)
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the company;
and (b) the cost of the item can be measured reliably. Under the recognition principle, an entity
recognises in the carrying amount of an item of property, plant and equipment the cost of replacing
part of such an item when that cost is incurred if the recognition criteria are met.
An item of property, plant and equipment that qualifies for recognition as an asset shall be
measured at its cost. The cost of an item of property, plant and equipment comprises: (a) its
purchase price, including import duties and non-refundable purchase taxes, after deducting trade
discounts and rebates.(b) any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended by management. After
recognition as an asset, an item of property, plant and equipment shall be carried at its cost less any
accumulated depreciation and any accumulated impairment losses.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the
total cost of the item shall be depreciated separately. The depreciation charge for each period shall
be recognised in profit or loss unless it is included in the carrying amount of another asset. The
depreciable amount of an asset shall be allocated on a systematic basis over its useful life. The
residual value and the useful life of an asset shall be reviewed at least at each financial year-end
and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change
in an accounting estimate in accordance with IND AS 8, Accounting Policies, Changes in Accounting
Estimates and Errors. The depreciation method used reflects the pattern in which the asset's future
economic benefits are expected to be consumed by the entity. The depreciation method applied to an
asset is reviewed at least at each financial year-end and, if there has been a significant change in
the expected pattern of consumption of the future economic benefits embodied in the asset, the
method is changed to reflect the changed pattern. Such a change shall be accounted for as a change
in an accounting estimate in accordance with IND AS 8.
The carrying amount of an item of property, plant and equipment is derecognised: (a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal. The gain or losses
arising from derecognition of an item of property, plant and equipment shall be included in profit or
loss when the item is derecognised.
Depreciation is recognised to write off the cost of assets less their residual values over their useful
lives, using the Straight Line method.
Estimated useful lives of the assets, are in accordance with that which is prescribed in Schedule II of
the Companies Act, 2013 which is as under :-
Depreciation is provided on straight line value method by adopting useful life of 30 years in the case
of Building (other than Building) other than RCC Frame structure as prescribed under schedule II to
the Companies Act, 2013 after retaining 5% of Original cost as residual value for Buildings.
1.11 Investment Property
Investment property shall be recognised as an asset when and only when: (a) it is probable that the
future economic benefits that are associated with the investment property will flow to the company;
and (b) the cost of the investment property can be measured reliably. An investment property shall
be measured initially at its cost.
Transaction costs shall be included in the initial measurement. The cost of a purchased investment
property comprises its purchase price and any directly attributable expenditure. After initial
recognition, an entity shall measure all of its investment properties in accordance with IND AS 16's
requirements for cost model, other than those that meet the criteria to be classified as held for sale
(or are included in a disposal group that is classified as held for sale) in accordance with IND AS 105,
Non-current Assets Held for Sale and Discontinued Operations. Investment properties that meet the
criteria to be classified as held for sale (or are included in a disposal group that is classified as held
for sale) shall be measured in accordance with IND AS 105. An investment property shall be
derecognised (eliminated from the balance sheet) on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal.
Gains or losses arising from the retirement or disposal of investment property shall be determined
as the difference between the net disposal proceeds and the carrying amount of the asset and shall
be recognised in profit or loss in the period of the retirement or disposal.
The fair value of investment property is being determined by property valuer, having recognised
qualifications and experience. However if the Investment property is disposed off during the
reporting period, the Sale Price not being less than valuation as per Registry office on which stamp
duty is being calculated and paid off as per the Registered Sales deed is treated as fair value.
1.12 Impairment of Assets
Company shall assess at the end of each reporting period whether there is any indication that an
asset may be impaired. If any such indication exists, the company shall estimate the recoverable
amount of the asset. If, and only if, the recoverable amount of an asset is less than its carrying
amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction
is an impairment loss. After the recognition of an impairment loss, the depreciation (amortisation)
charge for the asset is adjusted in future periods to allocate the asset's revised carrying amount,
less its residual value (if any), on a systematic basis over its remaining useful life.
1.13 Financial Instrument
Recognition and derecognition
The Company recognises a financial asset or a financial liability in its balance sheet when, and only
when, it becomes party to the contractual provisions of the instrument. A regular way purchase or
sale of financial assets shall be recognised and derecognised, as applicable, using trade date
accounting or settlement date accounting.
The company will derecognise a financial asset when and only when: (a) the contractual rights to the
cash flows from the financial asset expire, or (b) it transfers the financial asset as set out below and
the transfer qualifies for derecognition.
(i) An entity transfers a financial asset if, and only if, it either: (a) transfers the contractual
rights to receive the cash flows of the financial asset, or (b) retains the contractual
rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients in an arrangement that meets
the conditions.
(ii) When the company retains the contractual rights to receive the cash flows of a financial
asset (the ‘original asset'), but assumes a contractual obligation to pay those cash flows
to one or more entities (the ‘eventual recipients'), the company treats the transaction as
a transfer of a financial asset if, and only if, all of the conditions are met like:(a) The
entity has no obligation to pay amounts to the eventual recipients unless it collects
equivalent amounts from the original asset. Short-term advances by the company with
the right of full recovery of the amount lent plus accrued interest at market rates do not
violate this condition.(b) The company is prohibited by the terms of the transfer contract
from selling or pledging the original asset other than as security to the eventual
recipients for the obligation to pay them cash flows.(c) The company has an obligation to
remit any cash flows it collects on behalf of the eventual recipients without material
delay. In addition, the entity is not entitled to reinvest such cash flows, except for
investments in cash or cash equivalents during the short settlement period from the
collection date to the date of required remittance to the eventual recipients, and interest
earned on such investments is passed to the eventual recipients.
(iii) Whenever the company transfers a financial asset it evaluates the extent to which it
retains the risks and rewards of ownership of the financial asset. In this case: (a) if the
company transfers substantially all the risks and rewards of ownership of the financial
asset, the company derecognises the financial asset and recognise separately as assets
or liabilities any rights and obligations created or retained in the transfer. (b) If the
company retains substantially all the risks and rewards of ownership of the financial
asset, it will continue to recognise the financial asset. (c) If the company neither
transfers nor retains substantially all the risks and rewards of ownership of the
financial asset, the company determines whether it has retained control of the financial
asset.
In this case: (i) If the company has not retained control, it shall derecognise the financial
asset and recognise separately as assets or liabilities any rights and obligations created
or retained in the transfer. (ii) If the company has retained control, it shall continue to
recognise the financial asset to the extent of its continuing involvement in the financial
asset.
(i) When the company transfers a financial asset in a transfer that qualifies for
derecognition in its entirety and retains the right to service the financial asset for a fee,
it recognises either a servicing asset or a servicing liability for that servicing contract. If
the fee to be received is not expected to compensate the company adequately for
performing the servicing, a servicing liability for the servicing obligation is recognised at
its fair value. If the fee to be received is expected to be more than adequate
compensation for the servicing, a servicing asset shall be recognised for the servicing
right at an amount determined on the basis of an allocation of the carrying amount of the
larger financial asset as stated in (iv) below.
(ii) If, as a result of a transfer, a financial asset is derecognised in its entirety but the
transfer results in the entity obtaining a new financial asset or assuming a new financial
liability, or a servicing liability, the company recognises the new financial asset, financial
liability or servicing liability at fair value.
(iii) On derecognition of a financial asset in its entirety, the difference between: (a) the
carrying amount (measured at the date of derecognition) and (b) the consideration
received (including any new asset obtained less any new liability assumed) is
recognised in profit or loss.
(iv) If the transferred asset is part of a larger financial asset (e.g. when the company
transfers interest cash flows that are part of a debt instrument, and the part transferred
qualifies for derecognition in its entirety, the previous carrying amount of the larger
financial asset shall be allocated between the part that continues to be recognised and
the part that is derecognised, on the basis of the relative fair values of those parts on
the date of the transfer. For this purpose, a retained servicing asset shall be treated as a
part that continues to be recognised. The difference between: (a) the carrying amount
(measured at the date of derecognition) allocated to the part derecognised and (b) the
consideration received for the part derecognised (including any new asset obtained less
any new liability assumed) shall be recognised in profit or loss.
Transfers that do not qualify for derecognition
If a transfer does not result in derecognition because the entity has retained substantially all the
risks and rewards of ownership of the transferred asset, the entity shall continue to recognise the
transferred asset in its entirety and shall recognise a financial liability for the consideration
received. In subsequent periods, the entity shall recognise any income on the transferred asset and
any expense incurred on the financial liability.
Continuing involvement in transferred assets
When the company neither transfers nor retains substantially all the risks and rewards of
ownership of a transferred asset, and retains control of the transferred asset, the company
continues to recognise the transferred asset to the extent of its continuing involvement.
Derecognition of financial liabilities
An entity shall remove a financial liability (or a part of a financial liability) from its balance sheet
when, and only when, it is extinguished—i.e. when the obligation specified in the contract is
discharged or cancelled or expires.
Classification of financial assets
The Company will classify financial assets as subsequently measured at amortised cost, fair value
through other comprehensive income or fair value through profit or loss on the basis of both: (a) the
entity's business model for managing the financial assets and (b) the contractual cash flow
characteristics of the financial asset.
A financial asset shall be measured at amortised cost if both of the following conditions are met: (a)
the financial asset is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows and (b) 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.
Classification of financial liabilities
An entity shall classify all financial liabilities as subsequently measured at amortised cost.
1.14 Non-Performing Assets & Write-off Policy
Company has followed Reserve Bank of India Guidelines in respect of NPA provisioning applicable
for Non-Systematically Important-Non Deposit Taking Non-Banking Financial Company. Apart from
NPA Provision, Company has made additional Provision for impairment of Financial instruments as
required under Indian Accounting standard IND-AS 36. Both the provisions taken together have been
reflected in Profit & Loss Account under impairment on Financial Instrument. During the current
year, all the Non-Performing assets have been written off & consequently provision made in earlier
years in respect of said NPAs have been written back.
The Company's assessment of impairment loss on its loans and other assets is subject to a number
of management judgments and estimates, the impacts of actions of governments and other
authorities, and the responses of businesses and consumers in different industries, along with the
associated impact on the global economy.
1.15 Measurement of expected credit losses
The company has measured expected credit losses of a financial instrument in a way that reflects
:(a) an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes;(b) the time value of money; and(c) reasonable and supportable information that
is available without undue cost or effort at the reporting date about past events, current conditions
and forecasts of future economic conditions.
1.16 Investments in equity instruments
At initial recognition, the company makes an irrevocable election to present in other comprehensive
income subsequent changes in the fair value of an investment in an equity instrument within the
scope of this Standard that is neither held for trading nor contingent consideration recognised by an
acquirer in a business combination to which IND AS103 applies. Once it makes this election, it shall
recognise in profit or loss dividends from that investment.
1.17 Fair Value Hierarchy
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair
value that are either observable or unobservable and consists of the following three levels:
Level I - This level includes financial assets that are measured by reference to quoted prices in
active markets for identical assets or liabilities.
Level 2 - This level includes financial assets and liabilities, measured using inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly (i.e. price)
or indirectly (i.e. derived from prices).
Level 3 - This level includes financial assets and liabilities measured using inputs that are not based
on observable market data (unobservable inputs). Fair values are determined in whole or in part,
using a valuation model based on assumptions that are neither supported by prices from observable
current market transactions in the same instrument nor are they based on available market data.
1.18 Borrowing Cost
The company will capitalise borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that asset. It recognises other
borrowing costs as an expense in the period in which it incurs them. To the extent that it borrows
funds specifically for the purpose of obtaining a qualifying asset, it will determine the amount of
borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing
during the period less any investment income on the temporary investment of those borrowings. To
the extent that it borrows funds generally and uses them for the purpose of obtaining a qualifying
asset, it will determine the amount of borrowing costs eligible for capitalisation by applying a
capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted
average of the borrowing costs applicable to the borrowings of the company that are outstanding
during the period, other than borrowings made specifically for the purpose of obtaining a qualifying
asset. The amount of borrowing costs that company capitalises during a period shall not exceed the
amount of borrowing costs it incurred during that period. The company will begin capitalising
borrowing costs as part of the cost of a qualifying asset on the commencement date. The
commencement date for capitalisation is the date when it first meets all of the following conditions:
(a) it incurs expenditures for the asset; (b) it incurs borrowing costs; and (c) it undertakes activities
that are necessary to prepare the asset for its intended use or sale. It will suspend capitalisation of
borrowing costs during extended periods in which it suspends active development of a qualifying
asset. It will cease capitalising borrowing costs when substantially all the activities necessary to
prepare the qualifying asset for its intended use or sale are complete.
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