SIGNIFICANT ACCOUNTING POLICIES for FY 2023-24
1. Basis for preparation of Financial Statements:
The Company is incorporated in the year 1996 under the Companies Act, 1956. During the year, the Company was engaged in the business of manufacturing of HVAC components and equipment & MEP contracting. The Financial Statements have been prepared on a going concern basis under historical cost convention on accrual basis and in accordance with the generally accepted accounting principles in India and the provisions of Companies Act, 2013.
2. Use of Estimate:
The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting year. The difference between the actual results and estimates are recognized in the year in which the results are known / materialized.
3. Revenue recognition:
Revenues are recognized when it is earned and when there is no significant uncertainty as toits measurement and realization. The specific revenue recognition policies are as under:
a) Revenue from Turnkey Contracts is recognized based on work completion of activityor achievement of milestone.
b) Revenue from sale of products is recognized upon passing of the title of goods and/or on transfer of significant risk and rewards of ownership thereto.
c) Revenue from Services is recognized on performance of Service in accordance withthe terms of contract with customers.
d) Dividend income is recognized when the right to receive dividend is established.
e) Income such as annual maintenance contracts, Interest, Lease Rentals is recognizedas per contractually agreed terms on time proportion basis.
f) Export benefits are accounted for in the year of exports, based on eligibility andwhen there is no uncertainty of receiving the same.
g) Other income is recognized when the right to receive is established.
4. Fixed Assets, Intangible Assets and Capital Work in Progress:
Fixed Assets are stated at the cost of acquisition less accumulated depreciation and impairment losses, if any. All identifiable costs incurred up to the asset put to use are capitalized. Costs include purchase price (including non-refundable taxes/duties) and borrowing costs for the assets that necessarily take a substantial period of time to get ready for its intended use. Exchange differences arising on restatement / settlement of long-term foreign currency borrowings relating to acquisition of depreciable fixed assets are adjusted to the cost of the respective assets and depreciated over the remaining useful life of such assets. Machinery spares which can be used only in connection with an item of fixed asset
and whose use is expected to be irregular are capitalised and depreciated over the useful lifeof the principal item of the relevant assets.
Intangible Assets are stated at the cost of acquisition less accumulated amortization. Capital Work-In Progress includes cost of fixed assets that are not ready for their intendeduse as at the balance sheet date.
Fixed Assets purchased for less than Rs. 5000 are written off in the year of purchase.
5. Depreciation:
Depreciation has been provided on the written down value method as per the rates prescribed in Schedule II to the Companies Act, 2013 and in respect of additions to / deletionfrom the Fixed Assets, on pro rata basis.
Intangible assets are amortised over a period of 3 years.
6. Impairment of Assets:
An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting year/s is reversed if there has been a change in the estimate of recoverable amount.
7. Investments:
Current Investments are carried at the lower of cost or quoted / fair value computed scrip wise. Long Term Investments are stated at cost. Provision for diminution in the value of long- term investments is made only if decline in the value of such investments is other than temporary.
8. Inventories:
a) Inventories including Work-in-process and stores and spares are valued at the lower of cost and net realizable value.
b) Cost of inventories is generally ascertained on first in first out basis.
9. Foreign currency transactions:
a) Transactions in foreign currencies are normally recorded at the exchange rate prevailing on the date of the transaction.
b) Monetary foreign currency items are reported at the exchange rates as at Balance Sheet date.
c) In respect of transactions covered under forward exchange contracts, the difference between the exchange rates prevailing at the Balance Sheet date and rate on the date of the contract is recognized as exchange difference. The premium on forward contract/s is amortized over the life of the contract.
d) Non-monetary foreign currency items are carried at cost.
e) Any gains or losses on account of exchange difference either on settlement or on translation are recognized in the Statement of Profit and Loss.
10. Employee Benefits:
a) Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service isrendered.
b) Post-employment and other long-term employee benefits are recognized as an expense at the present value of amount payable determined using actual arithmetical valuation basis in the Statement of Profit and Loss of the year in which the employee has rendered services.
11. Provision for Current and Deferred Tax:
a) Current Tax: Provision is made for income tax, under the tax payable method, based on the liability as computed after taking credit for allowances, exemptions, and MAT credit entitlement for the year. Adjustments in books are made only after the completion of the assessment. In case of matters under appeal, due to disallowances or otherwise, full provision is made when the Company accepts the said liabilities.
b) Deferred tax: The differences that result between the profit / loss offered for income tax and the profit / loss as per the financial statements are identified and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another. Deferred tax is measured based on the tax rates and tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax asset is recognized only to the extent there is virtual certainty that the asset will be realized in the future. Carrying value of deferred tax asset is adjusted for its appropriateness at each balance sheet date.
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