3. Material accounting policies
a) Property, plant and equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and impairment, if
any. Costs directly attributable to acquisition are
capitalised until the property, plant and equipment
are ready for use, as intended by the management.
The cost of Property, plant and equipment comprises
of purchase price, applicable duties and taxes, any
directly attributable expenditure on making the asset
ready for its intended use.
For transition to Ind AS, the company has elected
to adopt carrying value of PPE measured as per
previous GAAP, as deemed cost as on 1st April, 2015.
Advances paid for acquisition of Property, plant and
equipment outstanding at each balance sheet date is
classified as capital advances under other non-current
assets. Cost of the assets not put to use before such
date are disclosed under 'Capital Work-in-progress'.
Any subsequent expenditure relates to property, plant
and equipment is capitalised only when it is probable
that future economic benefits associated with these
will flow to the company and the cost of the item can
be measured reliably. Repairs and maintenance costs
are recognised in the statement of profit and loss
when incurred. Items of spare parts are recognised
as Property, plant and equipment when they meet
the definition of Property, plant and equipment. The
cost and related depreciation are eliminated from
the property, plant and equipment upon sale or
retirement of the asset and the resultant gain or losses
are recognised in statement of profit and loss.
b) Intangible assets
Identifiable intangible assets are recognised when
the Company controls the asset, it is probable that
future economic benefits attributed to the asset will
flow to the Company and the cost of the asset
can be reliably measured. At initial recognition, the
separately acquired intangible assets are recognised
at cost. Following initial recognition, the intangible
assets are carried at cost less any accumulated
amortisation and accumulated impairment
losses, if any.
c) Depreciation and Amortisation
The depreciation on property, plant and equipment
is provided under the Straight-line method over
the useful lives of the assets estimated by the
management. The management based on internal
assessment, taking into account the nature of the
asset, estimated usage of the asset, operating
conditions of the asset, past history of replacement,
anticipated technical changes and independent
technical evaluation carried out by external valuers,
believes that the useful lives given below best
represent the period over which the management
expects to use these assets.
The management, based on technical evaluation
report of external valuer, estimates the useful lives
for the fixed assets are as follows:
Individual assets costing up to Rs. 5,000/- each,
other than mobile phones, are fully depreciated
in the year of purchase since in the opinion of
the management the useful life of such assets
are of one year.
Depreciation on assets added/sold during the
year is provided on pro-rata basis from the
date of acquisition or up to the date of sale, as
the case may be.
Intangible assets, comprising of expenditure on
computer software incurred are amortised on a
straight line method over a period of five years.
Depreciation and amortisation methods, useful
lives and residual values are reviewed periodically
at the end of each financial year with the effect
of any change in estimate accounted for on a
prospective basis.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
d) Government Grants
Government grants are not recognised until there is
reasonable assurance that the company will comply
with the conditions attaching to them and that the
grants will be received .
Government grants related to revenue are recognised
on a systematic basis in the Statement of Profit
and 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
recognised as deferred revenue in the Balance sheet
and transferred to the statement of Profit and Loss on
a systematic and rational basis over the useful lives of
the related assets.
e) Impairment of Assets
i) Financial assets (other than at fair value)
The company assesses at each balance sheet
date whether a financial asset or a group of
financial assets is impaired. Ind AS 109 requires
expected credit losses to be measured through a
loss allowance. The company recognises lifetime
expected losses for all trade receivables that do
not constitute a financing transaction. For all
other financial assets, expected credit losses are
measured at an amount equal to the 12 month
expected credit losses or at an amount equal
to the life time expected credit losses if the
credit risk on the financial asset has increased
significantly since initial recognition.
ii) Non financial assets
Property, plant and equipment and intangible
assets with finite life are evaluated for
recoverability whenever there is any indication
that their carrying amount may not be
recoverable. If any such indication exists, the
recoverable amount (i.e higher of the fair value
less cost of sale and value in use) is determined
on an individual asset basis unless the asset
does not generates cash flows that are largely
independent of those from other assets. In such
cases, the recoverable amount is determined for
the cash generating unit (CGU) to which the asset
belongs. If the recoverable amount of an asset
or CGU is estimated to be less than its carrying
amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An
impairment loss is recognised in the statement
of profit and loss.
An impairment loss is reversed in the
statement of profit and loss if there has been
a change in the estimates used to determine
the recoverable amount and the carrying
amount of the asset is increased to its revised
recoverable amount subject to maximum of
carrying amount.
f) Borrowing Costs
Borrowing Costs, that are directly attributable to the
acquisition or construction of assets, that necessarily
take a substantial period of time to get ready for
its intended use, are capitalised as part of the cost
of qualifying asset when it is possible that they will
result in future economic benefits and the cost can be
measured reliably.
Other borrowing costs are recognised as an expense in
the period in which they are incurred.
g) I nvestments in subsidiaries, joint ventures and
associates
Investments in subsidiaries, joint ventures and
associates are carried at cost less accumulated
impairment losses, if any. Where an indication of
impairment exists, the carrying amount of 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 the carrying amount are
recognised in the statement of profit and loss.
h) Inventories
a) Stores and consumables are valued at lower of
cost or Net realisable value.
b) Work-in-progress:
Contract execution expenses incurred in respect
of projects to be commenced are included under
work-in-progress and are valued at cost.
Contracts awarded to the company and not
commenced as on date of balance sheet, the cost
incurred in securing the contract, mobilisation
expenses of labour and material and other related
expenses incurred are shown as asset as per the
requirements of Ind AS.
i) Revenue Recognition
Revenue from contracts with customers is recognised
on transfer of control of promised goods or services
to a customer at an amount that reflects the
consideration to which the Company is expected to
be entitled to in exchange for those goods or services.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. Revenue (net of variable
consideration) is recognised only to the extent that it
is highly probable that the amount will not be subject
to significant reversal when uncertainty relating to its
recognition is resolved.
Identifying Performance Obligation:
A performance obligation is identified in the
construction projects that the Company engages
in, owing to the high degree of integration and
customisation of the various goods and services to
provide a combined output which is transferred to
the customer over time and not at a specific point in
time. Performance obligation is satisfied over time
when the transfer of control of asset (good or service)
to a customer is done over time and in other cases,
performance obligation is satisfied at a point in time.
Determination of Transaction Price:
Transaction price is the amount of consideration
to which the Company expects to be entitled in
exchange for transferring good or service to a
customer excluding amounts collected on behalf of
a third party(GST). The total transaction price of
each contract is to be allocated to each portion of
work as per the agreed terms of contract. Payment
terms agreed with a customer are as per business
practice and there is no financing component
involved in the transaction price.
Recognition of Revenue:
In case of sale of goods:
Revenue from sale of products is recognised when
the control on the goods have been transferred to the
customer. The performance obligation in case of sale
of product is satisfied at a point in time i.e., when the
material is shipped to the customer or on delivery to
the customer, as may be specified in the contract.
In case of construction services:
Revenue from services is recognised over time
by measuring progress towards satisfaction of
performance obligation for the services rendered.
Revenue from contracts is recognised by following the
percentage of completion method and is measured
with reference to actual completion of physical
proportion of the work, i.e the output method, to
the extent of work certified by the customer and
acknowledged by the customer. Under this method,
on a regular basis, the work completed under each
contract is measured and the corresponding output is
recognised as revenue.
The portion of the work which was completed,
but pending for certification by the customer, is
also recognised as revenue by treating the same
as uncertified revenue. Any claims, variations and
incentives is recognised as revenue only when the
customer accepts the same. Provision for expected
loss is recognised immediately when it is probable
that the total estimated cost will exceed total
contract revenue.
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.
In case of other Income:
Interest income is recognised using the effective
interest method.
Dividend income from Investments is recognised
when the shareholder's right to receive payment
has been established.
J) Employee Benefits
i) Defined Contribution Plans
Company's contribution to Employees
Provident Fund and Employees State Insurance
are made under a defined contribution plan,
and are accounted for at actual cost in the
year of accrual.
ii) Defined Benefit Plans
Gratuity, a defined Benefit scheme is covered by
a Group Gratuity cum Life Assurance policy with
LIC. The cost of providing benefits is determined
using the projected unit credit method with
actuarial valuations being carried out at the
end of each reporting period. Remeasurement,
comprising actuarial losses and gains, the effect
of changes to the asset ceiling and actual return
on plan assets, in excess of the yield computed
by applying the discount rate used to measure
the defined benefit obligation, is reflected in the
balance sheet with a charge or credit recognised
in other comprehensive income in the period
in which they occur. Such remeasurement
losses/gains are not reclassified to profit or
loss subsequently.
The employees of the company are entitled to
leave encashment which are both accumulating
and non-accumulating in nature. The liability
towards accumulated leave encashment,
which are to be encashable only at the time
of retirement, death while in service or on
termination of employment, is determined
by actuarial valuation using projected
unit credit method.
k) Foreign Currency Transactions
The functional currency of the company, including
of its foreign projects, is Indian Rupee and the
financial statements are presented in Indian rupee.
Transactions in foreign currency are initially
accounted at the exchange rate prevailing on the
date of the transaction, and adjusted appropriately,
with the difference in the rate of exchange arising
on actual receipt/payment during the year.
At each Balance Sheet date
i) Foreign currency denominated monetary items
are translated into the relevant functional
currency at exchange rate at the balance sheet
date. The gains and losses resulting from such
translations are included in net profit in the
statement of profit and loss.
ii) Foreign currency denominated non-monetary
items are reported using the exchange rate at
which they were initially recognised.
Transaction gains or losses realized upon settlement
of foreign currency transactions are included in
statement of profit and loss.
l) Income-Taxes
Income tax expense comprises the sum of tax
currently payable and deferred tax. Income tax
expense is recognised in net profit in the statement
of profit and loss except to the extent that it relates to
items recognised directly in equity, in which case it is
recognised in other comprehensive income.
Current tax is determined at the amount expected
to be paid to or recovered from the tax authorities,
using the tax rates and tax laws that have
been enacted or substantively enacted by the
balance sheet date.
Deferred income tax assets and liabilities are
recognised for all temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
The carrying amount of deferred tax assets is reviewed
at the end of each year 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 assets
to be recovered.
Deferred income tax assets and liabilities are measured
using tax rates and tax laws that have been enacted or
subsequently enacted by the balance sheet date and
are expected to apply to taxable income in the years
in which those temporary differences are expected
to be recovered or settled. The effect of changes in
tax rates on deferred income tax assets and liabilities
are recognised as income or expense in the year of
enactment. A deferred income tax asset is recognised
to the extent that it is probable that future taxable
profit will be available against which the deductible
temporary differences and tax losses can be utilised.
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