2. Material accounting policies
(a) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Initial recognition and measurement
Financial assets and liabilities are recognised when the
Company becomes a party to the contractual provisions
of the instrument. Financial assets (unless it is a trade
receivable without a significant financing component)
and liabilities are initially measured at fair value. Trade
receivables are initially measured at transaction 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 or loss) are added
to or deducted from the fair value measured on initial
recognition of financial asset or financial liability.
Financial Assets
Classification and subsequent measurement
On initial recognition, a financial asset is classified as
subsequently measured at:
(i) amortised cost.
(ii) fair value through other comprehensive income
(FVOCI) - equity investment; or
(iii) fair value through profit or loss (FVTPL).
Financial assets are not reclassified subsequent to their
initial recognition unless the Company changes its
business model for managing financial assets, in which
case all affected financial assets are reclassified on the
first day of the first reporting period following the change
in the business model.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised
cost if these financial assets are held within a business
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.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit
or loss unless it is measured at amortised cost or at fair
value through other comprehensive income on initial
recognition. The transaction costs directly attributable
to the acquisition of financial assets and liabilities at fair
value through profit or loss are immediately recognised
in profit or loss.
De-recognition of Financial Assets
The Company de-recognises a financial asset only when
the contractual rights to the cash flows from the financial
asset expire, or it transfers the financial asset and
substantially all risks and rewards of ownership of the
financial 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 recognise the financial
asset and also recognises a collateralised borrowing for
the proceeds received.
Financial liabilities
Financial liabilities are measured at amortised cost using
the effective interest method.
De-recognition of Financial Liabilities
Financial liabilities are de-recognised when the obligation
specified in the contract is discharged, cancelled or
expired. When an existing financial liability is replaced by
another from the same lender on substantially different
terms, or the terms of an existing financial liability are
substantially modified, such an exchange or modification
is treated as de-recognition of the original financial
liability and recognition of a new financial liability.
The difference in the respective carrying amounts is
recognised in the Statement of Profit and Loss.
Equity instruments
An equity instrument is a contract that evidences residual
interest in the assets of the Company after deducting all
of its liabilities. Equity instruments recognised by the
Company are measured at the proceeds received net of
direct issue cost.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and
the net amount is reported in financial statements if
there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle
them on a net basis, to realise the assets and settle the
liabilities simultaneously.
b) Measurement of fair values
A number of the Company's accounting policies and
disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in
Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices).
- Level 3: inputs for the asset or liability that
are not based on observable market data
(Unobservable inputs).
When measuring the fair value of an asset or a liability,
the Company uses observable market data as far as
possible. If the inputs used to measure the fair value
of an asset or a liability fall into different levels of the
fair value hierarchy, then the fair value measurement
is categorised in its entirety in the same level of the
fair value hierarchy as the lowest level input that is
significant to the entire measurement.
The Company recognises transfers between levels of the
fair value hierarchy at the end of the reporting period
during which the change has occurred.
(c) Property, plant and equipment
(i) Recognition, measurement and de-recognition
Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses, if any. Freehold
land is carried at cost and is not depreciated.
Cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly
attributable cost of bringing the item to its working
condition for its intended use and estimated costs
of dismantling and removing the item and restoring
the site on which it is located.
When 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.
Items such as spare parts, stand-by equipment and
servicing equipment that meet the definition of
property, plant and equipment are capitalized at
cost and depreciated over their useful life. Costs in
nature of repairs and maintenance are recognized
in the Statement of Profit and Loss as and when
incurred.
Items of property, plant and equipment are
derecognized from the Standalone Financial
Statements, either on disposal or when no economic
benefits are expected from its use or disposal. Gains
and losses on disposal of an item of property, plant
and equipment are determined by comparing the
proceeds from disposal with the carrying amount of
property, plant and equipment, and are recognised
net within other income in the statement of profit
and loss.
The assets residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of
each reporting period. An asset's carrying amount is
written down immediately to its recoverable amount
if the asset's carrying amount is greater than its
estimated recoverable amount.
Capital work-in-progress comprises the cost of
property, plant and equipment that are not ready
to use at the balance sheet date and are stated at
historical cost and impairment, if any.
(ii) Subsequent expenditure
The cost of replacing a part of an item of property,
plant and equipment is recognised in the carrying
amount of the item if it is probable that the future
economic benefits embodied within the part will
flow to the Company, and its cost can be measured
reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing
of property, plant and equipment are recognised in
the statement of profit and loss as incurred.
The Company provides depreciation on the straight¬
line method. The Company believes that straight
line method reflects the pattern in which the
asset's future economic benefits are expected to
be consumed by the Company.
The estimated useful lives of items of property, plant
and equipment for the current and comparative
periods are as follows:
Project specific assets are depreciated over life of the
project or useful life as per Schedule II of Companies
Act, 2013 whichever is lower.
Depreciation is calculated on a pro-rata basis from/uptc
the date the assets are purchased/sold. Useful life ol
assets and residual values are reviewed at each financia
year end and adjusted if appropriate.
(d) Intangible assets and amortisation
(i) Computer software
Computer software is recorded at the consideration
paid for acquisition. Computer software is amortisec
over their estimated useful lives on a straight-line
basis, commencing from the date the asset is
available to the Company for its use.
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only when il
increases the future economic benefits embodied
in the specific asset to which it relates. All othei
expenditure, including expenditure on internally
generated brands, is recognized in statement ol
profit and loss as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost
of intangible assets less their estimated residua
values over their estimated useful lives using the
straight-line method and is included in depreciation
and amortisation in statement of profit and loss
Computer software is amortised over their estimated
useful lives not exceeding 3 years.
(i) Revenue from construction contracts
The Company applies Ind AS 115 using cumulative
catch-up transition method. Revenue from contract
with customers is recognised when the Company
satisfies performance obligation by transferring
promised goods or services to the customer in an
amount that reflects the transaction price to which
the company expects to be entitled in exchange
for those goods or services. In determining
the transaction price, the promised amount of
consideration is adjusted for the effects of the time
value of money if the timing of payments agreed in
the contract provides the customer or the company
with significant benefit of financing the transfer of
goods or services to the customer.
With respect to the satisfaction of a performance
obligation, the Company has chosen output method
to measure the value of goods or services for
which control is transferred to the customer over
time based on the performance / measured unit
of work completed to date. Accordingly, revenue
is recognised corresponding to the units of work
performed and on the basis of the price allocated
thereto.
In cases where the work performed till the reporting
date has not reached the milestone specified in the
contract, the Company recognises revenue only
to the extent that it is highly probable that the
customer will acknowledge the same. This method
is applied as the progress of the work performed
can be measured during its performance on the
basis of the contract. Under this method, on a
regular basis, the work completed under each
contract is measured and the corresponding output
is recognised as revenue.
(ii) Other income
• Dividend Income
Dividend income from Investments is
recognised when the shareholder's right to
receive payment has been established.
• Interest income
Interest income from a financial asset is
recognised when it is probable that the
economic benefits will flow to the company
and the amount of income can be measured
reliably. Interest income is accrued on a
time basis, by reference to the principal
outstanding and at the effective interest
rate applicable, which is the rate that exactly
discounts estimated future cash receipts
through the expected life of the financial
asset to that asset's net carrying amount on
initial recognition.
• Rental income
Rental income from short term leases/ low
value assets are generally recognised over the
term of the relevant lease.
• Insurance claims
Insurance claims are accounted for on the
basis of claims admitted and to the extent
that there is no uncertainty in receiving the
claims.
• Sub-contractor recoveries
The supply of goods or rendering of services
by the Company to its sub-contractors at
project sites are recognised as sub-contractor
recoveries.
(f) Inventories
Inventories (Raw material and consumables) are valued
at the lower of cost and net realisable value. Cost of
inventory is determined on the weighted average basis.
Scrap is valued at net realisable value. The comparison
of cost and net realisable value is made on item-by-item
basis.
Cost of inventories comprises of all costs of purchase,
cost of conversion and other costs incurred in bringing
the inventories to their present location and condition.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of
completion and selling expenses.
(g) Impairment
(i) Impairment of financial instruments
Financial assets (other than at fair value)
The Company assesses on a forward-looking basis
the expected credit losses associated with its
assets carried at amortised cost and FVTOCI debt
instruments. The impairment methodology applied
depends on whether there has been a significant
increase in credit risk.
For trade receivables only, the Company applies
the simplified approach permitted by Ind AS 109
Financial Instruments, which requires expected
lifetime losses to be recognised from initial
recognition of the receivables.
Presentation of allowance for expected credit
losses in the balance sheet
Loss allowances for financial assets measured at
amortised cost are deducted from the gross carrying
amount of the assets.
Write-off
The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no realistic prospect of recovery. This
is generally the case when the Company determines
that the debtor does not have assets or sources of
income that could generate sufficient cash flows
to repay the amounts subject to the write off.
However, trade receivables that are written off
could still be subject to enforcement activities in
order to comply with the Company's procedures for
recovery of amounts due.
(ii) Impairment of non-financial assets
The carrying value of assets / cash generating units
(CGU) at each Balance Sheet date are reviewed
for impairment. If, any such indication exists, the
Company estimates their recoverable amount and
impairment is recognised if, the carrying amount
of these assets/cash generating units exceeds their
recoverable amount. The recoverable amount is the
greater of the net selling price and their value in
use. When there is indication that an impairment
loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased,
such reversal of impairment loss is recognised in
the Statement of Profit & Loss.
The Company's corporate assets (e.g., central
office building for providing support to various
CGUs) do not generate independent cash inflows.
To determine impairment of a corporate asset,
recoverable amount is determined for the CGUs to
which the corporate asset belongs.
(h) Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A
liability is recognised for the amount expected
to be paid e.g., under short-term cash bonus, if
the Company has a present legal or constructive
obligation to pay this amount as a result of past
service provided by the employee, and the amount
of obligation can be estimated reliably.
(ii) Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have
no legal or constructive obligation to pay further
amounts. The Company makes specified monthly
contributions towards Government administered
provident fund, employee insurance scheme,
superannuation fund and National pension
scheme. Obligations for contributions to defined
contribution plans are recognised as an employee
benefit expense in the statement of profit and loss
in the periods during which the related services are
rendered by employees.
Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in
future payments is available.
In accordance with the Payment of Gratuity
Act 1972, applicable for Indian companies, the
Company provides for a lump sum payment to
eligible employees, at retirement or termination
of employment based on the last drawn salary
and years of employment with the Company. The
Company's obligation in respect of the gratuity
plan, which is a Defined Benefit Plan, is provided
for based on actuarial valuation using the Projected
Unit Credit Method. The Company recognizes
actuarial gains and losses immediately in other
comprehensive income, net of taxes. Provision
for other retirement / long term compensated
absences (Leave Encashment) is made on the basis
of actuarial valuation.
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