1. MATERIAL ACCOUNTING POLICIES
1.1 GENERAL
(a) Statement of Compliance
The financial statements of the Company are being
prepared in accordance with Indian Accounting Standards
(Ind AS) notified under section 133 of the Companies
Act 2013, read with the Companies (Indian Accounting
Standards) Rules as amended from time to time.
Accounting policies have been consistently applied except
where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
(b) Basis of Preparation
The financial statements have been prepared on accrual
basis at historical cost, except for the following assets
and liabilities which have been measured at fair value/
amortized cost:
• Derivative financial instruments,
• Which are specifically indicated in the concerned
accounting policy.
(c) Use of Estimates and Judgments
The preparation of the financial statements requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities and contingent assets
as at the date of the financial statements and reported
amounts of revenues and expenses for the year. Actual
results could differ from these estimates. Future results
could differ due to changes in these estimates and the
difference between the actual result and the estimates
are recognized in the period in which the results are
known/materialize.
.2. REVENUE RECOGNITION
1.2.1 Revenue from Contracts with Customers
Operating revenue is from various streams viz.
consultancy fee, inspection fee, lease services, export
sales and construction projects.
1.2.1.1 Consultancy Fee
Revenue from consultancy services is recognized
based on performance obligation satisfied either
over time or at a point in time.
In case performance obligation satisfied over time,
revenue is recognised based on the actual service
provided to the end of the reporting period as a
proportion of the total services to be provided. This is
determined based on physical progress, efforts, cost
incurred to date bear to the total estimated cost of
the transaction, time spent, percentage of the value
of work done/built-up cost or service performed.
In other cases where performance obligation is
not satisfied over time, revenue is recognized at
a point in time.
In case of contracts, where customer pays fixed
amount based on a payment schedule, if services
rendered by the Company exceed the payment, a
contract asset is recognised. If payments exceed
services rendered, a contract liability is recognised.
Mobilization fee is considered as customer advance
until recognized as revenue based on the stage of
completion of activities/transactions as per the
terms of contract/work order.
Reimbursable and supplies are accounted for
on accrual basis.
In Construction Management/ Supervision
Contracts, revenue is recognised as a percentage
of the value of work done/built-up cost of each
contract as determined by the Management,
pending customer's approval, if any.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of
inspection certificates issued.
1.2.1.3 Export Sales
Export sales are accounted when the Company
transfers control of the assets to the customer
which happens at the point in time the customer
has undisputed right on delivered goods.
1.2.1.4 Construction Projects
In construction contracts/ projects, the company
recognises revenue over time. Due to high degree of
interdependence among various elements of these
projects, revenue is accounted for considering these
activities as a single performance obligation.
To depict the progress by which the Company
transfers control of the promised goods to the
customer, and to establish when and to what extent
revenue can be recognised, the Company measures
its progress towards complete satisfaction of the
performance obligation based on work done.
1.2.1.5 Lease Services
Refer Policy no-1.20: - Leases-Company as lessor.
1.2.2 Other Income
Other income is accounted for on accrual basis except
claims (including insurance claims)/supplementary claims
/ counter claims/interest on delayed payments / awards
in favour of the Company/ sale of tenders/ premium
on sale of licenses etc. which are accounted for on final
settlement / realization.
1.3. PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost net of
accumulated depreciation and impairment losses, if any.
Spares valuing more than H 10 lakh which can be used only in
connection with an item of property, plant and equipment and
whose use is expected to be irregular are capitalized at cost and
depreciated over the useful life of the spares or principal item
of the relevant assets, whichever is lower.
1.3.1 Depreciation
(a) Depreciation on property, plant and equipment
are provided on straight line method over their
estimated useful life determined by management.
Depreciation method, useful lives and residual
values are reviewed at the end of each financial
year. The useful lives of assets are as prescribed in
part C of schedule II of the Companies Act, 2013
except assets indicated in sub paragraphs (c),
(d) and (e) below.
(b) The estimated useful lives of the various
assets, are as under:-
(c) As per company's technical assessment, Fixtures,
Mobile Hand Set, Coolers & Air Conditioners and
In-Service Locomotives & Coaches (refurbished)
have lower useful lives than prescribed in part C of
schedule II of the Companies Act, 2013. Therefore
depreciation is charged considering lower useful life
than prescribed under the Companies Act, 2013
(d) In respect of buildings on lease hold land,
depreciation is charged over the period of lease of
land or the useful life stated above for buildings on
freehold land, whichever is lower.
(e) Individual low cost assets of value less than H 5,000/-
are fully depreciated in the year of acquisition.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are
carried at cost, comprising direct cost, related incidental
expenses, and attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property,
plant and equipment outstanding at each balance sheet
date are classified as capital advances under other
non-current assets.
1.4. INTANGIBLE ASSETS
Intangible assets acquired/ developed are measured on
recognition at cost less accumulated amortisation and
impairment losses, if any.
1.4.1 Amortization
Estimated useful life of the software is 4 years and
amortized on a straight-line basis over the period.
However, software of value less than H 100,000/- is fully
amortized in the year of acquisition.
1.5. INVESTMENT PROPERTY
Investment properties are measured at cost, including
transaction costs less accumulated depreciation and
impairment loss, if any.
The Company depreciates building component of investment
property over the estimated useful lives of the assets as
prescribed in property, plant and equipment.
Investment properties are de-recognised either on disposal or
on permanent withdrawal from use. The difference between
the net disposal proceeds and the carrying amount of the asset
is recognised in the Statement of Profit and Loss in the period
of de-recognition.
1.6. NON-CURRENT ASSET HELD FOR SALE
The Company classifies non-current assets and disposal groups as
held for sale if their carrying amounts will be recovered principally
through a sale rather than through continuing use. Actions
required to complete the sale should indicate that it is unlikely that
significant changes to the sale will be made or that the decision
to sell will be withdrawn. Management must be committed to the
sale expected within one year from the date of classification. Non¬
current assets classified as held for sale is recognized at lower of its
carrying amount and fair value less cost to sell.
1.7. INVESTMENTS
Equity investments are measured at fair value through profit
and loss except investments in subsidiary, participating joint
venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or
without joint control and associate are measured at cost.
1.8. JOINT OPERATIONS
(a) In case of participating joint operations with joint control,
company recognizes in relation to its interest in a joint
operation as under:-
(i) its assets, including its share of any assets held jointly;
(ii) its liabilities, including its share of any liabilities
incurred jointly;
(iii) its revenue from the sale of its share of the output
arising from the joint operation;
(iv) its share of the revenue from the sale of the output
by the joint operation; and
(v) its expenses, including its share of any expenses
incurred jointly.
(b) In case of participating joint operations without having
joint control, interest in such arrangements is to be
recognized as per aforesaid accounting policy if the
company has right to the assets and obligations for the
liabilities relating to joint operations otherwise interest
in the joint operation is recognized in accordance with
applicable Ind AS.
1.9. INVENTORIES
(a) Inventories are valued at the lower of cost and Net
Realizable Value.
(b) Cost is determined on weighted average basis.
(c) The diminution in the value of obsolete, unserviceable,
slow moving, and non-moving stores and spares are
assessed periodically and accordingly provided for.
(d) Consumables and Stores & Spares other than those held
for the purpose of warranty and for maintenance of rolling
stock are charged to the Statement of Profit and Loss in
the year of purchase.
1.10. EMPLOYEE BENEFITS
1.10.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/
post-retirement medical scheme are defined contribution
schemes. The Company has no obligation, other than the
contribution payable to such funds/ schemes. The Company
recognizes contribution payable to such funds/schemes as
an expense, when an employee renders the related service.
Defined contributions towards pension under EPFO,
superannuation pension fund and post retiral medical
schemes are charged to the Statement of Profit and
Loss based on contributions made in terms of applicable
schemes on accrual basis.
1.10.2 Defined benefit plan
1.10.2.1 Gratuity
Company provides gratuity, a defined benefit plan
covering eligible regular and contract employees. The
gratuity plan provides a lump-sum payment to vested
employees of an amount based on the respective
employee's salary and the tenure of employment with
the company at retirement, death, incapacitation, or
on completion of terms of employment.
The liabilities with regard to the Gratuity plan are
determined by actuarial valuation, performed by an
independent actuary, at the year end.
(a) The Company has set up a separate Gratuity
Trust for managing Gratuity Fund.
(b) The company recognizes the net obligation of
a defined benefit plan in its balance sheet as
an asset or liability.
(c) Gain or loss through re-measurements of net
defined benefit liability/(asset) is recognized in
Other Comprehensive Income.
(d) The actual return of the portfolio of plan
assets, in excess of the yields computed by
applying the discount rate used to measure
the defined benefit obligation is recognized in
Other Comprehensive Income.
(e) Service cost and net interest cost/(income)
on the net defined benefit liability/(asset) are
recognized in Statement of Profit and Loss.
1.10.2.2 Provident Fund
The Company makes contribution to the recognized
provident fund - “RITES CONTRIBUTORY
PROVIDEND FUND” for its employees, which is a
defined benefit plan to the extent that the Company
has an obligation to make good the shortfall, if
any, between the returns from the investments
of the trust and the notified interest rate. The
Company's obligation in this regard is determined
by an independent actuary and provided for if the
circumstances indicate that the Trust may not be
able to generate adequate returns to cover the
interest rates notified by the Government.
1.10.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees),
Leave Encashment (contract employees) and
Long Service Award (regular employees)
i. Accounted for on actuarial valuation
made at the end of year.
ii. The actuarial gains/losses are
recognized in the Statement of Profit
and Loss for the year.
(b) Leave Encashment and Medical Leave for
regular employees
i. Liabilities are funded under plan
assets through insurance policies from
insurance companies approved by
Insurance Regulatory Development
Authority (IRDA) and are accounted
for on actuarial valuation made at
the end of year.
ii. The company recognizes the net
obligation of a defined benefit plan in its
balance sheet as an asset or liability.
iii. Service cost and net interest cost/
(income) on the net defined benefit
liability/(asset) are recognized in
Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in
the Statement of Profit and Loss.
1.10.4 Other Benefits
Ex-gratia relief payable to the dependents of an
employee on death or permanent disablement
are recognised as an expense in the Statement
of Profit and Loss in the period in which the
obligating event occurs.
1.11. INCOME TAXES
1.11.1 Current Income Tax
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities. The tax rate applicable at the
reporting date as per Income Tax Act, 1961 is used to
compute the amount of Current Income Taxes.
Management periodically evaluates positions taken in
the tax assessments with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
Current tax assets are offset against current tax liabilities.
Additional taxes, interest and/or penalties levied/
imposed by the tax authorities / Appellate authorities on
finality are recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit or
loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
1.11.2 Deferred Tax
Deferred tax assets are recognised for all deductible
temporary differences, and the carry forward of
unused tax credits.
Deferred tax liabilities are recognised for all taxable
temporary differences.
Deferred tax assets and liabilities are measured at the rate
expected to apply in the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the
reporting date as per Income Tax Act, 1961.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
Deferred tax assets are offset against deferred tax
liabilities.
1.12. PREPAID EXPENSES AND PRIOR PERIOD ADJUSTMENTS
1.12.1. Prepaid Expenses
Prepaid expenses up to H 5,00,000/- in each case are
treated as expenditure/income of the current year and
accounted for to the natural head of accounts.
1.12.2. Prior Period Adjustments
Material prior period errors are corrected retrospectively
by restating the comparative amounts for the prior
periods presented in which the error occurred. If the error
occurred before the earliest period presented, the opening
balances of assets, liabilities and equity for the earliest
period presented, are restated unless it is impracticable,
in which case, the comparative information is adjusted to
apply the new accounting policy prospectively from the
earliest date practicable.
1.13. TRANSLATION AND TRANSACTIONS OF FOREIGN
CURRENCIES
1.13.1. Functional Currency of the company is Indian Rupees and
the financial statements are presented in Indian Rupees.
1.13.2. Transactions in foreign currencies are initially recorded
by the Company at functional currency spot rates at the
date the transaction first qualifies for recognition. The
company also uses average rate where the average rate
approximates the actual rate at the date of the transaction.
1.13.3. Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot
rates of exchange at the reporting date.
1.13.4. Exchange differences arising on settlement or translation
of monetary items are recognised in the Statement of
Profit and Loss
1.14. CASH & CASH EQUIVALENT
Cash comprises cash on hand and demand deposits with banks.
Cash equivalents are short term deposits with an original
maturity of three months or less from the date of acquisitions
which are readily convertible into known amounts of cash and
be subject to an insignificant risk of change in value. Cash and
cash equivalents consist of balances with banks which are
unrestricted for withdrawal and usage.
1.15. STATEMENT OF CASH FLOWS
Statement of Cash Flows is made using the indirect method,
whereby profit before tax is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of
past or future cash receipts or payments and item of income or
expenses associated with investing or financing cash flows. The
cash flows from operating, financing and investing activities of
the Company are segregated.
1.16. IMPAIRMENT OF FINANCIAL ASSETS
(Other than at Fair Value)
In accordance with Ind AS 109, the Company applies expected
credit loss (ECL) model for measurement and recognition of
impairment loss for financial assets.
ECL is the difference between all contractual cash flows that
are due to the Company in accordance with the contract and
all the cash flows that the Company expects to receive. When
estimating the cash flows, the Company consider the following:
• All contractual terms of the financial assets (including
extension) over the expected life of the assets.
• Cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
Trade receivables: In respect of trade receivables, the Company
applies the simplified approach of Ind AS 109, which requires
measurement of loss allowance at an amount equal to lifetime
expected credit losses. Lifetime expected credit losses are
the expected credit losses that result from all possible default
events over the expected life of a financial instrument.
Other financial assets: In respect of its other financial assets,
the Company assesses if the credit risk on those financial assets
has increased significantly since initial recognition. If the credit
risk has not increased significantly since initial recognition, the
Company measures the loss allowance at an amount equal to
12-month expected credit losses, else at an amount equal to
the lifetime expected credit losses.
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