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.
On March 31, 2023, MCA notified the Companies (Indian Accounting Standards) Amendment Rules, 2023 thereby mandating the companies to disclose only material
accounting policies. Accordingly, erstwhile significant accounting policies have been reviewed and the same has been replaced with material accounting policies. There is no financial implication on this replacement.
(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.
1.2. 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-1.14: - 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 ' 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.
(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 '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 ' 100,000/- is fully amortized in the year of acquisition.
1.5. 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.
1.6. 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 held for the purpose of warranty are charged to the Statement of Profit and Loss in the year of purchase.
1.7. EMPLOYEE BENEFITS
1.7.1 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.
1.7.2 Defined benefit plan 1.7.2.1 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.
1.7.2.2 Provident Fund
The Company makes contribution to the recognized provident fund - “RITES CONTRIBUTORY PROVIDENT 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.
1.7.3 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.
1.7.4Other Benefits
Ex-gratia payments on death are recognized on payment basis in the Statement of Profit and Loss.
1.8. INCOME TAXES
1.8.1 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).
1.8.2 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.
1.9. PREPAID EXPENSES
Prepaid expenses up to ' 5,00,000/- in each case are treated as expenditure/income of the current year and accounted for to the natural head of accounts.
1.10.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.
1.11. 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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