3. Material Accounting Policies
3.1 PROPERTY, PLANT AND EQUIPMENT
Freehold land and building are carried at Fair value. All other items of property, plant and equipment except
freehold land and building are stated at cost, which includes capitalized borrowing costs, less accumulated
depreciation, and impairment loss, if any. Cost includes purchase price, including non-refundable duties
and taxes, expenditure that is directly attributable to bring the assets to the location and condition neces¬
sary for its intended use and estimated costs of dismantling and removing the item and restoring the site
on which it is located, if any.
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognized impairment loss. Cost includes professional fees, and for qualifying assets,
borrowing costs capitalized in accordance with the Company’s accounting policies. Such properties are
classified to the appropriate categories of property, plant and equipment when completed and ready for
intended use. Depreciation of these assets, on the same basis as other property assets, commences when
the assets are ready for their intended use.
Spare parts are treated as capital assets in accordance with Ind AS when they meet the definition of prop¬
erty, plant and equipment. Otherwise, such items are classified as inventory.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for, as separate items (major components) of property, plant and equipment.
Any gains or losses on their disposal, determined by comparing sales proceeds with carrying amount, are
recognized in the Statement of Profit and Loss.
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated
with the expenditure will flow to the Company.
De-recognition
An item of property, plant and equipment is de-recognised upon disposal or when no future economic
benefits are expected to arise from its use. Any gain or loss arising from its de-recognition is measured as
the difference between the net disposal proceeds and the carrying amount of the asset and is recognised
in Statement of Profit and Loss when the asset is de-recognised.
Physical verification of Property, Plant & Equipments: The Company conducts a physical verification of
Property, Plant and Equipment (PPE) once in every three years in a phased and systematic manner to cover
all assets over the verification cycle. The verification is carried out by the internal team and reconciled with
the fixed asset register.
Depreciation methods, estimated useful lives and residual value
Depreciation on property, plant and equipment is provided using the straight-line method based on the life
and in the manner prescribed in Schedule II to the Companies Act, 2013, and is generally recognized in the
statement of profit and loss. Assets acquired under finance leases are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by
the end of the lease term. In the case of lease hold improvements, depreciation is provided over primary
lease period or useful life of the asset whichever is less. Freehold land is not depreciated.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted
if appropriate. Based on technical evaluation and consequent advice, the management believes that its
estimates of useful lives as given above best represent the period over which management expects to use
these assets.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on which
asset is ready for use (disposed of). Individual assets costing less than ?10,000 are generally fully depreci¬
ated in the year of purchase with a few management exceptions depending on their importance or where
they form part of the whole asset.
3.2 INTANGIBLE ASSETS
Intangible assets are recognized only if it is probable that the future economic benefits that are attributable
to the assets will flow to the enterprise and the cost of the assets can be measured reliably.
An intangible asset is an identifiable non-monetary asset without physical substance. Intangible assets are
initially measured at its cost and then carried at the cost less accumulated amortisation and accumulated
impairment, if any
i. Intangible Assets are stated at cost of acquisition less accumulated amortization and accumulated
impairment, if any.
ii. Intangible assets are amortized on a straight-line basis as under:
a. Software costing up to ? 25,000/- is charged to Statement of Profit and Loss in the year of acquisition.
Other Software acquired is amortized over its estimated useful life of 5 years.
b. Intellectual Property is amortized over its estimated useful life as decided by the management on
case to case basis.
The estimated useful life of the intangible assets and the amortization period are reviewed at the end of each
reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Research and Development expenses
Expenditure on research activities is charged to Statement of Profit and Loss in the period in which it is
incurred.
An internally generated intangible asset arising from development is recognised if, and only if, all of the
following have been demonstrated:
• Technical feasibility of completing the intangible asset to show its availability for use or sale;
• Intention to complete the intangible asset and its use or sell;
• Ability to use or sell;
• How it will generate future economic benefits;
• Availability of technical, financial and other resources to complete the development phase; and
• Ability to measure reliably the expenditure attributable to development phase.
The amount initially recognised is the sum of the expenditure incurred from the date when the intangi¬
ble asset first meets the recognition criteria listed above. Where no intangible asset can be recognised,
development expenditure is charged to Statement of Profit and Loss in the period in which the same are
incurred.
Subsequent to its initial recognition, the development expenditure recognised as an assets are reported at
cost less accumulated amortization and impairment loss, on the same basis as intangible assets that are
acquired separately.
De-recognition of intangible assets
Intangible asset is de-recognised on disposal or when no future economic benefits are expected from
its use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the
Statement of Profit and Loss when the asset is de-recognized.
3.3 IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intan¬
gible assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine
the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of
an individual asset, the Company estimates the recoverable amount of the cash generating unit (CGU) to
which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual CGU, or otherwise they are allocated to the smallest group of CGU
for which a reasonable and consistent allocation basis can be identified.
An intangible asset not yet available for use is tested for impairment at least annually, and/or whenever
there is an indication the asset is impaired accordingly.
The Company’s corporate assets 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.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recov¬
erable amount. Impairment losses are recognized in the statement of profit and loss.
Impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets of the CGU (or
group of CGUs) on a pro rata basis.
3.4 NON-CURRENT ASSETS HELD FOR SALE
Non-current assets, or disposal groups comprising assets and liabilities are classified as held for sale if
it is highly probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value
less costs to sell. Any resultant loss on a disposal group is allocated first to goodwill, and then to remain¬
ing assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets,
deferred tax assets, employee benefit assets, and biological assets, which continue to be measured in accor¬
dance with the Company’s other accounting policies. Losses on initial classification as held for sale and
subsequent gains and losses on remeasurement are recognised in Standalone Statement of Profit and Loss.
Once assets classified as held-for-sale, then Property, Plant and Equipment, Investment Property and
Other Intangible Assets are no longer required to be depreciated or amortised
3.5 Foreign currency transactions and balances
Transactions in foreign currency are initially recorded at the functional currency spot rates at the date the
transaction first qualifies for recognition.
At each balance sheet date, the foreign currency monetary items are reported at the functional currency
spot rates of exchange. Exchange differences that arise on settlement or on translation of monetary items
are recognized as income or expenses in the Statement of Profit and Loss, except exchange differences
arising from the translation of the following items which are recognized in OCI:
- equity investments at fair value through OCI (FVOCI); and
- qualifying cash flow hedges to the extent that the hedges are effective.
Non-monetary items which are carried at historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions.
Forward exchange contracts entered into to hedge and manage foreign currency exposures relating to
highly probable transactions or firm commitments are marked to market and resulting gains or losses are
recorded in the statement of profit and loss.
3.6 FINANCIAL INSTRUMENTS
The Company recognizes financial assets and financial liabilities when it becomes a party to the contrac¬
tual provisions of the instrument.
i. Financial Assets
a. Initial recognition and measurement
All financial assets are recognized at fair value plus, in the case of financial assets not recorded at fair
value through Profit and Loss, transaction costs that are attributable to the acquisition of the financial
asset. Purchase or sales of financial assets that require delivery of assets within a time frame estab¬
lished by regulation or convention in the marketplace (regular way trades) is recognised on the trade
date i.e. the date the company commits to purchase or sell the asset.
b. Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial Assets at Amortized Cost
A financial asset is subsequently measured at amortised cost if it is held within a business model
whose objectives is to hold the asset 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.
After initial measurement, debt instruments at amortised cost are subsequently measured at amor¬
tised cost using the effective interest rate method, less impairment, if any.
- Financial Assets at fair value through Other Comprehensive Income (FVOCI)
A financial asset is subsequently measured at fair value through other comprehensive income
if it is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets 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
outstanding.
- Financial Assets at fair value through Profit and Loss (FVTPL)
Financial assets which are not classified in any of the above categories are subsequently fair valued
through Profit and Loss.
c. De-recognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire or it transfers the financial asset, and the transfer qualifies for de-recognition
under Ind AS 109
d. Impairment
The Company recognises loss allowance using the Expected Credit Loss (ECL) model for the finan¬
cial assets which are not fair valued through Profit and Loss /OCI. Loss allowance for trade receiv¬
ables with no significant financing component is measured at an amount equal to lifetime ECL. For
all other financial assets, expected credit losses are measured at an amount equal to 12-month
ECL, unless there has been a significant increase in credit risk from the initial recognition in which
case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is
required to adjust the loss allowance at the reporting date to the amount that is required to be rec¬
ognised is treated as an impairment gain or loss in the Statement of Profit and Loss.
ii. Financial Liabilities
a. Initial recognition and measurement
The Company’s financial liabilities include trade and other payable, loans and borrowings including
bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities are classified, at initial recognition, as at fair value through profit and loss or as
those measured at amortised cost.
b. Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
- Financial Liabilities at fair value through Profit and Loss (FVTPL)
Financial liabilities at fair value through profit and loss include financial liabilities held for trading. The Com¬
pany has not designated any financial liabilities upon initial recognition at fair value through profit and loss.
- Financial Liabilities at Amortized Cost
After initial recognition, interest bearing loans and borrowings are subsequently measured at amor¬
tised cost using the effective interest rate method except for those designated in an effective hedg¬
ing relationship.
c. De-recognition
A financial liability (or a part of a financial liability) is derecognized from the Company’s balance sheet
when the obligation specified in the contract is discharged or cancelled or expires.
d. Off-setting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet
when, and only when, the Company currently has a legally enforceable right to set off the amounts and
it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(Refer Note 39 for details of Financial Instruments)
3.7 INVENTORIES
Inventories are measured at lower of cost and net realizable value. Cost of inventories is determined on a First
in First Out (FIFO) / weighted average basis respectively (as mentioned below), after providing for obsoles¬
cence and other losses as considered necessary. Cost includes expenditure incurred in acquiring the inven¬
tories, reduction and conversion costs and other costs incurred in bringing them to their present location and
condition. In the case of work-in-progress and finished goods, cost includes an appropriate proportion of
fixed production overheads based on normal operating capacity and, where applicable, excise duty.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
Raw materials and other supplies held for use in the production of finished products are not written down
below cost except in cases where material prices have declined and it is estimated that the cost of the
finished products will exceed their net realizable value.
The comparison of cost and net realisable value is made on an item-by-item basis.
The factors that the Company considers in determining the allowance for slow moving, obsolete and other
non-saleable inventory include estimated shelf life, planned product discontinuances, price changes, age¬
ing of inventory and introduction of competitive new products, to the extent each of these factors impact
the Company’s business and markets.
Physical verification of Inventories: Inventories are physically verified twice a year by the management. Any
discrepancies noted during the verification process are investigated and appropriately accounted for in the
books of account.
3.8 CASH AND CASH EQUIVALENTS
Cash and cash equivalent in the balance sheet comprise cash at bank and on hand and short term deposits
with original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of presentation in the Statement of Cash flows, Cash and cash equivalents comprises
cash at bank and on hand, demand deposits and short-term (with an original maturity of three months or
less from the date of acquisition), highly liquid investments that are readily convertible into known amounts
of cash and which are subject to an insignificant risk of changes in value.
3.9 TAXATION
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current Tax
Income tax expense comprises of current tax and deferred tax. Income tax expense is recognized in the
statement of profit and loss except to the extent that it relates to items recognized directly in equity/OCI,
in which case it is recognized in other comprehensive income. Current income tax for current and prior
periods is recognized 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 on the reporting date.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right
to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset
and settle the liability simultaneously.
Deferred Tax
Deferred tax assets and liabilities are recognized on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts of assets and liabilities in the financial statement.
Deferred tax asset are generally recognized for all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which those deductible temporary difference and the
carry forward unused tax losses can be utilized. However, deferred tax liabilities are not recognized if the
temporary difference arises from the initial recognition of goodwill.
Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting
profit nor taxable profit (tax loss).
Deferred tax liabilities are recognized for temporary difference associated with investments in subsidiaries
and associates and interests in joint ventures, except where the Company is able to control the reversal of
the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 asset to be recovered.
Deferred tax liabilities and assets are measured using tax rates (and laws) that have been enacted or sub¬
stantially enacted by the end of the reporting period and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax for the year
Current and deferred tax is recognised in Profit and Loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
3.10 REVENUE RECOGNITION
Revenue from contracts with customers is recognised when control of the goods or services are trans¬
ferred to the customer at an amount that reflects the consideration to which the Company expects to be
entitled in exchange for those goods or services.
Revenue from the sale of goods is recognized at the point in time when control of the asset is transferred
to the customer, generally on the delivery of the goods.
Revenue is recognisable to the extent of the amount that reflects the consideration (i.e. the transaction
price) to which the Company is expected to be entitled in exchange for those goods or services exclud¬
ing any amount received on behalf of third party (such as indirect taxes). The transaction price is deter¬
mined on the basis of agreement entered into with the customer.
The Company satisfies the performance obligation and recognises revenue over time, if one of the criteria
prescribed under Ind AS 115 - “Revenue from Contracts with Customers” is satisfied. If a performance
obligation is not satisfied over time, then revenue is recognised at a point in time at which the perfor¬
mance obligation is satisfied.
The Company recognises revenue for performance obligation satisfied over time only if it can reasonably
measure its progress towards complete satisfaction of the performance obligation. The Company would
not be able to reasonably measure its progress towards complete satisfaction of a performance obliga¬
tion if it lacks reliable information that would be required to apply an appropriate method of measuring
progress. In those circumstances, the Company recognises revenue only to the extent of cost incurred
until it can reasonably measure outcome of the performance obligation.
Rendering of Services
Revenue from service contracts are recognised net of GST, when all of the following conditions are satisfied.
• The amount of revenue can be measured reliably
• It is probable that the economic benefit associated with the transaction will flow to the Company.
• The stage of completion of transaction at the end of the reporting period can be measured reliably.
• The cost incurred for the transaction and the cost to complete the transaction can be measured reliably
• The amount of Corporate shared services is determined based on terms of agreements with the
subsidiaries.
Interest Income:
Interest income is recognized using the effective interest rate (EIR) method and subject to the following
conditions:
• The amount of revenue can be measured reliably
• It is probable that the economic benefit associated with the transaction will flow to the Company.
Dividend Income:
Dividend income on investments is recognised when the right to receive dividend is established.
Rent:
Rental income is recognised on accrual basis in accordance with terms of respective rent agreements
Export Incentives:
Income from export incentives such as duty drawback, Remission of Duties and Taxes on Export Prod¬
ucts Scheme (RoDTEP) income and premium on sale of import licenses are recognised on accrual basis;
Scrap Sale:
Income from sale of scrap is accounted for on realisation;
3.11 EMPLOYEE BENEFITS
Short-term obligations
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., wages
and salaries, short-term cash bonus, etc, 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.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contribu¬
tions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obli¬
gations for contributions to recognized provident funds and approved superannuation schemes which
are defined contribution plans are recognized as an employee benefit expense and charged to the state¬
ment of profit and loss as and when the services are received from the employees.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The
Company’s net obligation in respect of gratuity plan, which is a defined benefit plan, and certain other
defined benefit plans is calculated for each plan by estimating the amount of future benefits that the
employees have earned in return for their service in the current and prior periods; that benefit is dis¬
counted to determine its present value. An unrecognized past service costs and the fair value of any plan
assets are deducted.
The discount rate is the yield at the reporting date on risk free government bonds that have maturity
dates approximating the terms of the Company’s obligations. The calculation is performed annually by a
qualified actuary using the projected unit credit method. In case of funded defined benefit plans, the fair
value of the plan assets is reduced from the gross obligation under the defined benefit plans, to recognize
the obligation on net basis.
Retirement and other employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short
term employee benefits. Benefits such as salaries, wages, performance incentive, paid annual leave,
bonus, leave travel assistance, medical allowance, contribution to provident fund and superannuation
etc. recognized as actual amounts due in period in which the employee renders the related services.
i. A retirement benefit in the form of Provident Fund is a defined contribution scheme and the
contributions are charged to the statement of profit and loss for the year when the contribution to
the fund accrues. There are no obligations other than the contribution payable to the recognized
Provident Fund.
ii. A retirement benefit in the form of Superannuation Fund is a defined contribution scheme and the
contribution is charged to the statement of profit and loss for the year when the contribution accrues.
There are no obligations other than the contribution payable to the Superannuation Fund Trust. The
scheme is funded with Insurance Company in the form of a qualifying insurance policy.
iii. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each financial year. The Company has
established a gratuity trust to provide gratuity benefit through annual contributions to a Gratuity trust
which in turn contributes to Life Insurance Corporation of India (LIC). Under this plan, the settlement
obligation remains with the Gratuity trust. Life Insurance Corporation of India administers the plan
and determines the contribution premium required to be paid by the trust.
iv. Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short¬
term employee benefit. The Company measures the expected cost of such absences as the additional
amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting
date. The Company treats accumulated leave expected to be carried forward beyond twelve months,
as long-term employee benefit for measurement purposes. Such long-term compensated absences
are provided for based on the actuarial valuation using the projected unit credit method at the year-end.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit
that relates to past service (‘past service cost’ or ‘past service gain’) or the gain or loss on curtailment
is recognised immediately in the statement of profit and loss. The Company recognises gains and
losses on the settlement of a defined benefit plan when the settlement occurs.
Actuarial gains/losses are recognized immediately in the statement of other comprehensive income.
v. Share based payments:
Share based compensation benefits are provided to the employees of S & S Power Switchgear
Limited Employees Stock Option Scheme, 2024, an employee stock option scheme.
The fair value of options granted under S & S Power Switchgear Limited Employee Stock Option
Scheme, 2024 is recognised as an employee benefit expense to the extent options issued to its
employees and balance is recorded as recoverable from subsidiaries for which options is issued
to subsidiaries employees with a corresponding increase in ESOP reserve. The total amount to be
expensed is determined by reference to the fair value of the options granted. ‘- including any mar¬
ket performance conditions (e.g.,the entity’s share price) ‘- excluding the impact of any service and
non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining of
an employee of the entity over a specified time period) and ‘- including the impact of any non-vest¬
ing conditions (e.g. the requirement for employees to hold the shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each period, the entity revises its
estimates of the number of options that are expected to vest based on the non-market vesting and
service conditions. It recognises the impact of the revision to original estimates, if any, in Profit and
Loss, with a corresponding adjustment to equity.
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