NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of accounting and preparation of financial statements
These financial statements are prepared in accordance with Indian Accounting Standards (hereinafter
referred to as “Ind AS”) under the provisions of the Companies Act, 2013 (hereinafter referred to as
’the Act’) (to the extent notified).
The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment
Rules, 2016.
2.2 Historical Cost Convention
The Standalone Financial Statements have been prepared on a historical cost basis, except for the
following assets and liabilities, which have been measured at fair value:
Certain financial assets and financial liabilities;
Defined Benefit Plans Fair value is the price that would be received on sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
2.3 Current Vs Non-Current Classification
The Company presents assets and liabilities in the balance sheet based on current /non-current
classification.
An asset is treated as current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle.
• Held primarily for the purpose of trading
• Expected to be realized within twelve months after the reporting date, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period
• All other assets are classified as non-current.
• A liability is current when:
• It is expected to be settled in normal operating cycle
• It is due to be settled within twelve months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period
• All other liabilities are classified as non-current.
• Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and services offered by the Company, operating cycle determined is
12 months for the purpose of current and non-current classification of assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in
cash and cash equivalents,
2.4 Critical Accounting Estimate & Judgements
The preparation of these financial statements in conformity with the recognition and measurement
principles of Ind. AS requires management to make judgments, estimates and assumptions, that affect
the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date
of the financial statements and the reported amounts of income and expenses for the years presented.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
2.5 Property, Plant and Equipment’s:
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates
less accumulated depreciation and impairment losses, if any. Such cost includes purchase price,
borrowing cost and any cost directly attributable to bringing the assets to its working condition for its
intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate
variations attributable to the assets.
In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant
and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project
development stage prior to its intended use, are considered as pre - operative expenses and disclosed
under Capital Work - in - Progress.
Depreciation on Property, Plant and Equipment is provided using straight line method on useful
life of the assets as prescribed in Schedule II to the Companies Act, 2013. The residual values,
useful life and depreciation method are reviewed at each financial year-end to ensure that the
amount, method and period of depreciation are consistent with previous estimates and the expected
pattern of consumption of the future economic benefits embodied in the items of property, plant
and equipment.
Depreciation on assets under construction commences only when the assets are ready for their
intended use.
The Estimated useful lives of main categories of property, plant & equipment and intangible assets
are;
Vessels, Barges & Speed Boats
10 Yrs to 28 Yrs
Building
45 Yrs
Computers & Softwares
3 Yrs
Printers
10 Yrs
Furniture & Fixtures
5 Yrs to 10 Yrs
Office Equipment
5 Yrs to 10 Yrs
Motor Vehicles
8 to 10 Years
2.7 Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates
less accumulated amortization / depletion and impairment losses, if any. Such cost includes purchase
price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition
for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange
rate variations attributable to the Intangible Assets.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project
development stage prior to its intended use, are considered as pre - operative expenses and disclosed
under Intangible Assets Under Development.
Gains or losses arising from de-recognition of an Intangible Asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in the
Statement of Profit and Loss when the asset is de-recognized.
2.8 Impairment of Assets
Property, plant and equipment and intangible assets that are subject to depreciation / amortization are
tested for impairment periodically including when events occur or changes in circumstances indicate
that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable
amount of cash generating units is higher of value-in-use and fair value less cost to sell. The
calculation involves use of significant estimates and assumptions which includes turnover and earnings
multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted
discount rate, future economic and market conditions.
The Company reviews its carrying value of investments carried at cost or amortized cost annually or
more frequently when there is indication for impairment. If the recoverable amount is less than its
carrying amount, the impairment loss is accounted for.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset’s carrying
amount exceeds its recoverable amount. Reversal of impairment loss is recognized immediately as
income in the statement of profit and loss.
The determination of whether an arrangement is (or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment
of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset or assets, even if that right is not explicitly specified in an
arrangement.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that
transfers substantially all the risks and rewards incidental to ownership to the lessee is classified as a
finance lease.
Finance Lease as a lessee
Finance leases are capitalized at the commencement of the lease at the inception date at fair value
of the leased property or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
recognized in finance costs in the statement of profit and loss, unless they are directly attributable
to qualifying assets, in which case they are capitalized in accordance with the Company’s general
policy on the borrowing costs. Contingent rentals are recognized as expenses in the periods in which
they are incurred. A leased asset is depreciated over the useful life of the asset. However, if there is
no reasonable certainty that the Company will obtain ownership by the end of the lease term, the
asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating Lease as a lessee
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Operating lease payments are recognized as an expense in the
Statement of Profit and Loss on a straight-line basis over the lease term except where another
systematic basis is more representative of the time pattern in which economic benefits from leased
assets are consumed. The aggregate benefit of incentives (excluding inflationary increases) provided
by the lessor is recognized as a reduction of rental expense over the lease term on a straight-line
basis. Contingent rentals arising under operating leases are recognized as an expense in the period
in which they are incurred.
2.10 Financial Instruments
a. Financial assets
Initial recognition and measurement
Financial assets are recognized when, and only when, the Company becomes a party to the
contractual provisions of the financial instrument. The Company determines the classification of
its financial assets at initial recognition.
When financial assets are recognized initially, they are measured at fair value, plus, in the case of
financial assets not at fair value through profit or loss directly attributable transaction costs.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in the
Statement of Profit and Loss.
Classification
• Cash and Cash Equivalents - Cash comprises cash on hand and demand deposits with banks.
Cash equivalents are short-term balances (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 insignificant risk of changes in value.
• Debt Instruments - The Company classifies its debt instruments as subsequently measured at
amortized cost, fair value through Other Comprehensive Income or fair value through profit or
loss based on its business model for managing the financial assets and the contractual cash flow
characteristics of the financial asset.
(i) Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held for
collection of contractual cash flows where those cash flows represent solely payments of principal
and interest. Interest income from these financial assets is included as a part of the Company’s
income in the Statement of Profit and Loss using the effective interest rate method.
(ii) Financial assets at fair value through Other Comprehensive Income (FVOCI)
Financial assets are subsequently measured at fair value through Other Comprehensive Income if
these financial assets are held for collection of contractual cash flows and for selling the financial
assets, where the assets’ cash flows represent solely payments of principal and interest. Movements
in the carrying value are taken through Other Comprehensive Income, except for the recognition of
impairment gains or losses, interest revenue and foreign exchange gains or losses which are
recognized in the Statement of Profit and Loss. When the financial asset is de-recognized, the
cumulative gain or loss previously recognized in Other Comprehensive Income is reclassified from
Other Comprehensive Income to the Statement of Profit and Loss. Interest income on such
financial assets is included as a part of the Company’s income in the Statement of Profit and Loss
using the effective interest rate method.
• Equity Instruments - The Company subsequently measures all equity investments (other than the
investment in subsidiaries, joint ventures and associates which are measured at cost) at fair value.
Where the Company has elected to present fair value gains and losses on equity investments in
Other Comprehensive Income (“FVOCI”), there is no subsequent reclassification of fair value
gains and losses to profit or loss. Dividends from such investments are recognized in the Statement
of Profit and Loss as other income when the Company’s right to receive payment is established.
The Company has made an irrevocable election to present in Other Comprehensive Income subsequent
changes in the fair value of equity investments that are not held for trading.
When the equity investment is de-recognized, the cumulative gain or loss previously recognized in
Other Comprehensive Income is reclassified from Other Comprehensive Income to the Retained
Earnings directly.
De-recognition
A financial asset is de-recognized only when the Company has transferred the rights to receive cash
flows from the financial asset. Where the Company has transferred an asset, the Company evaluates
whether it has transferred substantially all risks and rewards of ownership of the financial asset. In
such cases, the financial asset is de-recognized. Where the Company has not transferred substantially
all risks and rewards of ownership of the financial asset, the financial asset is not de-recognized. Where
the Company retains control of the financial asset, the asset is continued to be recognized to the extent
of continuing involvement in the financial asset.
b. Financial Liabilities
Initial recognition and measurement
Financial liabilities are recognized when, and only when, the Company becomes a party to the
contractual provisions of the financial instrument. The Company determines the classification of its
financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value, plus, in the case of financial liabilities not at
fair value through profit or loss directly attributable transaction costs.
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value through profit or loss are
subsequently measured at amortised cost using the effective interest rate method. Gains and losses are
recognized in the Statement of Profit and Loss when the liabilities are de-recognized, and through the
amortization process.
De-recognition
A financial liability is de-recognized when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a de-recognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognized in the Statement of
Profit and Loss.
Derivatives
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and
are subsequently re-measured to their fair value at the end of each reporting period. The accounting
for subsequent changes in fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged and the type of hedge relationship
designated. The fair value changes of derivatives which are not designated as a hedging instrument are
accounted through Statement of Profit and Loss.
During the years reported, no hedge relationship was designated.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Company are recognized at the
proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity.
No gain or loss is recognized in the Statement of Profit and Loss on the purchase, sale, issue or
cancellation of the Company’s own equity instruments.
c. Impairment of financial assets
The Company assesses, at each reporting date, whether a financial asset or a group of financial assets
is impaired. Ind AS-109 on Financial Instruments, requires expected credit losses to be measured
through a loss allowance. For trade receivables only, the Company recognizes expected lifetime losses
using the simplified approach permitted by Ind AS-109, from initial recognition of the receivables.
For other financial assets (not being equity instruments or debt instruments measured subsequently at
FVTPL) the expected credit losses are measured at the 12 month expected credit losses or an amount
equal to the lifetime expected credit losses if there has been a significant increase in credit risk since
initial recognition.
2.11 Segment Reporting
All business activities of the company revolve around one business segment i.e. Shipping. Therefore,
disclosure requirements under AS-17 (Segment Reporting) is not applicable.
2.12 Inventories:
All materials and consumables procured for the purpose of vessel and barge repairs are recognized as
expenses immediately upon purchase.
2.13 Foreign currency transactions and translation:
The functional currency of the Company is Indian Rupee (?).
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign
currency amount the exchange rate between the reporting currency and the foreign currency at the
date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in
a foreign currency are reported using the exchange rate at the date of the transaction. All non¬
monetary items which are carried at fair value denominated in a foreign currency are retranslated at
the rates prevailing at the date when the fair value was determined.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the
transaction. Foreign currency denominated monetary assets and liabilities are translated at the
exchange rate prevailing on the Balance Sheet date and exchange gains and losses arising on
settlement and restatement are recognised in the Statement of Profit and Loss.
2.14 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is
recognized upon transfer of property of goods to buyer, provided persuasive evidence of an
arrangement exists, tariff / rates are fixed or are determinable and collectability is reasonably certain.
Revenue from sales of goods / service or rendering of services is net of Indirect taxes, returns and
discounts.
Income from services
Income from services is accounted for an accrual basis except for compensation which is accounted
for on receipt.
Dividend Income
Dividend income is recognized when the Company’s right to receive the payment is established.
Other Income:
Interest on Bank’s Fixed Deposits and other income are recognized on accrual basis.
2.15 Employees Benefits
Defined contribution plans
Contributions under defined contribution plans are recognized as expense for the period in which the
employee has rendered service. Payments made to state managed retirement benefit schemes are dealt
with as payments to defined contribution schemes where the Company’s obligations under the
schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
Defined benefit plans
For defined benefit retirement schemes, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuation being carried out at each year-end balance
sheet date. Remeasurement gains and losses of the net defined benefit liability/(asset) are recognised
immediately in other comprehensive income.
The service cost and net interest on the net defined benefit liability/(asset) are recognised as an expense
within employee costs.
Past service cost is recognised as an expense when the plan amendment or curtailment occurs or when
any related restructuring costs or termination benefits are recognised, whichever is earlier.
The retirement benefit obligations recognised in the balance sheet represents the present value of the
defined benefit obligations as reduced by the fair value of plan assets.
Compensated absences
Liabilities recognised in respect of other long-term employee benefits such as annual leave and sick
leave are measured at the present value of the estimated future cash outflows expected to be made by
the Company in respect of services provided by employees up to the reporting date using the projected
unit credit method with actuarial valuation being carried out at each year-end balance sheet date.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to the statement of profit and loss in the period in which they arise.
Compensated absences which are not expected to occur within twelve months after the end of the
period in which the employee renders the related service are recognised based on actuarial valuation.
2.16 Retirement Benefits
The Company’s retirement benefit obligations are subject to number of assumptions including
discount rates, inflation and salary growth. Significant assumptions are required when setting these
criteria and a change in these assumptions would have a significant impact on the amount recorded in
the Company’s balance sheet and the statement of profit and loss. The Company sets these
assumptions based on previous experience and third-party actuarial advice.
2.17 Taxes on Income
Income tax expense comprises current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred tax are recognized in the Statement of Profit and Loss,
except when they relate to items that are recognized in Other Comprehensive Income or directly in
equity, in which case, the current and deferred tax are also recognized in Other Comprehensive
Income or directly in equity, respectively.
(i) Current tax:
Current tax expenses are accounted in the same period to which the revenue and expenses relate.
Provision for current income tax is made for the tax liability payable on taxable income after
considering tax allowances, deductions and exemptions determined in accordance with the
applicable tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to
set off the recognized amounts and there is an intention to settle the asset and the liability on a net
basis.
(ii) Deferred Tax:
Deferred income tax is recognized using the balance sheet approach. Deferred tax assets and
liabilities are recognized for deductible and taxable temporary differences arising between the tax
base of assets and liabilities and their carrying amount in financial statements, except when the
deferred tax arises from the initial recognition of goodwill, an asset or liability in a transaction that
is not a business combination and affects neither accounting nor taxable profits or loss at the time
of the transaction.
Deferred income tax assets are recognized to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry forward of unused tax
credits and unused tax losses can be utilized.
Deferred tax liabilities are generally recognized for all taxable temporary differences except in
respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantially enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they elate to income taxes levied by the
same taxation authority and the Company intends to settle its current tax assets and liabilities on a
net basis.
2.18 Borrowing Cost:
Borrowing cost includes interest cost and bank commissions incurred in connection with the
arrangement of borrowings. Borrowing cost directly attributable to acquisition or construction of
Fixed Assets which necessarily take a substantial period of time to get ready for their intended use,
incurred till the time of commencement of assets are ready to use or their intended use are capitalized.
All other borrowing costs are expensed in the period they occur.
2.19 Exceptional Items
The Company discloses certain financial information both including and excluding exceptional items.
The presentation of information excluding exceptional items allows a better understanding of the
underlying operating performance of the Company and provides consistency with the Company’s
internal management reporting.
Exceptional items are identified by virtue of either their size or nature so as to facilitate comparison
with prior periods and to assess underlying trends in the financial performance of the Company.
Exceptional items can include, but are not restricted to, gains and losses on the disposal of assets /
investments, impairment charges, exchange gain / (loss) on long term borrowings / assets and changes
in fair value of derivative contracts.
2.20 Earnings Per Share
Basic earnings per share is computed by dividing the profit or loss after tax by the weighted average
number of equity shares outstanding during the year adjusting the bonus element for all the reported
period arising on account of issue of equity shares on rights and including potential equity shares on
compulsory convertible debentures.
Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend,
interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive
potential equity shares, by the weighted average number of equity shares considered for deriving basic
earnings per share.
2.21 Statement of Cash Flows
Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the
effects of transactions of non - cash nature and any deferrals or accruals of past or future cash receipts
or payments. Cash flow for the year are classified by operating, investing and financing activities.
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