3. SIGNIFICANT ACCOUNTING POLICIES
The Company has applied following accounting policies to all periods presented in the Ind AS Financial Statement.
A. Presentation and Disclosure of Financial Statements
All assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non - current classification of assets and liabilities.
B. Fair Value Measurement
The company measures financial instruments at fair value at each balance sheet date. Fair value is the price that would be received to sell 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 the fair value.
C. Use of Estimates
The preparation of Financial Statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, like provision for employee benefits, provision for doubtful trade receivables / advances / contingencies, provision for warranties, allowance for slow / non-moving inventories, useful life of Property, Plant and Equipment, provision for retrospective price revisions, provision for taxation, etc., during and at the end of the reporting period.
Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities. Any revision to the accounting estimates is recognized prospectively.
D. Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebate, values added taxes, goods and service tax and amounts collected on behalf of third parties.
a. Sale of Products and Services
Revenue from sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer as per the terms of the contract and the amount of revenue can be measured reliably. Revenue from services is accounted for when the work is performed.
b. Dividend income is recognized in the year when the right to receive the payment is established.
c. Interest income is recognized on time proportionate basis.
d. Rental income arising from operating lease is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit and loss due to its operating nature.
e. Sales of Real Estate business is recognized on actual sale on legal transfer or giving possession of plots on receiving full payments.
E. Tangible Fixed Assets - Property, Plant and Equipment
a. Property, plant and equipment
1) The Company has applied Ind AS 16 with retrospective effect for all of its property, plant and equipment as at the transition date, viz., 1 April 2016.
2) Property, Plant and equipment are stated at historical cost less accumulated depreciation and impairment losses, if any. Freehold land is measured at cost and not depreciated.
3) The initial cost of property, plant and equipment comprises its purchase price, attributable borrowing cost and any other directly attributable costs of bringing an asset to working condition and location for its intended use.
4) Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance, are normally charged to the statements of profit and loss in the period in which the costs are incurred. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within other income/other expenses in statement of profit and loss. An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal.
5) The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
6) Assets in the course of construction and which are not ready for intended use are capitalized in capital work in progress account and are carried at cost. Assets in the course of development or construction and freehold land are not depreciated.
7) Depreciation commences when the assets are ready for their intended use. Depreciation is calculated on the depreciable amount, which is the cost of an asset less its residual value. Depreciation is provided on a pro rata
F. Investment Properties
a. Investment property represents property held to earn rentals or for capital appreciation or both.
b. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
c. Depreciation on factory building and other building classified as investment property has been provided on the straight-line method over a period of 30 years and 60 years as prescribed in Schedule II to the Companies Act, 2013.
d. Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal.
e. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the statement of profit and loss in the period of de-recognition.
G. Inventories
a. Stock of land of Real Estate division is valued on cost including expenditure directly attributable for bringing the Assets to its working condition for its intended use.
b. Stock of Finished Goods, Work in Progress and Raw Materials are valued at lower of cost or net realizable value. Cost represents landed cost and is determined on First in First out (FIFO) basis.
H. Financial Instruments
a. Financial Assets
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of other company. Financial assets and financial liabilities are recognized when a Company becomes a party to the contractual provisions of the instruments.
1) Initial Recognition:
Financial assets are initially measured at fair value. In case of financial assets which are recognized at fair value through profit and loss (FVTPL) their transaction costs are recognized in the statement of profit and loss, while in other cases, the transaction costs are attributed to the acquisition value of financial assets.
2) Classification and Subsequent Measurement:
The Company classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) on the basis of following:
• The entity's business model for managing the financial assets and
• The contractual cash flow characteristics of the financial asset.
3) Amortized Cost:
A financial asset shall be classified and measured at amortized cost if both of the following conditions are met:
• The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and;
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
4) Fair Value through OCI
A financial asset shall be classified and measured at fair value through OCI, if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
5) Fair Value through Profit or Loss:
A financial asset shall be classified and measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through OCI.
The company has made an irrevocable election to present in Profit and Loss, subsequent changes in the fair value of equity instruments held as investments.
6) Recognition and De-recognition
Purchases and sales of investments (equity instruments) are recognized on trade-date - the date on which the Company commits to purchase or sell the asset. Investments are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.
7) Initial measurement
Financial assets are initially recognized at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognized at fair value.
b. Financial Liabilities:
1) Initial Recognition:
All financial liabilities are initially recognized at fair value and in case of Loans and Borrowings, net of directly attributable transaction costs.
2) Classification and Subsequent Measurement:
Financial liabilities are subsequently classified as either financial liabilities at amortized cost or at Fair Value through Profit and Loss (FVTPL). Financial liabilities are measured at amortized cost using the Effective Interest Rate (EIR) method. Financial liabilities carried at fair value through profit and loss are measured at fair value with all changes in fair value recognized in the statement of Profit and Loss.
3) De-recognition:
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
I. Investments:
Investment comprising of Investment in quoted and unquoted equity shares and units of mutual funds are carried at fair value. For fair value determination, in case of shares and units quoted on a recognized stock exchange, the closing market price as on balance sheet date is taken as fair value. For others, the book value of the company in which investment is made is treated as its fair value.
J. Employees benefits
The company's Contribution to provident funds is made to the recognized provident funds and is charged to the profit and loss account. The company has taken a gratuity policy from Life Insurance Corporation of India and premium paid for the year has been debited to profit and loss account. The liability towards leave encashment has been ascertained by actuarial valuation using projected unit credit method done at the end of the financial year.
Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service as per actuarial valuation using projected unit credit method done at the end of the financial year.
K. Lease
The company does not have any right-of-use asset or lease liability as at the balance sheet date.
L. Impairment of Assets
An asset is treated as impaired when the carrying cost of the assets exceeds its recoverable value. An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired. If impairment loss recognized in previous accounting periods cease to exist, the reversal of same is done and recognized in the statement of profit and loss account.
M. Foreign currency transaction
Foreign exchange transactions are recorded at the rates of exchange on the date of respective transaction. The assets and liabilities designated in foreign currency are converted into the rupee at the rates of exchange prevailing as on the balance sheet date or at the contracted rate and corresponding adjustment is being made to the relevant income/expense and assets/liability.
N. Segment Reporting
Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (‘CODM'), in deciding how to allocate resources and in assessing performance.
Operating segments are identified based on the internal organization at the financial reporting date.
The company has identified the business segments as reportable segments, which comprise:
1) Real Estate Division
2) Investment Division
The company has followed the following accounting policies for the segment reporting.
a) Segment revenue includes sales and other income directly identifiable with or allocable to a particular segment.
b) Segment expenses that are directly identifiable with/allocable to a segment are considered for determining the
segment results. The expenses, which relates to the company as a whole and not allocable to a particular segment are included under un-allocable expenses.
c) Income, which relates to the company, as a whole and not allocable to a segment is included under un-allocable income.
d) i. Segment assets include those assets which are directly identifiable with respective segments and
employed by a segment in its operating activities but do not include income tax assets.
ii. Segment liabilities include those liabilities directly identifiable to a segment and operating liability that result from operating activities of a segment, but does not include income tax liabilities and financial tax liabilities.
O. Income Taxes
The current charge for income tax is calculated in accordance with the relevant tax regulations applicable to the company.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to the timing differences that result between the profits offered for income tax and the profit as per the financial statements.
P. Borrowing Cost
Borrowing Cost that is attributable to the acquisition of qualifying assets is capitalized as part of such cost till the said assets put to use. All other borrowing cost is charged to revenue account.
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