2. Material Accounting Policies
2.1 Property, Plant and Equipment.
Property, Plant and Equipment are stated at original cost net
of tax/ duty credit availed, less accumulated depreciation and
accumulated impairment losses. The cost of an asset includes
the purchase cost of materials including import duties and
non-refundable taxes, and any directly attributable costs of
bringing an asset to the location and condition of its intended
use. Interest on borrowings used to finance the construction
of qualifying assets are capitalized as part of cost of the asset
until such time that the asset is ready for its intended use. The
present value of the expected cost for the decommissioning of
the asset after its use is included in the cost of the respective
asset if the recognition criteria for a provision are met.
When significant part of the property, plant and equipment
are required to replace at intervals, the company derecognized
the replaced part and recognized the new parts with its own
associated useful life and it depreciated accordingly. When
a major inspection is performed, its cost is recognized in the
carrying amount of the plant and equipment as a replacement
if the recognition criteria are satisfied. All other repair and
maintenance cost are recognized in the statement of the profit
and loss as incurred.
Internally manufactured property, plant and equipment are
capitalised at factory cost including excise duty and or GST
whatever is applicable.
Capital work-in-progress/intangible assets under installation/
development as at the balance sheet date are carried at
cost, comprising direct cost, related incidental expenses and
attributable borrowing cost and are transferred to respective
capital asset when they are available for use.
Property, plant and equipment are derecognised from the
financial statement, either on disposal or when no economic
benefits are expected from its use or disposal. Gains or losses
arising from disposal of property, plant and equipment are a
recognized in the statement of profit and loss in the year of
occurrence."
Investment Property
Investment properties are properties, either land or building
or both, held to earn rentals and/or for capital appreciation
(including property under construction for such purposes).
Investment properties are measured initially at cost including
transactions costs. Subsequent to initial recognition, investment
properties are measured in accordance with Ind AS 16's
requirement for cost model.
An investment property is derecognised upon disposal or when
the investment property is permanently withdrawn from use and
no future economic benefits are expected from the disposal. Any
gain or loss arising on derecognition of the property (calculated
as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the
period in which the property is de-recognised
2.2 Intangible Assets
Capital expenditure on purchase and development of
identifiable assets without physical substance is recognized as
intangible assets in accordance with principles given under Ind
AS-38 - Intangible Assets.
The amortization period and the amortization method for an
intangible asset with a finite useful life are reviewed at least at
the end of each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future economic
benefits embodied in the assets are considered to modify the
amortization period or method, as appropriate, and are treated
as changes in accounting estimates. Expenses incurred during
construction period, preliminary project expenditure, capital
expenditure, indirect expenditure incidental and related to
construction / implementation, interest on borrowings to finance
fixed assets and expenditure on start-up / commissioning
of assets forming part of a composite project are capitalized
up to the date of commissioning of the project as the cost of
respective assets.
2.3 Depreciation and Amortization
Depreciation on property plant and equipment is provided
on written down value method on the basis of useful life of
assets. The useful life of property, plant and equipment is
consistent with the useful life of assets indicated in Schedule
II to The Companies Act, 2013 (as amended). Property, Plant
and Equipment which are added / disposed off during the year,
depreciation is provided pro-rata basis with reference to the
month of addition/deletion.
The useful lives of intangible asset are assessed as either finite or
indefinite. Intangible asset with a finite useful life are amortized
over a period of 3 to 5 years on a written down value basis &
technical knowhow are amortised over the period of three years
on written down value basis and are reviewed at least at the
end of each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future economic
benefits embodied in the assets are considered to modify the
amortization period or method, as appropriate, and are treated
as changes in accounting estimates.
Intangible asset with indefinite useful lives, if they are not
amortised, but are tested for impairment either individually or
at the cash generating unit level. The assessment of indefinite
useful life is reviewed annually to determine whether the
indefinite life continues to be supportable. Currently there are
no intangible assets with indefinite useful life.
2.4 Impairment of Non-financial Assets
Property, plant and equipment, and intangible assets are
evaluated for recoverability whenever there is any indication
that their carrying amounts may not be recoverable. If any such
indication exists, the recoverable amount (i.e. higher of the fair
value less cost to sell and the value-in-use) is determined on an
individual asset basis unless the asset does not generate cash
flows that are largely independent of those from other assets.
In such cases, the recoverable amount is determined for the
Cash Generating Unit (CGU) to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. An impairment
loss is recognized in the statement of profit or loss.
An impairment loss is reversed in the statement of profit and loss
if there has been a change in the estimates used to determine
the recoverable amount. The carrying amount of the asset is
increased to its revised recoverable amount, provided that
this amount does not exceed the carrying amount that would
have been determined (net of any accumulated amortization or
depreciation) had no impairment loss been recognized for the
asset in prior years.
Impairment losses on continuing operations, including
impairment on inventories are recognized in the statement of
profit and loss, except for properties previously revalued with
the revaluation taken to other comprehensive income. For
such properties, the impairment is recognized in OCI up to the
amount of any previous revaluation surplus.
2.5 Leases
As a lessee
The Company's lease asset classes primarily consist of leases
for land. The Company assesses whether a contract contains
a lease, at inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right
to control the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic benefits
from use of the asset through the period of the lease and (iii)
the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company
recognizes a right-of-use asset ("ROU") and a corresponding
lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of twelve months or less (short¬
term leases) and low value leases. For these short-term and low
value leases, the Company recognizes the lease payments as
an operating expense on a straight-line basis over the term of
the lease.
Certain lease arrangements includes the options to extend
or terminate the lease before the end of the lease term. ROU
assets and lease liabilities includes these options when it is
reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or prior to the commencement
date of the lease plus any initial direct costs less any lease
incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement
date on a straight-line basis over the shorter of the lease term
and useful life of the underlying asset. Right of use assets are
evaluated for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may not
be recoverable. For the purpose of impairment testing, the
recoverable amount (i.e. the higher of the fair value less cost to
sell and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows that are
largely independent of those from other assets. In such cases,
the recoverable amount is determined for the Cash Generating
Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the
present value of the future lease payments. The lease payments
are discounted using the interest rate implicit in the lease or, if
not readily determinable, using the incremental borrowing rates
in the country of domicile of these leases. Lease liabilities are re¬
measured with a corresponding adjustment to the related right
of use asset if the Company changes its assessment if whether
it will exercise an extension or a termination option.
Lease liability and ROU asset are separately presented in the
Balance Sheet and lease payments are classified as financing
cash flows.
2.6 Borrowing Cost
Borrowing costs that are directly attributable to the acquisition
or construction of a qualifying asset are capitalized as part
of the cost of such asset till such time that is required to
complete and prepare the asset to get ready for its intended
use. A qualifying asset is one that necessarily takes a substantial
period of time to get ready for its intended use. Borrowing costs
consist of interest and other costs that the Company incurs in
connection with the borrowing of funds. Borrowing costs also
include exchange differences to the extent regarded as an
adjustment to the borrowing costs.
All other borrowing costs are charged to the Statement of Profit
and Loss in the period in which they are incurred. A qualifying
asset is one that necessarily takes a substantial period of time
to get ready for its intended use.
2.7 Segment Accounting and Reporting
The chief operational decision maker monitors the operating
results of its business segments separately for the purpose of
making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on profit
and loss and is measured consistently with profit and loss in the
financial statements.
The Operating Segments have been identified on the basis of
the nature of products/ services.
i. Segment Revenue includes sales and other income directly
identifiable with/ allocable to the segment including inter¬
segment revenue.
ii. Expenses that are directly identifiable with/ allocable to
the segments are considered for determining the segment
result. Expenses not allocable to segments are included
under unallocable expenditure.
iii. Income not allocable to the segments is included in
unallocable income
iv. Segment results includes margin on inter segment and sales
which are reduced in arriving at the profit before tax of the
company.
v. Segment assets and Liabilities include those directly
identifiable with the respective segments. Assets and
liabilities not allocable to any segment are classified under
unallocable category.
2.8 Employee Benefits
Expenses and liabilities in respect of employee benefits are
recorded in accordance with Indian Accounting Standard (Ind
AS)-19-Employee Benefits'.
a. Short-term Employee Benefits
Short-term employee benefits in respect of salaries and wages,
including non-monetary benefits are recognised as an expense
at the undiscounted amount in the Statement of Profit and Loss
for the year in which the related service is rendered.
b. Defined Contribution Plan
Retirement benefits in the form of provident fund, pension
scheme and superannuation scheme and ESI are a defined
contribution plan and the contributions are charged to the
statement of profit and loss of the year when the contributions
to the respective funds are due. There are no other obligations
other than the contribution payable to the provident fund.
c. Defined Benefit Plan
The Company's liabilities on account of gratuity (partly funded)
and earned leaves on retirement of employees are determined
at the end of each financial year on the basis of actuarial
valuation certificates obtained from registered actuary in
accordance with the measurement procedure as per Indian
Accounting Standard (INDAS)-19- 'Employee Benefits'. Gratuity
liability is funded on year-to-year basis by contribution to
respective fund. The Company's Employee Gratuity Fund is
managed by Life Insurance Corporation. The costs of providing
benefits under these plans are also determined on the basis
of actuarial valuation at each year end. Actuarial gains and
losses for defined benefit plans are recognized through OCI
in the period in which they occur. Re-measurements are not
reclassified to profit or loss in subsequent periods.
Accumulated leaves, 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 actuarial valuation. The
actuarial valuation is done as per projected unit credit method
at the year-end.
2.9 Financial Instruments
(a)Financial Assets
Classification
The company classified financial assets as subsequently
measured at amortised cost, fair value through other
comprehensive income or fair value through profit or loss on
the basis of its business model for managing the financial assets
and contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
The company recognizes financial assets when it becomes
a party to the contractual provisions of the instrument. All
financial assets (except for certain trade receivables) are
recognized initially at fair value plus, for financial asset not
subsequently measured at FVTPL, transaction costs that are
directly attributable to the acquisition of financial assets.
Trade receivables that do not contain a significant financing
component (determined in accordance with IND AS 115 -
Revenue Recognition) are initially measured at their transaction
price and not at fair value.
Subsequent measurement
For the purpose of subsequent measurement the financial
assets are classified in three categories:
• At amortised cost - For debt instruments only.
• At fair value through profit & loss account
• At fair value through other comprehensive income.
Debt instrument at amortised cost
A "debts instrument" is measured at the amortised cost if both
the following condition are met.
• The asset is held within a business model whose objective is to
hold assets for collecting contractual cash flow, and
• Contractual terms of the assets give rise on specified dates
to cash flows that are solely payments of principle and interest
(SPPI) on the principle amount outstanding.
After initial measurement, such financial assets are subsequently
measurement at amortised cost using the effective interest
rate (EIR) method. Amortised cost is calculated by taking into
account any discount and premium and fee or costs that are
an integral part of an EIR. The EIR amortisation is included in
finance income in the statement of profit and loss. The losses
arising from impairment are recognised in the statement of
profit and loss.
Debt Instrument at Fair value through Other Comprehensive
Income
A financial asset should be measured at FVTOCI if both the
following condition are met:
• The assets is held within a business model in which asset are
managed both in order to collect contractual cash flows and
for sale (business model test), and
• Contractual terms of the assets give rise on specified dates to
cash flows that are solely payments of principle and interest
(SPPI) on the principle amount outstanding (contractual cash
flow characteristics).
After initial measurement (at Fair value minus transaction cost),
such financial assets are measured at Fair value with changes in
fair value recognized in OCI except for:
(a) Interest calculated using EIR
(b) Foreign exchange gain and losses
(c) Impairment losses and gains
Debt Instrument at fair value through profit or loss
Debt instruments included within the fair value through profit
or loss (FVTPL) category are measured at fair value with all
changes recognised in the statement of profit and loss.
Equity Investments
All equity investments other than investment in subsidiaries
is measured at fair value. Equity instruments which are held
for trading are classified as at FVTPL. For all other equity
instruments, the company decides to classify the same either as
at fair value through other comprehensive income (FVTOCI) or
FVTPL. The company makes such election on an instrument-by¬
instrument basis. The classification is made on initial recognition
and is irrevocable.
If the company decides to classify an equity instrument as at
FVTOCI, then fair value changes on the instrument, excluding
dividends, are recognised in other compressive income (OCI).
There is no recycling of the amounts from OCI to statement of
profit or loss, even on sale of such investments.
Equity instrument includes within the FVTPL category are
measured at fair value with all changes recognised in the
Statement of profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset)
Annual Dannrt T m A _ T C
is primarily derecognised when:
• The right to receive cash flows from the assets have expired
or
• The company has transferred substantially all the risks and
rewards of the assets, or
• The company has neither transferred nor retained substantially
all the risks and rewards of the assets but has transferred
control of the assets.
Impairment of Financial Assets
The Company applies the expected credit loss model for
recognising impairment loss on financial assets measured at
amortised cost, trade receivables and other contractual rights
to receive cash or other financial asset.
Expected credit loss 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 (i.e. all cash shortfalls), discounted at the original
effective interest rate. The Company estimates cash flows by
considering all contractual terms of the financial instrument
through the expected life of that financial instrument.
The Company measures the loss allowance for a financial
instrument at an amount equal to the lifetime expected
credit losses if the credit risk on that financial instrument has
increased significantly since initial recognition. If the credit risk
on a financial instrument has not increased significantly since
initial recognition, the Company measures the loss allowance
for that financial instrument at an amount equal to 12-month
expected credit losses.
(b) Financial Liabilities & Equity
Classification
Debt and equity instruments issued by the company are
classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the
definitions of a financial liability and an equity instrument
Initial recognition and measurement
The company recognizes financial liability when it becomes a
party to the contractual provisions of the instrument. All financial
liability are recognized initially at fair value minus, for financial
liability not subsequently measured at FVTPL, transaction costs
that are directly attributable to the issue of financial liability
Subsequent measurement of financial liability
All financial liabilities are subsequently measured at amortised
cost using the effective interest method or at FVTPL
Financial Liability at Amortised Cost
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the
Effective Interest Rate (EIR) Method. Gain and losses are
recognised in statement of profit and loss when the liabilities
are derecognised.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and transaction cost. The EIR
amortization is included as finance cost in the statement of
profit and loss.
This category generally applies to loans & borrowings.
Financial Liability at FVTPL
"Financial liabilities are classified as at FVTPL when the financial
liability is either contingent consideration recognised by the
Company as an acquirer in a business combination to which Ind
AS 103 applies or is held for trading or it is designated as at
FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any
gains or losses arising on re-measurement recognised in
profit or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability
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 a company entity are
recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is
recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Company's own equity instruments.
Derecognition
A financial liability is derecognised 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 the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amount are recognised in the Statement
of Profit and loss.
Offsetting of Financial Instrument
Financial Assets and Financial Liabilities are offset and the net
amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and
there is an intention to settle on a net basis, to realize the assets
and settle the liabilities simultaneously.
2.10 Investments in Subsidiary
Investments in equity shares of Subsidiary, is recorded at cost
and reviewed for impairment at each balance sheet date.
2.11 Revenue Recognition
Revenue from contracts with customers is recognised when
control of the goods or services are transferred 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 is measured based on the transaction price, which is
the consideration, adjusted for discounts and other incentives,
if any, as specified in the contract with the customer. Revenue
also excludes taxes or other amounts collected from customers.
The specific recognition criteria described below must also be met
before revenue is recognised.
Revenue from Services
(i) Engineering Consultancy and Project Management charges
Revenue is recognised based on the performance of services as
agreed in the contract with customers at a point in time.
(ii) Works Contract Services
The Company's contracts may include multiple goods or services
that are accounted for as separate performance obligations if they
are distinct - if a good or service is separately identifiable from
other items in the contract and if a customer can benefit from
it. Most of the Company's contracts include a single performance
obligation because the promise to transfer the individual goods
or services is not separately identifiable from other promises in
the contract and therefore is not distinct.
The Company transfers control of the goods or services it
provides to clients over time and therefore recognizes revenue
progressively as the services are performed as per the terms
mentioned under the contracts with customers. Revenue from
fixed-fee contracts is recognized based on the percentage of
completion method, where the stage of completion is measured
using costs incurred to date as a percentage of total estimated
costs for each contract, and the percentage of completion is
applied to total estimated revenue. When the contract outcome
cannot be measured reliably, revenue is recognized only to the
extent that the expenses incurred are eligible to be recovered.
Revenue is adjusted for the effects of a significant financing
component when the period between the transfer of the
promised goods or services to the customer and payment by the
customer exceeds one year. Advance payments and retention
money typically do not result in a significant financing component
because the intent is to provide protection against the failure of
one party to adequately complete some or all of its obligations
under the contract.
Contract Assets
A contract asset is the right to consideration in exchange for
goods or services transferred to the customer. If the Company
performs by transferring goods or services to a customer before
the customer pays consideration or before payment is due, a
contract asset is recognised for the earned consideration that is
conditional.
Contract assets represent unbilled amounts where the right
to payment is subject to more than the passage of time.
Contract assets are transferred to receivables when the right to
consideration becomes unconditional.
Trade Receivables
A receivable represents the Company's right to an amount of
consideration that is unconditional i.e. only the passage of time is
required before payment of consideration is due and the amount
is billable.
Contract Liabilities
A contract liability is the obligation to transfer goods or services
to a customer for which the Company has received consideration
from the customer. Contract liabilities are recognised as revenue
when the Company performs obligations under the contract.
Interest income
Interest income is recognized on time apportionment basis.
Effective interest method is used to compute the interest income
on long terms loans and advances.
Dividends
Dividend income is recognized when the right to receive is
established, which is generally when shareholders approve the
dividend.
2.12 Foreign Currency Transactions
Standalone financial statements have been presented in Indian
Rupees (' in lakhs), which is the Company's functional and
presentation currency.
• Initial recognition
Foreign currency transactions are recorded on initial recognition
in the functional currency, using the exchange rate at the date of
the transaction.
• Conversion
Foreign currency monetary items are retranslated using the
exchange rate prevailing at the reporting date. Non-monetary
items, which are measured in terms of historical cost denominated
in a foreign currency, are reported using the exchange rate at the
date of the transaction. Non-monetary items, which are measured
at fair value or other similar valuation denominated in a foreign
currency, are translated using the exchange rate at the date when
such value was determined.
• Exchange differences
The gain or loss arising on translation of monetary items
measured at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognized in
OCI or profit or loss are also recognized in OCI or profit or loss,
respectively).
• Foreign Operations
In respect of overseas branch operation, the financial of branch
are converted in presenational currency using the following
procedures.
a) Assets and liabilities for each balance sheet presented (i.e.
including comparatives) shall be translated at the closing rate
at the date of that balance sheet;
b) Income and expenses for each statement of profit and loss
presented (i.e. including comparatives) shall be translated
at exchange rates at the dates of the transactions or a rate
that approximates the exchange rates at the dates of the
transactions; and
c) All resulting exchange differences shall be recognised in
other comprehensive income
Tax expense comprises current and deferred tax. Current
income tax is measured at the amount expected to be paid to
the tax authorities in accordance with the Income-Tax Act, 1961
enacted in India. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at
the reporting date.
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. Current income tax relating to items recognized
directly in equity is recognised in equity and not in the statement
of profit and loss. Management periodically evaluates positions
taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) paid in a year is charged to
the statement of profit and loss as current tax. The Company
recognizes MAT credit available as an asset only to the extent
that there is convincing evidence that the Company will pay
normal income tax during the specified period, i.e., the period
for which MAT credit is allowed to be carried forward. In the year
in which the Company recognizes MAT credit as an asset, the
said asset is created by way of credit to the statement of profit
and loss and shown as "MAT Credit Entitlement." The Company
reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does
not have convincing evidence that it will pay normal tax during
the specified period.
Deferred Tax
Deferred tax is provided using the balance sheet approach on
temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purpose at reporting date. Deferred income
tax assets and liabilities are measured using tax rates and tax
laws that have been enacted or substantively enacted by the
balance sheet date and are expected to apply to taxable income
in the years in which those temporary differences are expected
to be recovered or settled. The effect of changes in tax rates
on deferred income tax assets and liabilities is recognized as
income or expense in the period that includes the enactment or
the substantive enactment date. A deferred income tax asset is
recognized to the extent that it is probable that future taxable
profit will be available against which the deductible temporary
differences and tax losses can be utilized.
The carrying amount of deferred tax assets are reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax assets to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and
are recognised to the extent that it has become probable
that future taxable profits will allow deferred tax assets to be
recovered.
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.
|