Note 1: Corporate Information
Sgl Resources Ltd. (formerly known as Scanpoint Geomatics Limited) is a public company incorporated under the provisions of the Companies Act, 1956. Its shares are listed on the Bombay Stock Exchange. The Company is engaged in the business of GIS-based software development and sales.
Note 2: Material Accounting Policies
This note provides a list of the material accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of Preparation & Presentation of Financial Statements
a. Statement of Compliance
These standalone financial statements have been prepared in accordance with the Indian Accounting Standards (referred to as "Ind AS") as prescribed under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules as amended from time to time.
b. Basis of Measurement
The financial statements have been prepared on a historical cost convention and on an accrual basis, except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies below.
c. Use of Judgment, Estimates, and Assumptions
The preparation of the financial statements in conformity with Ind AS requires the management to make judgments, estimates, and assumptions considered in the reported amounts of assets and liabilities and disclosure relating to contingent liabilities as at the date of financial statement and the reported amounts of income and expenditure during the reported year. Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty, and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:
• Income Taxes
The Company's major tax jurisdiction is India. Significant judgments are involved in determining the provision for income taxes, including amounts expected to be paid/recovered for uncertain tax positions. In assessing the reliability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the Company will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.
• Impairment Testing
Investments in subsidiaries, goodwill, and intangible assets are tested for impairment annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or cash-generating units to which these pertain is less than its carrying value. The recoverable amount of cash-generating units is the higher of value-in-use and fair value less cost to dispose. The calculation of value in use of a cash-generating unit involves the use of significant estimates and assumptions, which include turnover and earnings multiples, growth rates, and net margins used to calculate projected future cash flows, risk-adjusted discount rate, and future economic and market conditions.
• Depreciation and Amortization
Depreciation and amortization are based on management estimates of the future useful lives of certain classes of property, plant, and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions, and other factors and may result in changes in the estimated useful life and in the depreciation and amortization charges.
• Other Estimates
The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements, and the reported amount of revenues and expenses for the reporting period. Specifically, the Company estimates the probability of collection of accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness, and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. The stock compensation expense is determined based on the Company's estimate of equity instruments that will eventually vest. Fair valuation of derivative hedging instruments designated as cash flow hedges involves significant estimates relating to the occurrence of forecast transactions.
2.2 Summary of Significant Accounting Policies
a. Functional and Presentation Currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (i.e., the "functional
currency"). The financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the Company.
b. Investment in Subsidiaries, Associate, and Joint Venture
Investment in subsidiary companies, associates, and joint venture companies are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiary companies, associates, and joint venture companies, the difference between net disposal proceeds and the carrying amounts is recognized in the Statement of Profit and Loss.
c. Property, Plant, and Equipment
Property, plant, and equipment are measured at historical cost or its deemed cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditures directly attributable to the acquisition of the asset.
When parts of an item of property, plant, and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant, and equipment. Subsequent expenditure relating to property, plant, and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Statement of Profit and Loss when incurred.
An item of property, plant, and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant, and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
d. Capital Work-in-Progress
Amounts paid towards the acquisition of property, plant, and equipment outstanding as of each reporting date and the cost of property, plant, and equipment not ready for intended use before such date are disclosed under capital advances and capital work-in-progress, respectively.
e. Depreciation/Amortization
The depreciable amount for assets is the cost of the asset less its estimated residual value. Depreciation has been provided on all assets using the straight-line method, as per the useful life prescribed in Schedule II of the Companies Act, 2013.
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. The Company assesses at each Balance Sheet date whether there is objective evidence that an asset or a group of assets is impaired. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
The residual values are not more than 5% of the original cost of assets.
f. Leases
From April 1, 2019, Ind AS 116 'Leases' is applicable to all listed companies. Ind AS 116 provides certain exemptions from the application of Ind AS 116:
• Short-Term Leases
A lease that, at the commencement date, has a lease term of 12 months or less. However, a lease that contains an option to purchase the asset is not a short-term lease. The election for short-term leases shall be made by class of underlying asset to which the right of use relates and can be made on a lease-by-lease basis.
• Leases for Low-Value Assets
An underlying asset can be of low value only if:
1. The lessee can benefit from the use of the underlying asset on its own or together with other resources that are readily available to the lessee; and
2. The underlying asset is not highly dependent on, or highly interrelated with, other assets.
Examples of low-value underlying assets include tablets, personal computers, small items of office furniture, and telephones. When new, if the asset is typically not of low value, the lease of such asset does not qualify as a lease of a low-value asset. The assessment of whether an underlying asset is of low value is performed on an absolute basis. Leases of low-value assets qualify for recognition exemption regardless of whether those leases are material to the lessee. The assessment is not affected by the size, nature, or circumstances of the lessee.
Accounting for Short-Term and Low-Value Asset Leases** If a lessee elects to opt for the recognition exemption for either short-term leases or leases for which the underlying asset is of low value, the lessee shall recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis. According to information and explanations provided to us, all the lease agreements of the Company are short-term lease agreements, so the application of Ind AS 116 'Leases' is not applicable to us.
g. Financial Instruments
All financial instruments are recognized initially at fair value. Transaction costs that are attributable to the acquisition of the financial asset (other than financial assets recorded at fair value through profit or loss) are included in the fair value of the financial assets. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trade) are recognized on the trade date. Loans, borrowings, and payables are recognized net of directly attributable transaction costs.
For the purpose of subsequent measurement, financial instruments of the Company are classified in the following categories: non-derivative financial assets comprising amortized cost, debt instruments at fair value through other comprehensive income (FVTOCI), equity
instruments at FVTOCI or fair value through profit and loss account (FVTPL), non-derivative financial liabilities at amortized cost or FVTPL, and derivative financial instruments (under the category of financial assets or financial liabilities) at FVTPL.
The classification of financial instruments depends on the objective of the business model for which it is held. Management determines the classification of its financial instruments at initial recognition.
• Non-derivative Financial Assets
o Financial Assets at Amortized Cost
A financial asset shall be 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 (SPPI) on the principal amount outstanding.
They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets. Financial assets are measured initially at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest rate method, less any impairment loss.
Financial assets at amortized cost are represented by trade receivables, security deposits, cash and cash equivalents, employee and other advances, and eligible current and non-current assets.
Cash and cash equivalents comprise cash on hand and in banks and demand deposits with banks which can be withdrawn at any time without prior notice or penalty on the principal.
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand, in banks, and demand deposits with banks, net of outstanding bank overdrafts that are repayable on demand, book overdraft, and are considered part of the Company's cash management system.
o Financial Assets at Fair Value through Other Comprehensive Income (FVTOCI)
For assets, if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and where the Company has exercised the option to classify the equity investment as at FVTOCI, all fair value changes on the investment are recognized in OCI. The accumulated gains or losses on such investments are not recycled to the Statement of Profit and Loss even on sale of such investment.
o Financial Assets at Fair Value through Profit and Loss (FVTPL)
A financial asset which is not classified in any of the above categories is measured at FVTPL. These include surplus funds invested in mutual funds,
etc. Financial assets included within the FVTPL category are measured at fair values with all changes recorded in the Statement of Profit and Loss.
• Non-derivative Financial Liabilities
o Financial Liabilities at Amortized Cost
Financial liabilities at amortized cost represented by borrowings, trade, and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest rate method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying value approximates fair value due to short maturity.
o Financial Liabilities at Fair Value through Profit and Loss (FVTPL)
Financial liabilities at FVTPL represented by contingent consideration are measured at fair value with all changes recognized in the Statement of Profit and Loss.
o Derivative Financial Instruments and Hedging Activities
A derivative is a financial instrument which changes value in response to changes in an underlying asset and is settled at a future date. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Company enters into derivative contracts to hedge the risks associated with currency fluctuations relating to firm commitments and highly probable transactions. The Company does not use derivative instruments for speculative purposes.
The Company documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in Other Comprehensive Income. The ineffective portion of changes in the fair value of the derivative is recognized in the Statement of Profit and Loss.
Amounts accumulated in the hedging reserve are reclassified to the Statement of Profit and Loss in the periods when the hedged item affects the Statement of Profit and Loss.
The full fair value of a hedging derivative is classified as a current/non-current asset or liability based on the remaining maturity of the hedged item.
When a hedging instrument expires, is swapped or unwound, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the Statement of Changes in Equity is recognized in the Statement of Profit and Loss.
o Offsetting Financial Instruments
Financial assets and liabilities are offset, and the net amount reported in the Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
o Fair Value Measurement
The Company classifies the fair value of its financial instruments in the following hierarchy, based on the inputs used in their valuation:
- Level 1: The fair value of financial instruments quoted in active markets is based on their quoted closing price at the Balance Sheet date.
- Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves, or foreign exchange rates, dealer quotes for similar instruments, and the use of comparable arm's length transactions.
- Level 3: The fair value of financial instruments that are measured on the basis of entity-specific valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with sufficient reliability, the Company carries such instruments at cost less impairment, if applicable.
h. Employee Benefits
• Short-Term Employee Benefits
Short-term benefits are recognized as an expense at the undiscounted amounts in the Statement of Profit and Loss of the year in which the related service is rendered.
• Post-Employment Benefits
o Defined Contribution Plan: The employee and Company make monthly fixed contributions to the Government of India Employee's Provident Fund equal to a specified percentage of the covered employee's salary. Provision for the same is made in the year in which services are rendered by the employee.
o Defined Benefit Plans: The liability for gratuity to employees, which is a defined benefit plan, as at the Balance Sheet date is determined on the basis of
actuarial valuation based on the Projected Unit Credit method, and the contribution thereof paid/payable is absorbed in the accounts.
o The present value of the defined benefit obligations is determined by discounting the estimated future cash flows at a predetermined rate of interest, taking into account the probability of payment. This cost is included in employee benefit expenses in the Statement of Profit and Loss.
o Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in Other Comprehensive Income. They are included in retained earnings in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.
• Other Long-Term Employee Benefits
Other long-term employee benefits comprise leave encashment towards un-availed leave and compensated absences. These are recognized based on the present value of the defined obligation, which is computed using the Projected Unit Credit method, with actuarial valuations being carried out at the end of each annual reporting period. These are accounted for either as current employee cost or included in the cost of assets as permitted.
Re-measurement of leave encashment towards un-availed leave and compensated absences is recognized in the Statement of Profit and Loss, except those included in the cost of assets as permitted in the period in which they occur.
i. Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
j. Income Taxes
Income tax comprises current and deferred tax. Income tax expense is recognized in the Statement of Profit and Loss except to the extent it relates to items directly recognized in equity or in Other Comprehensive Income.
• Current Income Tax
Current income tax liability/(asset) for the current and prior periods is measured at the amount expected to be recovered from or paid to the taxation authorities based on the taxable income for the year. The tax rates and tax laws used to compute the current tax amount are those that are enacted or substantively enacted by the reporting date and applicable for the year. 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 liability simultaneously.
• Deferred Tax
Deferred income tax is recognized using the Balance Sheet approach. Deferred income 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 income tax arises from the initial recognition of goodwill or 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 income tax liabilities are recognized for all taxable temporary differences.
The carrying amount of deferred income tax assets is 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 income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
k. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. The cash flow from operating, investing, and financing activities of the Company is segregated.
l. Revenue Recognition
The Company derives revenue primarily from software development and from the licensing of software products. The Company recognizes revenue when it transfers control over a product or a service to a customer. The method for recognizing revenues and costs depends on the nature of the services rendered.
The timing of revenue recognition, billings, and cash collections results in receivables, unbilled revenue, and unearned revenue on the Company's Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Company's receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed-price maintenance contracts are classified as financial assets when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed-price contracts is based on milestones as defined in the contract, and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore, unbilled revenues for other fixed-price contracts (contract asset) are classified as "non-financial asset" because the right to consideration is dependent on completion of contractual milestones. Invoicing in excess of earnings is classified as "unearned revenue".
• Remaining Performance Obligation Disclosure
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation-related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material and unit of work-based contracts. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, and adjustments for revenue that has not materialized and adjustments for currency.
• Time and Materials Contracts
Revenues from contracts priced on a time and material basis are recognized as the related services are performed and related costs are incurred.
• Fixed-Price Contracts
Revenues from fixed-price contracts are recognized using the "percentage-of-completion" method. Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity.
If the Company does not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable.
When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the Statement of Profit and Loss in the period in which such losses become probable based on the current contract estimates.
• Maintenance Contracts
Revenue from maintenance contracts is recognized ratably over the period of the contract using the "percentage-of-completion" method. When services are performed through an indefinite number of repetitive acts over a specified period of time, revenue is recognized on a straight-line basis over the specified period or under some other method that better represents the stage of completion.
'Unbilled revenues' represent cost and earnings in excess of billings as at the end of the reporting period.
'Unearned revenues' represent billing in excess of revenue recognized. Advance payments received from customers for whom no services are rendered are presented as 'Advance from customers'.
Revenues are reported net of sales returns, GST, and applicable discounts and allowances.
m. Dividend and Dividend Distribution Tax
Final dividends on shares are recorded as a liability on the date of approval by the shareholders, and interim dividends are recorded as a liability on the date of declaration by the Company's Board of Directors. The Company declares and pays dividends in Indian rupees and is subject to applicable distribution taxes. The applicable distribution taxes are treated as an appropriation of profits.
n. Foreign Currency Transactions and Translations
Transactions in foreign currency are translated into the respective functional currencies using the exchange rates prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the exchange rates prevailing at the reporting date of monetary assets and liabilities denominated in foreign currencies are recognized in the Statement of Profit and Loss and reported within foreign exchange gains/(losses).
Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction.
Foreign currency gains and losses are reported on a net basis. This includes changes in the fair value of foreign exchange derivative instruments, which are accounted for at fair value through profit or loss.
o. Finance Income and Expense
Finance income consists of interest income on funds invested, dividend income, and fair value gains on the FVTPL financial assets. Interest income is recognized as it accrues in the Statement of Profit and Loss, using the effective interest method.
Dividend income is recognized in the Statement of Profit and Loss on the date that the Company's right to receive payment is established.
Finance expenses consist of interest expense on loans and borrowings. Borrowing costs are recognized in the Statement of Profit and Loss using the effective interest method.
p. Impairment
• Financial Assets
In accordance with Ind AS 109, the Company applies the Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company assesses at each Balance Sheet date whether a financial asset or a group of financial assets is impaired. The Company follows the 'simplified approach' for recognition of impairment loss allowance on trade receivables and unbilled revenue. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company recognizes lifetime expected credit losses for all trade receivables and/or other contract assets that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
ECL allowance (or reversal) is recognized as income/expense in the Statement of Profit and Loss.
• Non-Financial Assets
The Company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non-financial assets is impaired. If any such indication exists, the Company estimates the amount of impairment loss.
An impairment loss is calculated as the difference between an asset's carrying amount and recoverable amount. Losses are recognized in the Statement of Profit and Loss and reflected in an allowance account. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through the Statement of Profit and Loss.
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 depreciation/amortization) had no impairment loss been recognized for the asset in prior years.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").
q. Earnings Per Share
Basic earnings per equity share are computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e., the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as at the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
r. Contingent Liabilities
Contingent liabilities exist when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required or the amount cannot be reliably estimated. Contingent liabilities are appropriately disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
s. Contingent Assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. The Company does not recognize a contingent asset.
t. Events After the Reporting Period
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorization for issue. Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Non-adjusting events after the reporting date are not accounted for, but disclosed.
u. Intangible Assets
Intangible assets are measured on initial recognition at cost (net of recoverable taxes, if any). Subsequently, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
The gain or loss arising on the disposal or retirement of an intangible asset is determined as the difference between net disposal proceeds and the carrying amount of the asset and is recognized as income or expense in the Statement of Profit and Loss in the year of disposal.
v. Borrowing Costs
Borrowing costs include interest and amortization of ancillary costs incurred to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalization of such asset are added to the cost of the assets. Capitalization of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
During the year, the Company has not capitalized any borrowing costs.
w. Rounding of Amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest rupees as per the requirement of Schedule III, unless otherwise stated.
x. Goods & Service Tax
GST credit on materials purchased for production/service availed for production/input service is taken into account at the time of purchase, and GST credit on the purchase of capital items, wherever applicable, is taken into account as and when the assets are acquired.
The GST credits so taken are utilized for payment of excise duty/GST on sales. The unutilized GST credit is carried forward in the books. The GST credits so taken are utilized for payment
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