Note 2 Significant accounting policies :-
i Basis of preparation
The financial statements of the Company have been prepared to comply in all material
respects with the Indian Accounting Standards (‘Ind AS*) as prescribed under Section 133
of the Companies Act, 2013 (‘the Act) read with Companies (Indian Accounting
Standards) Rules as amended from time to time .
The financial statements have been prepared under the historical cost convention, with
the exception of certain financial assets and liabilities, which have been measured at fair
value, on an accrual basis of accounting.
The Company’s financial statements are reported in Indian Rupees, which is also the
Company’s functional currency, and all values are rounded to the nearest lakhs ('
00,000), except when otherwise indicated. Amount
presented as ‘0.00* ‘are non zero numbers rounded off in Lakhs.
The statement of cash flow has been prepared under the indirect method as set out in Ind
AS 7 - Statement of Cash Flows.
ii Operating cycle for current and non-current classification:
All the assets and liabilities have been classified as current or non-current, wherever
applicable, as per the operating cycle of the Company as per the guidance set out in
Schedule III to the Act. Operating cycle for the business activities of the Company covers
the duration of the project/ contract / service including the defect liability period,
wherever applicable, and extends up to the realization of receivables (including retention
monies) within the credit period normally applicable to the respective project.
iii Accounting estimates
The preparation of the financial statements, in conformity with the recognition and
measurement principles of Ind AS, requires the management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities as at the date of financial statements and the results of operation
during the reported period. Although these estimates are based upon management’s best
knowledge of current events and actions, actual results could differ from these estimates
iv. Investments in joint venture and associates
When the Company has with other parties joint control of the arrangement and
rights to the net assets of the joint arrangement, it recognizes its interest as joint
venture. Joint control exists when the decisions about the relevant activities require
unanimous consent of the parties sharing the control. When the Company has
significant influence over the other entity, it recognizes such interests as associates.
Significant influence is the power to participate in the financial and operating policy
decisions of the entity but is not control or joint control over the entity.
The results, assets and liabilities of joint venture and associates are incorporated in
the standalone financial statements using equity method of accounting after making
necessary adjustments to achieve uniformity in application of accounting policies,
wherever applicable. An investment in associate or joint venture is initially recognised
at cost and adjusted thereafter to recognise the Company’s share of profit or loss and
other comprehensive income of the joint venture or associate. Gain or loss in respect
of changes in other equity of joint ventures or associates resulting in dilution of stake
in the joint ventures and associates is recognised in the Statement of Profit and Loss.
The unrealised profits/ losses on transactions with joint ventures are eliminated by
reducing the carrying amount of investment.
The carrying amount of the equity accounted investments is tested for impairment
in accordance with the policy.
v Key accounting estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below. The Company based its assumptions and estimates on
parameters available when the financial statements were prepared.
Existing circumstances and assumptions about future developments, however, may
change due to market changes or circumstances arising that are beyond the control of
the Company. Such changes are reflected in the financial statements in the period in
which changes are made and, if material, their effects are disclosed in the notes to the
financial statement.
a. Contract estimates
Revenue is recognized upon transfer of control of promised products or services to
customers in an amount that reflects the consideration the Company expect to receive in
exchange for those products or services. The Company derives revenues primarily from
providing engineering and construction services. The percentage-of-completion of a
contract is determined by the proportion that contract costs incurred for work performed
upto the reporting date bear to the estimated total contract costs. When there is
uncertainty as to measurement or ultimate collectability, revenue recognition is
postponed until such uncertainty is resolved.
Due to the nature of the work required to be performed on many of the performance
obligations, the estimation of total revenue and cost of completion is complex, subject to
many variables and requires significant judgment. Variability in the transaction price
arises primarily due to liquidated damages, price variation clauses, changes in scope,
incentives, if any. The Company considers its experience with similar transactions and
expectations regarding the contract in estimating the amount of variable consideration
to which it will be entitled and determining whether the estimated variable
consideration should be constrained. The Company includes estimated amounts in the
transaction price to the extent it is probable that a significant reversal of cumulative
revenue recognized will not occur when the uncertainty associated with the variable
consideration is resolved.
The estimates of variable consideration are based largely on an assessment of
anticipated performance and all information (historical, current and forecasted) that is
reasonably available.
Contract modifications are accounted for when additions, deletions or changes are
approved either to the contract scope or contract price. The accounting for modifications of
contracts involves assessing whether the services added to an existing contract are distinct
and whether the pricing is at the standalone selling price. Services added that are not
distinct are accounted for on a cumulative catch up basis, while those that are distinct
are accounted for prospectively, either as a separate contract, if the additional services are
priced at the standalone selling price, or as a termination of the existing contract and
creation of a new contract if not priced at the standalone selling price.
The Company presents revenues net of indirect taxes in its Statement of Profit and Loss.
Costs to obtain a contract which are incurred regardless of whether the contract was
obtained are charged-off in Statement of Profit and Loss immediately in the period in
which such costs are incurred.
b. Variable consideration (claims)
The Company has claims in respect of cost over-run arising due to client caused delays,
suspension of projects, deviation in design, Escalation clause and change in scope of
work etc., which are at various stages of negotiation/ discussion/ arbitration/ litigation
with the clients. The reliability of these claims are estimated based on contractual terms,
historical experience with similar claims as well as legal opinion obtained from internal
and/or external experts, wherever necessary. Changes in facts of the case or the legal
framework may impact reliability of these claims.
c. Deferred tax assets
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
ultimate 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 applicable tax rates, scheduled reversal of deferred
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.
d. Useful lives of property, plant and equipment, investment property, right of
use assets and intangible assets
The charge in respect of periodic depreciation is derived after determining an estimate
of an asset’s expected useful life and the expected residual value at the end of its life.
The useful lives and residual values of assets are determined by the management at
the time of acquisition of asset and reviewed periodically, including at each financial
year. The lives are based on historical experience with similar assets as well as
anticipation of future events, which may impact their life, such as changes in
technology.
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