2 Material accounting policies
Material accounting policies adopted by the
Company are as under:
2.1 Basis of Preparation of Financial Statements
(a) Statement of Compliance with Ind AS
These standalone financial statements have been
prepared in accordance with Indian Accounting
Standards (Ind AS) notified under Section 133 of
the Companies Act, 2013 (the ""Act"") read with the
Companies (Indian Accounting Standards) Rules,
2015 as amended from time to time.
Accounting policies have been consistently applied
to all the years presented except where a newly
issued accounting standard is initially adopted or a
revision to an existing accounting standard requires
a change in the accounting policy hitherto in use.
(b) Basis of measurement
The financial statements have been prepared on a
historical cost convention on accrual basis, except
for items that have been measured at fair value as
required by relevant Ind AS.
i) Certain financial assets and liabilities
measured at fair value (refer accounting policy
on financial instruments);
ii) Embedded derivative; and
iii) Asset classified as held for sale.
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 to the Companies Act, 2013. Based on
the nature of services and the time between the
rendering of service and their realization in cash
and cash equivalents, the Company has ascertained
its operating cycle as twelve months for the purpose
of current and noncurrent classification of assets
and liabilities.
(c) Use of estimates
The preparation of standalone financial statements
in conformity with Ind AS requires the Management
to make estimate and assumptions that affect the
reported amount of assets and liabilities as at the
Balance Sheet date, reported amount of revenue
and expenses for the year and disclosures of
contingent liabilities as at the Balance Sheet
date. The estimates and assumptions used in the
accompanying financial statements are based upon
the Management's evaluation of the relevant facts
and circumstances as at the date of the financial
statements. Actual results could differ from these
estimates. Estimates and underlying assumptions
are reviewed on a periodic basis. Revisions to
accounting estimates, if any, are recognized in
the year in which the estimates are revised and in
any future years affected. Refer note 3 for detailed
discussion on estimates and judgments.
2.2 Property, plant and equipment
a) Property, plant and equipment are carried at cost
of acquisition or construction less accumulated
depreciation and/ or accumulated impairment, if
any. The cost includes its purchase price, including
import duties and other non-refundable taxes or
levies (for Leasehold improvements and Vehicles,
Goods and Services Tax is not availed but added to
the cost of acquisition or construction), freight and
any directly attributable cost of bringing the asset to
its working condition for its intended use; any trade
discounts and rebates are deducted in arriving at
the purchase price.
b) Subsequent expenditures related to an item of
property plant and equipment added to its book
value only if they increase the future benefits from
the existing asset beyond its previously assessed
standard of performance.
c) The cost of property, plant and equipment not ready
for their intended use at the balance sheet date are
disclosed as capital work in progress.
d) Advances paid towards the acquisition of property,
plant and equipment, outstanding at each balance
sheet date are disclosed as 'capital advances' under
'long-term loans and advances'.
e) Assets received on amalgamation are recorded at
its fair value.
f) Where a significant component (in terms of cost)
of an asset has an economic useful life shorter than
that of it's corresponding asset, the component is
depreciated over it's shorter life.
Depreciation methods, estimated useful lives
Depreciation is provided on straight line method
over the estimated useful life of property plant
and equipment as per the useful life prescribed
under Part C of Schedule II of the Companies Act,
2013.Leasehold improvements are being amortised
over the duration of the lease, or estimated useful
life of the assets, whichever is lower. Depreciation
on addition to property, plant and equipment's
is provided on pro-rata basis from the date the
assets are ready for intended use. Depreciation on
sale / deletion of property, plant and equipment's
is provided for up to the date of sale, deduction or
discard of property, plant and equipment as the case
may be. In case of impairment, if any, depreciation
is provided on the revised carrying amount of the
asset over its remaining useful life.
Depreciation methods, useful lives and residual
values are reviewed periodically at each financial
year end and adjusted prospectively, as appropriate.
Assets individually costing up to Rupees five
thousand are fully depreciated in the year of
capitalisation.
2.3 Foreign Currency Transactions
(a) Functional and presentation currency
Items included in the financial statements are
measured using the currency of the primary
economic environment in which the entity operates
(‘the functional currency'). The financial statements
are presented in Indian Rupee (INR), which is the
Company's functional and presentation currency.
Foreign currency transactions are recorded in the
reporting currency by applying the exchange rate
between the reporting currency and the foreign
currency at the date of the transaction.
(b) Transactions and balances
On initial recognition, all foreign currency
transactions are recorded by applying to the foreign
currency amount the exchange rate between the
functional currency and the foreign currency at the
date of the transaction. Gains / (losses) arising out
of fluctuation in foreign exchange rate between the
transaction date and settlement date are recognised
in the Statement of Profit and Loss.
All monetary assets and liabilities in foreign
currencies are restated at the year end at the
exchange rate prevailing at the year end and
the exchange differences are recognised in the
Statement of Profit and Loss.
Non-monetary items which are carried 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 denominated
in a foreign currency and measured at fair value are
translated at the exchange rate prevalent at the date
when the fair value was determined.
2.4 Fair value measurement
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 fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the
liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability
accessible to the Company.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the
use of relevant observable inputs and minimizing the use
of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities;
• Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable;
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.
2.5 Revenue Recognition
Revenue is measured at fair value of the consideration
received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances.
Ind AS 115 Revenue from contracts with customers,
outlines a single comprehensive model of accounting for
revenue arising from contracts with customers.
The Company recognises revenue from operations based
on five step model as set out in Ind AS 115:
Step 1: Identify contract(s) with a customer: A Contract
is defined as an agreement between two or more parties
that creates enforceable rights and obligations and sets
out the criteria for every contract that must be met.
Step 2: Identify performance obligations in the contract:
A performance obligation is a promise in a contract with
a customer to transfer a good or service to the customer.
Step 3: Determine the transaction price: The transaction
price is the amount of consideration to which the
Company expects to be entitled in exchange for
transferring promised goods or services to a customer,
excluding amounts collected on behalf of third parties.
Step 4: Allocate the transaction price to the performance
obligations in the contract: For a contract that has more
than one performance obligation, the Company allocates
the transaction price to each performance obligation in
an amount that depicts the amount of Consideration to
which the Company expects to be entitled in exchange
for satisfying each performance obligation.
Step 5: Recognise revenue when the Company satisfies a
performance obligation.
Revenue from sale of goods in the course of ordinary
activities is recognised when the property in the goods
and all significant risks and rewards of their ownership
are transferred to the customer which generally
coincides with delivery to the customers and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of goods
and regarding its collection. The amount recognised
as revenue is exclusive of GST and net of trade and
quantity discounts.
The Company presents revenues net of indirect taxes in
its Standalone Statement of Profit and loss.
Billings in excess of revenue recognized is classified as
contract liabilities (‘Deferred revenue') included in other
current liabilities.
Other Income
Interest Income is recognised on basis of effective
interest method as set out in Ind AS 109 , Financial
Instruments, and where no significant uncertainty as to
measurability or collectability exists.
Interest income is recognised using the time-proportion
method, based on underlying interest rates.
2.6 Taxes
Tax expense for the year, comprising current tax, deferred
tax and minimum alternate tax credit are included in the
determination of the net profit or loss for the year.
(a) Current income tax
Current tax is the amount of tax payable on the
taxable income for the year as determined in
accordance with the provisions of the Income
Tax Act, 1961. Current tax assets and liabilities are
measured at the amount expected to be recovered
or paid to the taxation authorities. Current tax assets
and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either
to settle on a net basis, or to realize the asset and
settle the liability simultaneously.
(b) Minimum Alternate Tax
Minimum Alternate Tax (MAT) under the provisions
of the Income Tax Act, 1961 is recognised as current
tax in the Statement of Profit and Loss. The credit
available under the Income tax act, in respect of
MAT paid is recognised as asset only when and to
the extent there is convincing evidence that the
Company will pay normal income tax during the
period for which the MAT credit can be carried
forward for set- off against the normal tax liability.
MAT credit recognised as an asset is reviewed
at each Balance Sheet date and written down
to the extent the aforesaid convincing evidence
no longer exists.
(c) Deferred tax
Deferred income tax is provided in full, using the
balance sheet approach, on temporary differences
arising between the tax bases of assets and liabilities
and their carrying amounts in financial statements.
Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability
in a transaction other than a business combination
that at the time of the transaction affects neither
accounting profit nor taxable profit (tax loss).
Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially
enacted by the end of the year and are expected to
apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all
deductible temporary differences and unused
tax losses only if it is probable that future taxable
amounts will be available to utilize those temporary
differences and losses.
Management periodically evaluates positions taken
in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on
the basis of amounts expected to be paid to the
tax authorities.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority.
Current and deferred tax is recognized in Statement
of Profit and Loss, except to the extent that it
relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is
also recognised in other comprehensive income or
directly in equity, respectively.
2.7 Leases
As a lessee
The Company's lease asset classes primarily consist of
leases for buildings. The Company assesses whether a
contract contains a lease at the 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 (ROU) asset and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of 12
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.
As a lessor
Leases for which the Company is a lessor is classified as a
finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease.
All other leases are classified as operating leases.
For operating leases, rental income is accounted for on
a straight-line basis or another systematic basis over
the lease terms based on agreement/contract entered
into with the third party and is included in revenue in the
Statement of Profit or Loss due to its operating nature.
Leases are classified as finance leases when substantially
all of the risks and rewards of ownership transfer from
the company to the lessee. Amounts due from lessees
under finance leases are recorded as receivables at the
companies net investment in the leases. Finance lease
income is allocated to accounting periods so as to reflect
a constant periodic rate of return on the net investment
outstanding in respect of the lease.
Leases where the lessor effectively retains substantially all
the risks and rewards of ownership of the leased asset are
classified as operating leases. Operating lease payments
are recognised as an expense in the statement of profit
and loss on a straight-line basis over the lease term.
2.8 Inventories
Inventories are valued at lower of cost (weighted average
method) and net realisable value after providing for
obsolescence and other losses, where considered
necessary. For traded goods purchases costs include
cost of purchase and other costs bringing inventory to
there location.
Stock of raw materials, stores, spares, bought out
items and certain components are valued at cost less
amounts written down.
Stock of certain aero structures, components, work-in¬
progress and finished goods are valued at lower of cost
and net realisable value based on technical estimate of
the percentage of work completed.
In determining the cost of raw materials, components,
stores, spares and loose tools, the First In First Out (FIFO)
method is used. Cost of inventory comprises all costs of
purchase, duties, taxes (other than those subsequently
recoverable from tax authorities) and all other costs
incurred in bringing the inventory to their present
location and condition.
Work-in-progress, manufactured finished goods
and traded goods are valued at the lower of cost
and net realisable value. Cost of work -in-progress
and manufactured finished goods is determined on
the weighted average basis and comprises direct
material, cost of conversion and other costs incurred
in bringing these inventories to their present location
and condition. Cost of traded goods is determined on a
weighted average basis.
Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated cost of
completion and the estimated costs necessary to make
the sale. The comparison of cost and net realizable value
is made on item by item basis.
2.9 Impairment of non-financial assets
The Company assesses at each year end 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 asset's
recoverable amount and 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 Statement of Profit and
Loss and reflected in an allowance account. When the
Company considers that there are no realistic prospects
of recovery of the asset, the relevant amounts are written
off. If the amount of impairment loss subsequently
decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised,
then the previously recognised impairment loss is
reversed through Statement of Profit and Loss.
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").
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