1.1. BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PREPARTION OF FINANCIAL STATEMENTS
1.1 Statement of Compliance
These unancial statements have been prepared in accordance with the Indian Accounting Standards
(“Ind AS”) as prescribed by Ministry of Corporate Auairs pursuant to Section 133 of the Companies
Act, 2013 (“the Act”), read with the Companies (Indian Accounting Standards) Rules, 2015 (as
amended), other relevant provisions of the Act and other accounting principles generally accepted
in India.
1.2 Basis of Measurement
The unancial statements have been prepared on historical cost convention, except for following:
• Financial assets and liabilities (including derivative instruments ) that are measured at fair
value/amortised cost;
• Non-current assets held for sale are measured at the lower of the carrying amount and fair
value less cost to sell;
1.3 Functional and Presentation Currency
The unancial statements have been presented in Indian Rupees (Rs.), which is also the Company’s
functional currency. All unancial information presented in (Rs.) has been rounded ou to the nearest
Rupee as per the requirements of Schedule III, unless otherwise stated.
1.4 Use of Estimates and Judgments
The preparation of unancial statements require judgments, estimates and assumptions to be made
that auect the reported amount of assets and liabilities including contingent liabilities on the date
of the unancial statements and the reported amount of revenues and expenses during the reporting
period. Diuerence between actual results and estimates are recognized in the period prospectively
in which the results are known/materialised.
1.5 Current Vs. Non-Current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current
classiucation. An asset is classiued as current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized within twelve months after the reporting period ; or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least twelve months after the reporting period.
All the other assets are classified as non current.
A liability is classiued as current when:
• It is expected to be settled in normal operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months as per the reporting period ; or
• There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period.
The Company classiues all other liabilities as non-current.
Deferred tax assets and liabilities are classiued as non-current assets and non-current liabilities
respectively.
(B) SIGNIFICANT ACCOUNTING POLICIES
A summary of the signiucant accounting policies applied in the preparation of the unancial statements
are given below. These accounting policies have been applied consistently to all the periods presented
in the unancial statements.
1.6 Inventories
Inventories are valued at the lower of cost and net realizable value.
• The inventories of materials, stores and consumables etc., are valued at lower of cost and net
realizable value. Cost includes cost of purchase, non-refundable taxes and other costs incurred
in bringing the inventories to their present location and condition. Cost is computed on
weighted average basis.
• Land inventory including plots have been valued at lower of cost or net realisable value. Land
which is under development/in near future is classified as current asset. Land which is held
for undetermined use or for future development is classified as fixed assets.
• Work in progress (Fencing) is valued at cos or net realizable value. Cost includes direct material
and labour and direct expenses.
• Finished Goods: cost includes cost of direct materials and labour and a proportion of
manufacturing overheads based on the normal operating capacity, but excluding borrowing
cost. Cost is determined on weighted average cost basis.
• Traded Goods: cost includes cost or purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined on weighted average
basis.
Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and estimated cost necessary to make the sale.
1.7 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short term
deposits with an original maturity of three months or less, which are subject to an insigniucant risk
of change in value.
1.8 Income Tax
Income tax comprises current and deferred tax. It is recognized in the statement of prout and loss
except to the extent that it relates to an item recognized directly in equity or in other
comprehensive income.
a) Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
‘profit before tax’ as reported in the statement of profit and loss because of items of income
or expense that are taxable or deductible in other years and items that are never taxable or
deductible. The Company’s current tax is calculated using tax rates that have been enacted
or substantively enacted, by the end of the reporting period.
b) Deferred Tax
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to
apply to 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 by the end of the reporting period.
• Deferred tax is recognized in respect of temporary diuerences between the carrying amounts
of assets and liabilities for unancial reporting purposes and the corresponding amounts
used for taxation purposes (i.e. tax base). Deferred tax is also recognized for carry forward
of unused tax losses and unused tax credits.
• Deferred tax assets are recognized to the extent that it is probable that taxable prout will
be available against which the deductible temporary diuerences, and the carry forward of
unused tax credits and unused tax losses can be utilised.
• The carrying amount of deferred tax assets is reviewed at the end of each reporting
period. The Company reduces the carrying amount of a deferred tax asset to the extent
that it is no longer probable that suucient taxable prout will be available to allow the
beneut of part or that entire deferred tax asset to be utilised. Any such reduction is
reversed to the extent that it becomes probable that suucient taxable prout will be available.
• Deferred tax relating to items recognised outside the statement of prout and loss is recognised
either in other comprehensive income or in equity. Deferred tax items are recognized in
correlation to the underlying transaction either in other comprehensive income or directly
inequity.
• Deferred tax assets and liabilities are ouset when there is a legally enforceable right to
setou current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its current
tax assets and liabilities on a net basis.
• Minimum alternate tax (MAT) paid in a year is charged to the statement of profit & 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
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 in accordance with the guidance
note on accounting for Credit Available in respect of Minimum Alternate Tax under the
Income tax Act, 1961, 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 to the extent the company does not have convincing evidence that it
will pay normal tax during the specified period.
1.9 Property, Plant and Equipment
a) Recognition and Measurement
• Property, plant and equipment held for use in the and supply of goods or services, or for
administrative purposes, are stated in the balance sheet at cost, less any accumulated
depreciation/ amortization and accumulated impairment losses (if any).
• Cost of an item of property, plant and equipment acquired comprises its purchase price,
including non-refundable import duties and taxes, as per deducting any trade discounts
and rebates, borrowing cost, if capitalization criteria is met and any directly attributable
costs of bringing the assets to its working condition and location for its intended use and
present value of any estimated cost of dismantling and removing the item and restoring the
site on which it is located. the cost includes excise duty, value added tax and service tax
etc However, w.e.f 01.07.17, G.ST. is excluded to the extent credit of the duty or tax is
availed of.
• Prout or loss arising on the disposal of property, plant and equipment are recognized in the
statement of prout and loss. Gain or losses on disposals are determined by comparing
proceeds with the carrying amount. These are included in the Statement of Profit and Loss
within Other Gain/Losses.
b) Subsequent Expenditure
• Subsequent costs are included in the asset’s carrying amount, only when it is probable that
future economic beneuts associated with the cost incurred will uow to the Company and
the cost of the item can be measured reliably. The carrying amount of any component
accounted for any component accounted for as a separate asset is derecognised when
replaced.
• Major inspection /repairs /overhauling expenses are recognized in the carrying amount of
the item of property, plant and equipment as a replacement if the recognition criteria are
satisued. Any un amortised part of the previously recognised expenses of similar nature is
derecognised.
c) Depreciation and Amortisation-Tangible Assets
• Depreciation on property, plant and equipment is provided on straight line method at the
rates determined based on the useful lives of respective assets as prescribed in the Schedule
II of the Act.
• Each part of items of property, plant and equipment with a cost that is signiucant in relation
to the total cost of the item is depreciated separately.
• Depreciation on additions (disposals) during the year is provided on a pro-rata basis i.e.,
from (up to) the date on which asset is ready for use (disposed of).
• Depreciation method, useful lives and residual values are reviewed at each unancial year-
end and adjusted, if appropriate.
• The residual value for all the assets are retained at 5% of the cost
• Useful life of the Tangible assets as per Part C of Schedule II of the Act read with notification
dated 29.08.2014 of Ministry of corporate affairs is as follows :
d) Reclassification to Investment Property
When the use of a property changes from owner-occupied to investment property, the property
is re classiued as investment property only when it has substantial value on the date of
reclassiucation and if so it is reclassified at its carrying amount. During the year, the Company
reclassified a major asset from Property, Plant and Equipment (PPE) to Investment Property, in
accordance with the provisions of Indian Accounting Standard (Ind AS) 40 - Investment Property.
This reclassification was necessitated as the property is now held to earn rentals and is not
intended for use in the production or supply of goods or services, or for administrative purposes.
The asset met the recognition criteria of an investment property as defined under Ind AS 40.
The carrying amount of the asset at the date of transfer was reviewed. All necessary disclosures
relating to the reclassification, including the nature, reason, and impact of the change, have
been appropriately made in the financial statements. Further, the Company confirms that the
lease arrangements for the said property are on an arm’s length basis and consistent with the
Company’s accounting policies.
1.10Amortization of Intangible Assets
Intangible assets acquired are accounted at their acquisition cost and are amortised over its
useful life.
1.11 Impairment of Non Financial Assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which these are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets or groups of assets (cash
generating units).Non-financial assets other than goodwill that suffered impairment are reviewed
for possible reversal of the impairment at the end of each reporting period.
1.12 Leases
At inception of contract, the Company assesses whether the Contract is, or contains, a lease. 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. At inception or on reassessment
of a contract that contains a lease component, the Company allocates consideration in the contract
to each lease component on the basis of their relative standalone price.
As a lessee
i) Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease. Right-of-
use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct costs incurred, lease payments made
at or before the commencement date less any lease incentives received and estimate of costs
to dismantle. Right- of-use assets are depreciated on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets.
The Company presents right-to-use assets that do not meet the definition of investment property
in ‘Property, plant and equipment’.
ii) Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at
the present value of lease payments to be made over the lease term. In calculating the
present value of lease payments, the Company generally uses its incremental borrowing rate
at the lease commencement date if the discount rate implicit in the lease is not readily
determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. The carrying amount is
remeasured when there is a change in future lease payments arising from a change in index or
rate. In addition, the carrying amount of lease liabilities is remeasured if there is a modification,
a change in the lease term, a change in the lease payments or a change in the assessment of
an option to purchase the underlying asset.
The Company presents lease liabilities under financial liabilities in the Balance Sheet.
iii) Short term leases and leases of low value of assets
The Company applies the short-term lease recognition exemption to its short-term leases. It
also applies the lease of low- value assets recognition exemption that are considered to be
low value. Lease payments on short-term leases and leases of low value assets are recognised
as expense on a straight-line basis over the lease term.
As a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership
of an asset are classified as operating leases. Rental income from operating lease is recognised on
a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and recognised
over the lease term on the same basis as rental income. Contingent rents are recognised as
revenue in the period in which they are earned.
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 Company’s 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.
1.13 Revenue Recognition
• Revenue is recognised to the extent that it is probable that the economic beneuts will uow to
the Company and the revenue can be reliably measured, regardless of when the payment is
being made. Revenue is measured at the fair value of the consideration received or receivable,
taking into account contractually deuned terms of payment and excluding taxes or duties
collected on behalf of the Government.
• The Company recognizes revenue when the amount of revenue can be reliably measured, it is
probable that future economic beneuts will uow to the entity and speciuc criteria have been
met for each of the Company’s activities as described below. The Company bases its estimates
on historical results, taking into consideration the type of customer, the type of transaction
and the speciuc of each arrangement.
a) Sale of Goods
Revenue from the sale of developed plot/land and other rights is recognized when signiucant
risks and rewards of ownership are transferred to customers and the Company retains neither
continuing managerial involvement to the degree usually associated with ownership nor euective
control over the goods sold. Revenue from the sale of goods is measured at the fair value of
the consideration received or receivables, net of returns and allowances., trade discounts
and volume rebates.
b) Sale of Services
Revenue from services is recognized in the accounting period in which the services are rendered
and when invoices are raised.
c) Lease Income
The Company has recognized revenue during the year in accordance with the principles laid
down under Indian Accounting Standard (Ind AS) 115 - Revenue from Contracts with Customers,
and Ind AS 116 - Leases, wherever applicable. Revenue from the sale of goods and services is
recognized when control of the goods or services is 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.
During the year, the Company leased out a significant property that was previously classified
under Property, Plant and Equipment (PPE). Accordingly, this property has been reclassified as
Investment Property in accordance with Ind AS 40 - Investment Property, and rental income
arising from the lease of this property has been recognized as revenue under Ind AS 116 -
Leases, on a straight-line basis over the lease term, unless another systematic basis is more
representative of the time pattern in which the benefit derived from the use of the leased
asset is diminished.
The Company confirms that all lease arrangements have been evaluated to determine their
appropriate classification under Ind AS 116, and lease income is presented separately from
revenue from contracts with customers to ensure proper disclosure and compliance with
applicable standards. All significant judgments and estimates made in applying the revenue
recognition and lease income policies have been appropriately disclosed in the financial
statements.
d) Interest Income
For all debt instruments measured either at amortised cost or at fair value through other
comprehensive income (FVTOCI), interest income is recorded using the euective interest rate
(EIR). EIR is the rate that exactly discounts the estimated future cash receipts over the
expected life of the unancial instrument or a shorter period, where appropriate to the gross
carrying amount of the unancial asset. When calculating the effective interest rate, the Company
estimates the expected cash flows by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call and similar options) but does not consider
the expected credit losses.
e) Dividend Income
Dividend income from investments is recognised when the Company’s right to receive payment
has been established.
1.14 Employee Benefits
a) Short Term Employee Beneuts
Short term employee benefit obligations are measured on an undiscounted basis and are expensed
as the related services are provided. Liabilities for wages and salaries, including non-monetary
beneuts that are expected to be settled wholly within twelve months as at the end of the
period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period.
b) Other Long Term Employee Benefits
The known liabilities for earned leaves that are not expected to be settled wholly within
twelve months are measured as the present value of the expected future payments to be
made in respect of services provided by employees up to the end of the reporting period using
the projected unit credit method.
c) Post Employment Benefits
• Defined Benefits Plans
The known liability, if any, recognised in the balance sheet in respect of defined benefit plans
is the present value of the deuned beneut obligation at the end of the reporting period less
the fair value of plan assets. The Company’s net obligation in respect of defined benefit plans
is calculated separately for each plan by estimating the amount of future benefit that employees
have earned in the current and prior periods. if any liability in a financial year it is charged to
Statement of Profit and Loss account. The deuned beneut obligation if any, is calculated
annually by Actuaries using the projected unit credit method. In other cases, such expenditure
are charged to Statement of Profit and Loss Account considering it as Short Term Benefits
when it is crystalizes.
• Defined Contribution Plan
Defined contributions, if any, to Statutory Schemes are charged to the statement of prout and
loss of the year.
d) Termination Benefit
Expenditure incurred on Voluntary Retirement Scheme is charged to the statement of profit
and loss immediately.
1.15 Foreign Currency Transactions
• Foreign currency transactions are translated into the functional currency using the spot
rates of exchanges at the dates of the transactions.
• Foreign Currency Monetary assets and liabilities denominated in foreign currencies are
translated at the functional currency spot rate of exchanges at the reporting date.
• Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities are recognised in profit or loss in the year in
which they arise.
• Non-monetary items are not retranslated at period end and are measured at historical cost
(translated using the exchange rate at the transaction date).
1.16 Borrowing Cost
• Borrowing Costs consist of interest and other costs that an entity incurs in connection with
the borrowings of funds.
• Borrowing costs directly attributable to the acquisition or construction of a qualifying asset
are capitalised as a part of the cost of that asset that necessarily takes a substantial period of
time to complete and prepare the asset for its intended use. The Company considers a period
of twelve months or more as a substantial period of time.
• All other borrowing costs are recognised in the statement of prout and loss in the period in
which they are incurred.
1.17 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
a) Financial Assets
• Recognition and Initial Measurement:
All financial assets are initially recognised when the Company becomes a party to the contractual
provisions of the instruments. A financial asset is initially measured at fair value plus, in the case
of financial assets not recorded at fair value through profit or loss, transaction costs that are
attributable to the acquisition of the unancial asset.
• Classification and Subsequent Measurement:
For purposes of subsequent measurement, unancial assets are classified in four categories:
- Measured at amortised cost;
- Measured at fair value through other comprehensive income (FVTOCI);
- Measured at fair value through profit or loss (FVTPL); and
- Equity Instruments measured at fair value through other comprehensive income (FVTOCI).
Financial assets are not reclassified subsequent to their initial recognition, except if and in
the period the Company changes its business model for managing financial assets.
- Measured at amortised cost
A financial asset is measured at the amortised cost if both the following conditions are met:
• The asset is held within a business model whose objective is achieved by both collecting
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.
As per initial measurement, such financial assets are subsequently measured at amortised cost
using the effective interest rate (EIR) method.
- Measured at FVTOCI
A financial asset is measured at the FVTOCI if both the following conditions are met:
• The objective of the business model is achieved by both collecting contractual cash uows and
selling the financial assets; and
• The asset’s contractual cash flows represent SPPI.
Financial assets meeting these criteria are measured initially at fair value plus transaction
costs. They are subsequently measured at fair value with any gains or losses arising on
remeasurement recognised in other comprehensive income, except for impairment gains or
losses and foreign exchange gains or losses. Interest calculated using the effective interest
method is recognised in the statement of profit and loss in interest income. Where the asset
is disposed of, the cumulative gain or loss previously accumulated in other comprehensive
income reserve is transferred in the statement of profit and loss.
- Measured at FVTPL
FVTPL is a residual category for unancial assets. Any financial assets, which does not meet the
criteria for categorization as at amortised cost or as FVTOCI, is classiued as FVTPL. In addition,
the Company may elect to designate a unancial asset, which otherwise meets amortised cost
or FVTOCI criteria, as at FVTPL. Financial asset included within the FVTPL category are measured
at fair value with all changes recognised in the statement of profit and loss. Interest / dividend
income on unancial instruments measured at FVTPL are presented separately under other
income.
- Equity Instruments measured at FVTOCI
All equity investments in scope of Ind AS - 109 are measured at fair value. Equity instruments
which are, held for trading are classiued as at FVTPL. For all other equity instruments, the
Company may make an irrevocable election to present subsequent changes in the fair value in
other comprehensive income. The Company makes such election on an instrument-by¬
instrument basis. The classiucation is made on initial recognition and is irrevocable. In case
the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes
on the instrument, excluding dividends, are recognised in the OCI. There is no reclassification
of the amounts from OCI to the statement of prout and loss, even on sale of investment.
• Derecognition
The Company derecognises a unancial asset on trade date only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another entity.
• Impairment of Financial Assets
In accordance with Ind As 109, the company uses Expected Credit Loss (ECL) model, for evaluating
impairment of financial assets other than those measured at fair value through profit and loss
(FVTPL).
Expected credit losses measured through a loss allowance at an amount equal to:
1. ) The 12-months expected credit losses (expected credit losses that result from those default
events on the financial instrument that are possible within 12 months after the reporting
date);or
2. ) Full lifetime expected credit losses (expected credit losses that result from all possible default
events over the life of the financial instrument)
For trade receivables Company applies ‘simplified approach’ which requires expected lifetime
losses to be recognised from initial recognition of the receivables. The Company uses historical
default rates to determine impairment loss on the portfolio of trade receivables. At every
reporting date these historical default rates are reviewed and changes in the forward looking
estimates.
For other assets, the company uses 12 month ECL, if any, to provide for impairment loss where
there is no significant increase in credit risk. If there significant increase in credit risk full
lifetime ECL is used.
b) Financial Liabilities
• Recognition and Initial Measurement
Financial liabilities are classiued, at initial recognition, as at fair value through prout or loss,
loans and borrowings, payables or as derivatives, as appropriate. All unancial liabilities are
recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
• Subsequent Measurement
Financial liabilities are measured subsequently at amortised cost or FVTPL. A financial liability
is classified as FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit or loss. Other financial
liabilities are subsequently measured at amortised cost using the effective interest rate method.
Interest expense and foreign exchange gains and losses are recognised in prout or loss. Any
gain or loss on derecognition is also recognised in prout or loss.
• Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires.
• Offsetting Financial Instruments
Financial assets and liabilities are ouset and the net amount reported in the balance sheet
when there is a legally enforceable right to ouset the recognised amounts and there is an
intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be enforceable
in the normal course of business and in the event of default, insolvency or bankruptcy of the
counterparty.
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