2 Significant accounting policies
2.1 Basis of preparation
(i) Statement of compliance
These financial statements have been prepared in accordance with Indian Accounting Standards ('Ind AS') as per
Companies (Indian Accounting Standards) Rules, 2015 (as amended) notified under Section 133 of the Companies Act,
2013 (the 'Act' ) read with Companies (Indian Accounting Standards Rules, 2015; and the other relevant provisions of the
Act and Rules there under.
(ii) Functional and Presentation Currency
These financial statements are presented in Indian rupees, which is the functional currency of the Company. All financial
information presented in Indian rupees has been rounded to the nearest lacs, except otherwise indicated.
(iii) Basis of measurement
These Financial statements are prepared under the historical cost convention unless otherwise indicated.
(iv) Use of Estimates and Judgements
The preparation of financial statements in accordance with Ind AS requires management to use of certain critical
accounting estimates, judgements and assumptions considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the year. Management believes that the estimates
used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these
estimates and the differences between the actual results and the estimates are recognised in the periods in which the
results are known/ materialise. Estimates and underlying assumptions are reviewed on an ongoing basis.
2.2 Current versus non-current classification
The Company presents assets and liabilities in its Balance Sheet based on current versus non-current classification.
An asset is classified as current when it is:
a) Expected to be realized or intended to sold or consumed in normal operating cycle,
b) Held primarily for the purpose of trading,
c) Expected to be realized within twelve months after the reporting period, or
d) 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 other assets are classified as non-current.
A liability is classified as current when:
a) it is expected to be settled in normal operating cycle,
b) it is held primarily for the purpose of trading,
c) it is due to be settled within twelve months after the reporting period
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period.
The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current
assets and liabilities.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The Company operates in one reportable business segment i.e. "Solar systems and Trading in Industrial
Goods".
2.4 Foreign Currency Transactions / Translations
In preparing the financial statements of the Company, transactions in currencies other than the Company's functional
currency (i.e. foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the
end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at
that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate as at the date of initial transactions.
Exchange differences on monetary items are recognised in the Statement of Profit and Loss in the period in which they
arise.
2.5 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow 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 defined terms of payment and excluding
taxes or duties collected on behalf of the government.
The specific recognition criteria described below must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have
passed to the buyer. Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns and allowances, trade discounts and volume rebates.
Income from Services
Revenues resulting from services rendered by the Company are recognized over the period of the contract as and when
services are rendered in accordance with the terms of the underlying contracts. The Company collects service tax / Goods
and Service Tax (GST) on behalf of the government and, therefore, it is not an economic benefit flowing to the Company.
Hence, it is excluded from revenue.
Interest income
Revenue is recognized using effective interest rate on a time proportion basis taking into account the amount outstanding
and the rate applicable. Interest income is included under the head "Other income" in the statement of profit & loss.
2.6 Income Tax
Income tax expense comprises current tax and deferred tax. It is recognised in Statement of Profit and Loss except to the
extent that it relates items recognised directly in equity or in OCI.
Current tax:
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any
adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or
substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
i) has a legally enforceable right to set off the recognised amounts; and
ii) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes (including those arising from adjustments such
as unrealised profit on inventory etc.).
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax
rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on
the same taxable entity.
Minimum Alternate Tax ('MAT') credit entitlement is generally recognised as a deferred tax asset if it is probable (more
likely than not) that MAT credit can be used in future years to reduce the regular tax liability.
2.7 Impairment of non-financial assets
The carrying values of assets at each balance sheet date are reviewed for impairment if any indication of impairment
exists. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for
such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the
asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by
discounting the future cash flows to their present value based on an appropriate discount rate.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier
accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the
Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case
of revalued assets, such reversal is not recognised.
2.8 Inventories
Raw materials, components, stores and spares - Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written down below cost if the finished products in which they
will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale. Excess and obsolete inventories are fully provided for based on the age
and usage pattern of individual items in inventory. Inventory items not consumed in the trailing twelve months are
considered obsolete. Management also identifies specific items that may be unusable or obsolete, which are written
down regardless of age or usage pattern.
A. Financial Assets
Classification
On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value
through other comprehensive income or fair value through profit or loss on the basis of its business model for managing
the financial assets and the contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value
plus transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets
that require delivery of assets within a time frame established by regulation or convention in the market place (regular
way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Financial assets at amortised cost
A 'financial asset' is measured at the amortised cost if both the following conditions are met:
i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and
interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest
rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are
an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The
losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to
trade and other receivables.
Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all
changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset ) is primarily derecognised (i.e. removed from the
Company's financial statements) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either:
i) the Company has transferred substantially all the risks and rewards of the asset, or
ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
Company continues to recognise the transferred asset to the extent of the Company's continuing involvement. In that
case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Company has retained.
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition
of impairment loss on the following financial assets and credit risk exposure:
i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities,
deposits, and bank balance.
ii) trade receivables.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables which do
not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
B. Financial Liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities
measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently
measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at
amortised cost (loans and borrowings, and payables), or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative
financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships
as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss. Financial liabilities
designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and
only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to
changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to Statement of Profit
and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of
such liability are recognised in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigatethe
risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value
is positive and as financial liabilities when the fair value is negative.
The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the Statement of Profit
and Loss.
2.10 Property, plant and equipment
Recognition and Measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if
any. The cost of an item of property, plant and equipment comprises:
-its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and
rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by Management.
- the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the
obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item
during a particular period for purposes other than to produce Inventories during that period.
- income and expenses related to the incidental operations, not necessary to bring the item to the location and condition
necessary for it to be capable of operating in the manner intended by management, are recognised in Statement of Profit
and Loss. If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
The Company has elected to continue with the carrying value of all its property, plant and equipment as recognized in the
financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as the deemed
cost as at the transition date pursuant to the exemption under Ind AS 101.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of
direct costs, related incidental expenses and attributable interest.
Subsequent Expenditure:
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.
Depreciation:
The Company is providing depreciation based on straight line method at rate based on useful life of assets as prescribed in
the Companies Act, 2013.
Further, Schedule II allows Companies to use higher/lower useful lives and residual values if such useful lives and residual
values can be technically supported and justification for difference is disclosed in the financial statements. The
management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual
values of fixed assets.
Depreciation method, useful live and residual values are reviewed at each financial year end and adjusted if appropriate.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for
use (disposed of).
2.11 Intangible assets
Recognition and measurement
Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible
asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently
recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its
intended use.
The Company has elected to continue with the carrying value of all its intangible assets as recognized in the standalone
financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as the deemed
cost as at the transition date pursuant to the exemption under Ind AS 101.
Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.
Amortisation methods and periods
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an
intangible asset when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and
the asset is available for use. It is amortised over the period of expected future sales from the related project, not
exceeding ten years. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms
part of carrying value of another asset.
During the period of development, the asset is tested for impairment annually.
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