Note 2.1 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 (INR 00,000), except when otherwise indicated.
The statement of cash flow has been prepared under the indirect method as set out in Indian Accounting Standard
(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 upto the realisation 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 which are recognised in the period in which
they are determined.
iv Key estimates and assumptions
The key estimates and 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 statements.
a. Contract estimates
The Company, being a part of construction industry, prepares budgets in respect of each project to compute
project profitability. The two major components of contract estimate are 'claims arising during construction
period' (described below) and 'budgeted costs to complete the contract'. While estimating these components
various assumptions are considered by the management such as (i) Work will be executed in the manner
expected so that the project is completed timely (ii) consumption norms will remain same (iii) Assets will
operate at the same level of productivity as determined (iv) Wastage will not exceed the normal % as
determined etc. (v) Estimates for contingencies (vi) There will be no change in design and the geological
factors will be same as communicated and (vii) Price escalations etc. Due to such complexities involved in the
budgeting process, contract estimates are highly sensitive to changes in these assumptions. All assumptions
are reviewed at each reporting date.
b. Recoverability of claims
The Company has claims in respect of cost over-run arising due to client caused delays, suspension of projects,
deviation in design and change in scope of work etc., which are at various stages of negotiation/discussion
with the clients or under arbitration. The realisability of these claims are estimated based on contractual
terms, historical experience with similar claims as well as legal opinion obtained from internal and external
experts, wherever necessary. Changes in facts of the case or the legal framework may impact realisability of
these claims.
c. Valuation of investment in/ loans to subsidiaries/ joint ventures
The Company has performed valuation for its investments in equity of subsidiaries / joint ventures for
assessing whether there is any impairment in the fair value. When the fair value of investments in subsidiaries
cannot be measured based on quoted prices in active markets, their fair value is measured using valuation
techniques including the discounted cash flow model. Similar assessment is carried out for exposure in
the nature of loans and interest receivable thereon. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair
values. Judgements include considerations of inputs such as expected earnings in future years, liquidity risk,
credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of
these investments.
d. Deferred tax assets
In assessing the realisability 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 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.
e. Defined benefit plans
The cost and present value of the gratuity obligation and compensated absences are determined using
actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, future salary increases,
attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature,
a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed
at each reporting date.
f. Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as result of a past event and it is
probable that the outflow of resources will be required to settle the obligation, in respect of which a reliable
estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current
best estimates. Contingent liabilities are not recognised in the financial statements. Contingent assets are
disclosed where an inflow of economic benefits is probable.
v Fair value measurement
The Company measures financial instruments, at fair value at each balance sheet date. (Refer Note 33)
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.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximising the use of relevant observable inputs and minimising 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 prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based
on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which
are required to be remeasured or re-assessed as per the Company's accounting policies. For this analysis, the
Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
The Management also compares the change in the fair value of each asset and liability with relevant external
sources to determine whether the change is reasonable.
vi Property, Plant and Equipment
Property, Plant and Equipment are stated at cost of acquisition including attributable interest and finance costs,
if any, till the date of acquisition/ installation of the assets less accumulated depreciation and accumulated
impairment losses, if any.
Subsequent expenditure relating to Property, Plant and Equipment is capitalised only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost of the item can be
measured reliably. All other repairs and maintenance costs are charged to the Statement of Profit and Loss as
incurred. The cost and related accumulated depreciation are eliminated from the financial statements, either on
disposal or when retired from active use and the resultant gain or loss are recognised in the Statement of Profit
and Loss.
vii Capital work-in-progress
Capital work-in-progress, representing expenditure incurred in respect of assets under development and not
ready for their intended use, are carried at cost. Cost includes related acquisition expenses, construction cost,
related borrowing cost and other direct expenditure.
viii Intangible assets
Intangible assets comprise of license fees and implementation cost for software and other application software
acquired / developed for in-house use. These assets are stated at cost, only when it is probable that future
economic benefits associated with the item will flow to the Company and the cost of the item can be measured
reliably, less accumulated amortisation and accumulated impairment losses, if any.
ix Asset classified as held for sale
Assets that are available for immediate sale and where the sale is highly probable of being completed within one
year from the date of classification are considered and classified as assets held for sale. Assets classified as held
for sale are measured at the lower of carrying amount or fair value less costs to sell. The determination of fair
value less costs to sell includes use of management estimates and assumptions. The fair value of asset held for
sale has been estimated using observable inputs such as price quotations.
x Depreciation/ Amortisation
Depreciation is provided for property, plant and equipment so as to expense the cost less residual value over their
estimated useful lives on a straight line basis, except Building and sheds which is depreciated using WDV method.
Intangible assets are amortised from the date they are available for use, over their estimated useful lives. The
estimated useful lives are as mentioned below:
A Useful lives of asset classes determined by management estimate, which are generally lower than those
prescribed under Schedule II to the Act are supported by internal technical assessment of useful lives.
The estimated useful life and residual values are reviewed at each financial year end and the effect of any change
in the estimates of useful life/residual value is accounted on prospective basis.
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.
Depreciation on additions is provided on a pro-rata basis, from the date on which asset is ready to use.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are accounted
in the Statement of Profit and Loss under Other income and Other expenses.
xi Investments in subsidiaries, joint ventures and associates
Investments in subsidiaries, joint ventures and associates are recognised at cost as per Ind AS 27 except where
investments accounted for at cost shall be accounted for in accordance with Ind AS 105, Non-current Assets Held
for Sale and Discontinued Operations, when they are classified as held for sale.
xii 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
i) Initial Recognition
In the case of financial assets, not recorded at fair value through profit or loss (FVPL), financial assets
are recognised initially at fair value plus transaction costs that are directly 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.
ii) Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
- Financial Assets at Amortised Cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within
a business model with an objective to hold these 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 on the principal amount outstanding. Interest income from
these financial assets is included in finance income using the effective interest rate ("EIR") method.
Impairment gains or losses arising on these assets are recognised in the Statement of Profit and Loss.
- Financial Assets Measured at Fair Value
Financial assets are measured at fair value through OCI if these financial assets are held within a
business model with an objective to hold these assets in order to collect contractual cash flows or to
sell these financial assets and the contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest revenue and foreign exchange gains and losses which are recognised in the
Statement of Profit and Loss.
In respect of equity investments (other than for investment in subsidiaries and associates) which
are not held for trading, the Company has made an irrevocable election to present subsequent
changes in the fair value of such instruments in OCI. Such an election is made by the Company on
an instrument by instrument basis at the time of transition for existing equity instruments/ initial
recognition for new equity instruments.
Financial asset not measured at amortised cost or at fair value through OCI is carried at FVPL.
Interest free intercompany loans
Intercompany loans to subsidiaries/ jointly controlled entities for which settlement is neither
planned nor likely to occur in the foreseeable future and in substance is a part of the Company's
net investment in those subsidiaries/ jointly controlled entities, are stated at cost less accumulated
impairment losses, if any, and forms part of investment in other equity of these entities.
iii) Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies the expected credit loss ("ECL") model for
measurement and recognition of impairment loss on financial assets and credit risk exposures.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade
receivables. Simplified approach does not require the Company to track changes in credit risk. Rather, it
recognises impairment loss allowance based on lifetime ECL at each reporting date, right from its initial
recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines
that whether there has been a significant increase in the credit risk since initial recognition. If credit
risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However,
if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality
of the instrument improves such that there is no longer a significant increase in credit risk since initial
recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the group in accordance with
the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted
at the original EIR. Lifetime ECL are the expected credit losses resulting from all possible default events
over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which
results from default events that are possible within 12 months after the reporting date.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/
expense in the Statement of Profit and Loss.
iv) De-recognition of Financial Assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the
asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Company recognizes its retained interest in the assets and
an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial asset and also recognises a collateralised borrowing
for the proceeds received.
b Equity Instruments and Financial Liabilities
Financial liabilities and equity instruments issued by the Company are classified according to the substance of
the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
i) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments which are issued for cash are recorded at the proceeds
received, net of direct issue costs. Equity instruments which are issued for consideration other than cash
are recorded at fair value of the equity instrument.
ii) Financial Liabilities
- Initial Recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and
borrowings and payables 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.
- Subsequent Measurement
The measurement of financial liabilities depends on their classification, as described below
- Financial liabilities at FVPL
Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at FVPL. Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held
for trading are recognised in the Statement of Profit and Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment
to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a
payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts
are recognised initially as a liability at fair value, adjusted for transaction costs that are directly
attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher
of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the
amount recognised less cumulative amortisation. Amortisation is recognised as finance income in
the Statement of Profit and Loss.
- Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the EIR method. Any difference between the proceeds (net of transaction
costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings
in the Statement of Profit and Loss.
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.
Where the Company issues optionally convertible debenture, the fair value of the liability portion
of such debentures is determined using a market interest rate for an equivalent non-convertible
debenture. This value is recorded as a liability on an amortised cost basis until extinguished on
conversion or redemption of the debentures. The remainder of the proceeds is attributable to the
equity portion of the instrument. This is recognised and included in shareholders' equity (net of
income tax) and are not subsequently re-measured.
Where the terms of a financial liability is re-negotiated and the Company issues equity instruments
to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised
in the Statement of Profit and Loss; measured as a difference between the carrying amount of the
financial liability and the fair value of equity instrument issued.
- De-recognition of Financial Liabilities
Financial liabilities are de-recognised when the obligation specified in the contract is discharged,
cancelled or expired. 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 de-recognition of the original liability and recognition of
a new liability. The difference in the respective carrying amounts is recognised in the Statement of
Profit and Loss.
c Offsetting 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.
xiii Employee Benefits
a Defined Contribution Plan
Contributions to defined contribution schemes such as provident fund, employees' state insurance, labour
welfare fund and superannuation scheme are charged as an expense based on the amount of contribution
required to be made as and when services are rendered by the employees. Company's provident fund
contribution, in respect of certain employees, is made to a government administered fund and charged as
an expense to the Statement of Profit and Loss. The above benefits are classified as Defined Contribution
Schemes as the Company has no further obligations beyond the monthly contributions.
b Defined Benefit Plan
In respect of certain employees, provident fund contributions are made to a trust administered by the
Company. The interest rate payable to the members of the trust shall not be lower than the statutory rate
of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous
Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Accordingly, the contribution
paid or payable and the interest shortfall, if any, is recognised as an expense in the period in which services
are rendered by the employee.
The Company also provides for gratuity which is a defined benefit plan the liabilities of which is determined
based on valuations, as at the balance sheet date, made by an independent actuary using the Projected
Unit Credit Method. Re-measurement, comprising of actuarial gains and losses, in respect of gratuity are
recognised in the OCI, in the period in which they occur and is not eligible to be reclassified to the Statement
of Profit and Loss in subsequent periods. Past service cost is recognised in the Statement of Profit and Loss
in the year of plan amendment or curtailment. The classification of the Company's obligation into current and
non-current is as per the actuarial valuation report.
c Leave entitlement and compensated absences
Accumulated leave which is expected to be utilised within next twelve months, is treated as short-term
employee benefit. Leave entitlement, other than short term compensated absences, are provided based on
a actuarial valuation, similar to that of gratuity benefit. Re-measurement, comprising of actuarial gains and
losses, in respect of leave entitlement are recognised in the Statement of Profit and Loss in the period in
which they occur.
d Short-term Benefits
Short-term employee benefits such as salaries, wages, performance incentives etc. are recognised as expenses
at the undiscounted amounts in the Statement of Profit and Loss of the period in which the related service
is rendered. Expenses on non-accumulating compensated absences is recognised in the period in which the
absences occur.
xiv Inventories
The stock of construction materials, stores, spares and embedded goods and fuel is valued at cost or net realisable
value, whichever is lower. Cost is determined on weighted average basis and includes all applicable cost of bringing
the goods to their present location and condition. Net realisable value is estimated selling price in ordinary course
of business less the estimated cost necessary to make the sale.
xv Cash and Cash Equivalents
Cash and cash equivalents in the Balance Sheet comprises of cash at banks and on hand and short-term deposits
with an original maturity of three month or less, which are subject to an insignificant risk of changes in value.
xvi Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker regularly monitors and reviews the operating result of the
whole Company as one segment of "Engineering and Construction". Thus, as defined in Ind AS 108 "Operating
Segments”, the Company's entire business falls under this one operational segment and hence the necessary
information has already been disclosed in the Balance Sheet and the Statement of Profit and Loss.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of
funds. Also, the EIR amortisation is included in finance costs.
Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial
period of time to get ready for its intended use are added to the cost of such asset to the extent they relate to
the period till such assets are ready to be put to use. All other borrowing costs are expensed in the Statement of
Profit and Loss in the period in which they occur.
xviii Foreign Exchange Translation of Foreign Projects and Accounting of Foreign Exchange Transaction
a Initial Recognition
Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign
currency amount the exchange rate between the reporting currency and the foreign currency at the date of
the transaction. However, for practical reasons, the Company uses a monthly average rate if the average rate
approximate the actual rate at the date of the transactions.
b Conversion
Monetary assets and liabilities denominated in foreign currencies are reported using the closing rate at the
reporting date. 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.
c Treatment of Exchange Difference
Exchange differences arising on settlement/ restatement of short-term foreign currency monetary assets and
liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.
Exchange differences arising on long-term foreign currency monetary items related to acquisition of a
Property, Plant and Equipment are capitalised and depreciated over the remaining useful life of the Property,
Plant and Equipment and exchange differences arising on all other long-term foreign currency monetary items
are accumulated in the "Foreign Currency Monetary Translation Reserve” and amortised over the remaining
life of the concerned monetary item.
On transition to Ind AS, the Company has opted to continue with the accounting for exchange differences
arising on long-term foreign currency monetary items, outstanding as on the transition date, as per previous
GAAP. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a
fixed asset are capitalised and depreciated over the remaining useful life of the asset.
xix Revenue Recognition
The Company derives revenues primarily from providing engineering and construction services.
Effective 1 April 2018, the Company adopted Ind AS 115 "Revenue from Contracts with Customers” using the
cumulative catch-up transition method, applied to contracts that were not completed as of 1 April 2018. In
accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively
adjusted. The effect on adoption of Ind AS 115 was insignificant. On account of adoption of Ind AS 115, unbilled
work-in-progress (contract asset) as at 31 March 2019 has been considered as non-financial asset and accordingly
classified under other current assets.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that
reflects the consideration we expect to receive in exchange for those products or services.
Revenue from engineering and construction services, where the performance obligations are satisfied over time
and where there is no uncertainty as to measurement or collectability of consideration, is recognized as per
the percentage-of-completion method. The Company determines the percentage-of-completion on the basis
of direct measurements of the value of the goods or services transferred to the customer to date relative to
the remaining goods or services promised under the contract. When there is uncertainty as to measurement or
ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled work-in-progress)
while invoicing in excess of revenues are classified as contract liabilities (which we refer to as due to customers).
'Advance payments received from contractee for which no services are rendered are presented as 'Advance from
contractee'.
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.
xx Other Income
a. Interest Income
Interest income is accrued on a time proportion basis, by reference to the principal outstanding and the
applicable Effective Interest Rate (EIR).
b. Dividend Income
Dividend is recognised when the right to receive the payment is established, which is generally when
shareholders approve the dividend.
c. Other Income
Other items of income are accounted as and when the right to receive such income arises and it is probable
that the economic benefits will flow to the Company and the amount of income can be measured reliably.
xxi Interest in Joint Arrangements
As per Ind AS 111 - Joint Arrangements, investment in Joint Arrangement is classified as either Joint Operation
or Joint Venture. The classification depends on the contractual rights and obligations of each investor rather than
legal structure of the Joint Arrangement. The Company classifies its Joint Arrangements as Joint Operations.
The Company recognises its direct right to assets, liabilities, revenue and expenses of Joint Operations and its
share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in
the financial statements under the appropriate headings.
xxii Income Tax
Income tax expense comprises of current tax expense and the net change in the deferred tax asset or liability
during the year. Current and deferred taxes are recognised in the Statement of Profit and Loss, except when they
relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current
and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
a Current Income Tax
Current income tax is recognised based on the estimated tax liability computed after taking credit for
allowances and exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and
liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at
the reporting date.
b Deferred Income Tax
Deferred tax is determined by applying the Balance Sheet approach. Deferred tax assets and liabilities are
recognised for all deductible temporary differences between the financial statements' carrying amount of
existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured
using the enacted tax rates or tax rates that are substantively enacted at the Balance Sheet date. The effect
on deferred tax assets and liabilities of a change in tax rates is recognised in the period that includes the
enactment date. Deferred tax assets are only recognised to the extent that it is probable that future taxable
profits will be available against which the temporary differences can be utilised. Such assets are reviewed at
each Balance Sheet date to reassess realisation.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities. 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 realise the asset and settle the liability
simultaneously.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India,
to the extent it would be available for set off against future current income tax liability. Accordingly, MAT
is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is
probable that the future economic benefit associated with the asset will be realised.
xxiii Leases
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership over the leased
term, 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 except where the lease payments are structured to
increase in line with expected general inflation. Assets acquired on finance lease are capitalised at fair value or
present value of minimum lease payment at the inception of the lease, whichever is lower.
xxiv Impairment of Non-Financial Assets
As at each Balance Sheet date, the Company assesses whether there is an indication that a non-financial asset
may be impaired and also whether there is an indication of reversal of impairment loss recognised in the previous
periods. If any indication exists, or when annual impairment testing for an asset is required, the Company
determines the recoverable amount and impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount.
Recoverable amount is determined:
- In case of an individual asset, at the higher of the assets' fair value less cost to sell and value in use; and
- In case of cash generating unit (a group of assets that generates identified, independent cash flows), at the
higher of cash generating unit's fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax
discount rate that reflects current market assessments of the time value of money and risk specified to the asset.
In determining fair value less cost to sell, recent market transaction are taken into account. If no such transaction
can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement
of Profit and Loss, except for properties previously revalued with the revaluation taken to OCI. For such properties,
the impairment is recognised in OCI up to the amount of any previous revaluation.
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 the Statement of Profit and Loss.
xxv Trade receivables
A receivable is classified as a 'trade receivable' if it is in respect of the amount due on account of goods sold or
services rendered in the normal course of business. Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the EIR method, less provision for impairment.
xxvi Trade payables
A payable is classified as a 'trade payable' if it is in respect of the amount due on account of goods purchased or
services received in the normal course of business. These amounts represent liabilities for goods and services
provided to the Company prior to the end of the financial year which are unpaid. These amounts are unsecured
and are usually settled as per the payment terms stated in the contract. Trade and other payables are presented
as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised
initially at their fair value and subsequently measured at amortised cost using the EIR method.
xxvii Earnings Per Share
Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity
shareholders of the Company by the weighted average number of equity shares outstanding during the period.
The weighted average number of equity shares outstanding during the period and for all periods presented is
adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed
the number of equity shares outstanding, without a corresponding change in resources.
Diluted earnings per share is computed by dividing the net profit or loss for the period attributable to the equity
shareholders of the Company and 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).
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