B. MATERIAL ACCOUNTING POLICIES
(i) Statement of Compliance
These financial statements have been prepared in
accordance with Ind AS prescribed under Section 133 of
the Companies Act read with Companies (Indian
Accounting Standards) Rules as amended from time to
time.
(ii) Basis of Accounting
These financial statements have been prepared on the
historical cost basis, except for certain financial
instruments and defined benefits plans which are
measured at fair values at the end of each reporting
period. Historical cost is generally based on the value of
the consideration given in exchange for goods and
services. 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 Functional currency of the Company is in Indian
Rupees. These Financial Information are presented in
Indian Rupees. All amounts have been rounded off to
the nearest Lakhs and rounded off to two decimals
except for Earnings Per Share and where mentioned
otherwise.
All the assets and liabilities have been classified as
current and non-current as per the company's normal
operating cycle and criteria set out in schedule III
(Division II) of the Companies Act 2013.
The Company has ascertained it's operating cycle as 12
months for the purpose of current and non- current
classification of assets and liabilities.
(iii) Use of Estimates
The preparation of the Financial Statements in
conformity with IND AS requires the management to
make estimates, judgments and assumptions. These
estimates, judgment and assumptions affect the
application of accounting policies and the reported
amount of Assets and Liabilities and disclosure of
contingent liabilities on the date of the Financial
Statements and reported amounts of revenues and
expenses for the year.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are
revised, and future periods are affected.
Key sources of estimation of uncertainty at the date of
the financial statements, which may cause a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year, is in respect of
impairment of investments, useful lives of property,
plant and equipment, valuation of deferred tax assets,
provisions and contingent liabilities and fair value
measurement of financial instruments have been
discussed below. Key source of estimation of
uncertainty in respect of revenue recognition and
employee benefits have been discussed in their
respective policies.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant
and equipment at the end of each reporting period. This
reassessment may result in change in depreciation
expense in future periods.
Valuation of deferred tax assets
The Company reviews the carrying amount of deferred
tax assets at the end of each year. The policy has been
explained under note B (xxi).
(iv) Property, plant and equipment
Property, plant and equipment are carried at the cost of
acquisition revalued amount or construction less
accumulated depreciation. Costs directly attributable to
acquisition are capitalized until the property, plant and
equipment are ready for use, as intended by
management.
Depreciation has been provided on straight line method
in accordance with the life of the respective assets as
prescribed in Schedule II of the Companies Act, 2013
except certain assets for which useful life of assets has
been ascertained based on report of technical experts.
All assets costing ' 5,000 or below are fully depreciated
in the year of addition.
The Company, based on technical assessment made by
technical expert and management estimate,
depreciates Building and Plant & Equipment over
estimated useful lives which are different from the useful
life prescribed in Schedule II to the Companies Act, 2013.
The Management believes that these estimated useful
lives are realistic and reflect fair approximation of the
period over which the assets are likely to be used. The
estimated useful lives and residual value are reviewed at
the end of each reporting period, with the effect of any
change in estimate accounted for on a prospective basis.
The estimated useful lives are as mentioned below:
• Buildings (Site Office) 3 years
• Buildings/Investment Property 30 to 60 years
• Roads 5 to 10 years
• Railway Sidings 15 to 30 years
• Electrical Machinery 10 to 20 years
• Plant & Equipment 5 to 17 years
• Furniture 10 years
• Office Equipment 5 years
• Computers 3 years
• Motor Vehicles 8 years
• Intangible Assets (Softwares) 3 to 6 years
Capital work-in-progress
Capital work-in-progress / Intangible assets under
development are carried at cost, comprising direct cost,
related incidental expenses and attributable borrowing
cost. Advances paid towards the acquisition of property,
plant and equipment outstanding at each Balance Sheet
date is classified as Capital Advances.
Investment Properties
Properties that are held for - long term rental yields or for
capital appreciation or both, and that is not occupied by
the Company, is classified as investment property.
Investment property is measured initially at its cost,
including related transaction costs and where
applicable borrowing costs. Subsequent expenditure is
capitalised to the asset's carrying amount only when it is
probable that future economic benefits associated with
expenditure will flow to the Company and the cost of the
item can be measured reliably. All other repairs and
maintenance costs are expensed when incurred. When
part of an investment property is replaced, the carrying
amount of the replaced part is derecognised.
(v) Intangible Assets
Intangible Assets are recorded at the consideration paid
for acquisition less accumulated amortization and
accumulated impairment, if any, Amortization is
recognized at Straight Line Basis over their estimated
useful life. The estimated useful life and amortization
method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets
with indefinite useful lives that are acquired separately
are carried at cost less accumulated impairment losses.
Intangible assets are amortized on Straight Line Basis
over a period of 3 to 6 years.
(vi) Impairment of Non-Financial Assets
The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment
testing for an asset is required, the Group estimates the
asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs of disposal and its
value in use. The recoverable amount is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those
from other assets or groups of assets. Where the
carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired
and is written down to its recoverable amount. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset. In determining net selling price, recent market
transactions are taken into account, if available. If no
such transactions can be identified, an appropriate
valuation model is used.
(vii) Derivative Financial Instrument
The Company enters into derivative financial
instruments to manage its exposure to foreign
exchange rate risks, including foreign exchange forward
contracts. The Company holds derivative financial
instruments such as foreign exchange forward contracts
to mitigate the risk of changes in exchange rates on
foreign currency exposures. The counter party for these
contracts is generally a bank.
Derivatives are initially recognized at fair value at the
date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of
each reporting period. The resulting gain or loss is
recognized to statement profit or loss immediately.
(viii) Financial Instrument
The Company recognizes financial assets and financial
liabilities when it becomes a party to the contractual
provisions of the instrument. All financial assets and
liabilities are recognized at fair value on initial
recognition, except for trade receivables which are
initially measured at transaction price. Transaction costs
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities, that are not
measured at fair value through profit or loss, are added/
deducted to the fair value on initial recognition.
All recognized financial assets are subsequently
measured in their entirety at either amortized cost or fair
value, depending on the classification of the financial
assets.
(a) Financial assets carried at amortized cost
A Financial asset is subsequently measured at
amortized cost if it is held within a business model
whose objective is to hold the asset 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.
b) Investment in Equity Instruments at fair value
through other comprehensive income
Equity investments are initially measured at fair
value plus transaction costs. Subsequently, they are
measured at fair value with gains and losses arising
from changes in fair value recognized in other
comprehensive income and accumulated in the
'Reserve for equity instruments through other
comprehensive income'.
c) Financial assets at fair value through profit or
loss
A financial asset which is not classified in any of the
above categories is subsequently fair valued
through profit or loss.
d) Financial liabilities
Financial liabilities are subsequently carried at
amortized cost using the effective interest method.
For trade and other payables maturing within one
year from the Balance Sheet date, the carrying
amounts approximate fair value due to the short
maturity of these instruments.
e) Investment in Subsidiaries and Joint Ventures
Investment in Subsidiaries and Joint Ventures are
carried at cost in the Financial Statements.
f) Impairment
The Company assesses at each reporting date
whether a financial asset (or a group of financial
assets) such as investments, trade receivables,
advances and security deposits held at amortized
cost and financial assets that are measured at fair
value through other comprehensive income are
tested for impairment based on evidence or
information that is available without undue cost or
effort. Expected credit losses are assessed and loss
allowances recognized if the credit quality of the
financial asset has deteriorated significantly since
initial recognition.
g) Offsetting Financial Instruments
Financial assets and liabilities are offset, and the net
amount is included in the Balance Sheet where
there is a legally enforceable right to offset the
recognized amounts and there is an intention to
settle on a net basis or realize the asset and settle the
liability simultaneously.
(ix) Measurement of Fair Values
Certain accounting policies and disclosures of the
Company require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Company has an established control framework
with respect to the measurement of fair values.
Fair Values are categorized into different levels in a fair
value hierarchy based on the inputs used in the
valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
• Level 2: inputs other than quoted prices included in
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 asset or liability that are not based
on observable market data (unobservable inputs).
When measuring the fair value of an asset or liability, the
company uses observable market data as far as
possible. If the inputs used to measure the fair value of
an asset or a liability fall into a different level of the fair
value hierarchy, then the fair value measurement is
categorized in its entirety in the same level of the fair
value hierarchy as the lowest level input that is
significant to the entire measurement.
(x) Revenue Recognition
Sales revenue is measured at fair value of the
consideration received or receivable and stated at net of
GST, trade discounts, rebates but includes excise duty.
Income from services is recognized as the services are
rendered based on agreement/arrangement with the
concerned parties. Export incentives, certain insurance
and other claims, where quantum of accruals cannot be
ascertained with reasonable certainty, are accounted on
acceptance basis.
a. Revenue from Operations
Revenue from the sale of goods is recognized when
the goods are delivered and titles have been passed,
at which time all the following conditions are
satisfied:
- the Company has transferred to the buyer the
significant risks and rewards of ownership of
the goods;
- the Company retains neither continuing
managerial involvement to the degree usually
associated with ownership not effective control
over the goods sold;
- the amount of revenue can be measured
reliably;
- it is probable that the economic benefits
associated with the transaction will flow to the
Company;
- the costs incurred or to be incurred in respect of
the transaction can be measured reliably.
- Rent I ncome/Lease Rentals
b. Revenue from construction contracts
Revenue from contract with customers is
recognised when a performance obligation is
satisfied by transferred of promised goods or
services to a customer.
For performance obligation satisfied over time, the
revenue recognition is done by measuring the
progress towards complete satisfaction of
performance obligation.
The progress is measured in terms of a proportion of
actual cost incurred to date, to the total estimated
cost attributable to the performance obligation.
The company transfers controls of a goods or service
over time and therefore satisfies a performance
obligation and recognise revenue over a period of
time if one of following criteria is met:
(i) The customer simultaneously consumes the
benefits of Company's performance or
(ii) The customer controls the assets as it is being
created/enhanced by the company's
performance or
(iii) There is no alternative use of assets and the
company has either explicit or implicit rights of
payment considering legal precedents.
Transaction price is the amount of consideration to
which company expects to be entitled in exchange for
transferring goods or services to a customer. The
company includes Variable consideration as part of
transaction price when there is basis to reasonably
estimate the amount of the variable consideration and
when it is probable that a significant reversal of
cumulative revenue recognised will not occur when the
uncertainty associated with the variable consideration is
resolved. Variable consideration is estimated using the
expected value method or most likely amount as
appropriate in a given circumstance. Payment terms
agreed with a customer are as per business practice and
the financing component, if significant, is separated
from the transaction price.
Significant judgements are used in:
1. Determining the revenue to be recognised in case of
performance obligation satisfied over a period of time,
revenue recognition is done by measuring the progress
towards complete satisfaction of performance
obligation.
2. Determining the expected losses, which are recognised
in the period in which such losses become probable
based on the expected total contract cost as at the
reporting date.
3. Determining the method to be applied to arrive at the
variable consideration requiring an adjustment to the
price.
For contracts where the aggregate of contract cost
incurred to-date plus recognised profits (or minus
recognised losses as the case may be) exceeds the
progress billing, the surplus is shown as contract assets
and termed as "unbilled revenue". For contracts where
the progress billing exceeds the aggregate of contract
cost incurred to-date plus recognised profits (or minus
recognised losses as the case may be), the surplus is
shown as contract liability and termed as "Advances
from customer". The amounts billed on the customer for
work performed and are unconditionally due for
payment i.e only passage of time is required before
payment falls due, are disclosed in the Balance Sheet as
trade receivables. The amount of retention money held
by customers pending completion of performance
milestone is disclosed as part of contract asset and is
classified as trade receivables when it became due for
payment.
Impairment loss (termed as provision for impairment
loss in financial statement) is recognised in the
statement of Profit & Loss to the extent the carrying
amount of the contract assets exceeds the remaining
performance obligations (after deducting the costs that
relate directly to fulfil such remaining performance
obligations).
c. Other Income
Other income comprises of primarily of Interest Income,
Dividend Income. Gain/ (I oss) on sale of Investments.
Rental Income and Claims (if any).
Interest Income from a financial asset is recognized
when it is probable that the economic benefits will flow
to the Company and the amount of income can be
measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the
asset's net carrying amount on initial recognition.
Dividend Income is recognized as and when right to
receive payment is established provided, which is
generally after the shareholders approves it in the
Annual General Meeting.
Gain/ (Loss) on sale of Current/ Non Current
Investments are recognized at the time of redemption/
Sale and at Fair value at each reporting period.
Rent Income/Lease rentals are recognized on accrual
basis in accordance with the terms of agreements.
Insurance and other claims are accounted for as and
when admitted by the appropriate authorities in view of
uncertainty involved in ascertainment of final claim.
(xi) Employee Benefits
The Company's contribution to provident fund, pension
fund, employees' state insurance scheme and super¬
annuation fund are charged on accrual basis to
Statement of Profit & Loss.
a. Short term benefits:
Short term employee benefits are recognized as an
expense at the undiscounted amount in the
statement of profit and loss of the year in which the
related service is rendered.
b. Defined contribution retirement benefits:
Payments to defined contribution retirement
benefits are recognized as an expense when
employees have rendered services entitling them to
the contributions. Defined contribution plans are
those plans where the Company pays fixed
contributions to funds/schemes managed by
independent trusts or authority. Contributions are
paid in return for services rendered by the
employees during the year. The Company has no
legal or constructive obligation to pay further
contributions if the fund/scheme does not hold
sufficient assets to pay/extend employee benefits.
The Company provides Provident Fund facility to all
employees. The contributions are expensed as they
are incurred in line with the treatment of wages and
salaries. The Company's Provident Fund is exempted
under section17 of Employees' Provident Fund and
Miscellaneous Provision Act, 1952. Conditions for
exemption stipulate that the Company shall make
good deficiency, if any, in the interest rate declared
by the trust vis s-vis interest rate declared by the
Employees' Provident Fund Organisation.
c. Defined benefit retirement benefits:
The cost of providing defined benefit retirement
benefits are determined using the projected unit
credit method, with independent actuarial
valuations being carried out at the end of each
reporting period. The Company provides gratuity to
its employees.
Remeasurement, comprising actuarial gains and
losses, return on plan assets excluding amounts
included in net interest on the net benefit liability
(asset) and any change in the effect of the asset
ceiling (if applicable) are recognized in the balance
sheet with a charge or credit recognized in other
comprehensive income in the period in which they
occur. Remeasurement recognized in the
comprehensive income are not reclassified to the
statement of profit and loss but recognized directly
in the retained earnings. Past service costs are
recognized in the statement of profit and loss in the
period in which the amendment to plan occurs. Net
interest is calculated by applying the discount rate to
the net defined liability or asset at the beginning of
the period, taking into account of any changes in the
net defined benefit liability (asset) during the period
as a result of contribution and benefit payments.
Defined benefit costs which are recognized in the
statement of profit and loss are categorized as
follows
- Service cost (including current service cost, past
service cost as well as gains and losses on
curtailments and settlements); and
- Net interest expense or income; and
The retirement benefit obligation recognized in the
standalone Balance Sheet represents the actual
deficit or surplus in the Company's defined benefit
plans. Any surplus resulting from this calculation is
limited to the present value of any economic
benefits available in the form of refunds from the
plans or reduction in future contributions to the
plans.
The liability for termination benefit is recognized at
the earlier of when the entity can no longer
withdraw the offer of the termination benefit and
when the entity recognizes any related restructuring
costs.
d. Voluntary Retirement Scheme Benefits
Voluntary retirement scheme benefits are
recognized as an expense in the year they are
incurred.
(xii) Custom Duty & Goods & Service Tax (GST)
GST Credit availed on Raw materials, Stores and Capital
Goods are reduced from the cost of the Respective
Goods.
(xiii) Research and Development
Research and Development expenditures of revenue
nature are charged to Profit & Loss Account, while capital
expenditure is added to the cost of fixed assets in the
year in which these are incurred.
(xiv) Valuation of Inventories
Raw materials, work-in-progress and finished products
are valued at lower of cost and net realisable value after
providing for obsolescence and other losses, where
considered necessary. Cost includes purchase price and
all other costs incurred in bringing the inventories to
their present location and condition. Cost are assigned
to individual items of inventory on weighted average
basis.
Stores and Spares are valued on the "weighted average"
basis.
(xv) Lease
a. Where the Company is the lessee
Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). 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 present value of
lease payments to be made over the lease term,
initial direct costs incurred, and lease payments
made at or before the commencement date less any
lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the lease
agreement period of underlying assets.
If ownership of the leased asset transfers to the
company at the end of the lease term or the cost
reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset.
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. The lease payments include fixed
payments (including in substance fixed payments)
less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and
amounts expected to be paid under residual value
guarantees. The lease payments also include the
exercise price of a purchase option reasonably
certain to be exercised by the company and
payments of penalties for terminating the lease, if
the lease term reflects the company exercising the
option to terminate. Variable lease payments that do
not depend on an index or a rate are recognised as
expenses (unless they are incurred to produce
inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate at
the lease commencement date because the interest
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.
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 (e.g.,
changes to future payments resulting from a change
in an index or rate used to determine such lease
payments) or a change in the assessment of an
option to purchase the underlying asset.
b. Where the Company is the lessor
Assets subject to operating leases are included in
fixed assets. Lease income is recognized in the
statement of profit and loss on a straight-line basis
over the lease term. Costs, including depreciation
are recognized as an expense in the statement of
Profit &Loss. Initial direct costs such as legal costs,
brokerage costs, etc. are recognized immediately in
the statement of Profit &Loss.
Assets given under a finance lease are recognized as
a receivable at an amount equal to the net
investment in the lease. Lease income is recognized
over the period of the lease so as to yield a constant
rate of return on the net investment in the lease.
Initial direct costs relating to assets given on finance
leases are charged to statement of Profit & Loss.
(xvi) Foreign Currency Transactions and Exchange
Differences
Transactions in currencies other than entity's functional
currency (spot rates) are recorded at the rates of
exchange prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies (other than derivative contracts) remaining
unsettled at the end of the each reporting period are
premeasured at the rates of exchange prevailing at that
date. Exchange difference on monetary items are
recognized in the statement of Profit & Loss in the period
in which they arise. Non-monetary items carried at
historical cost are translated using exchange rates at the
dates of the initial transaction.
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