Note 2: Material accounting policy information
This note provides a list of the material accounting policies
adopted in the preparation of these financial statements.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
(i) Revenue recognition
Revenue from contracts with customers is recognised
when control of the goods or services are transferred to
the customer at an amount that reflects the consideration
to which the Company expects to be entitled in exchange
for those goods or services. Transaction price at which
revenue is recognised is net of goods & services tax and
amounts collected on behalf of third parties, if any and
includes effect of variable consideration (viz. returns,
rebates, trade allowances, credits, penalties etc.). Variable
consideration is estimated using the expected value
method or most likely amount as appropriate in a given
circumstance and is included in the transaction price only
to the extent it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised
will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
Recognising revenue from major business
activities
(a) Sale of goods
Revenue from the sale of goods is recognised at
the point in time when control of the goods are
transferred to the customer (i.e. satisfaction of
performance obligation), generally on dispatch of the
goods. The Company, in its engineering business,
generally provides warranties to its customers in
the nature of assurance, which is considered as
an obligation and provided for under Ind AS 37
Provisions, Contingent Liabilities and Contingent
Assets (refer note 2(x)).
(b) Rendering of services
The Company provides engineering services that
are either sold separately or bundled together with
the sale of goods to a customer.
Contracts for bundled sales of goods and
engineering services are comprised of two
performance obligations because the promises to
transfer goods and provide engineering services are
distinct and capable of being separately identifiable.
Accordingly, the Company allocates the transaction
price based on relative stand-alone selling prices of
such goods and engineering services.
The Company recognises revenue from engineering
services over time, using an input method to
measure progress towards complete satisfaction of
the service, because the customer simultaneously
receives and consumes the benefits provided by
the Company. The progress towards complete
satisfaction of the service is determined as follows:
• erection & commissioning / servicing revenue
- based on technical estimate of completion of
physical proportion of the contract work;
• operation & maintenance revenue - as the
proportion of the total period of services
contract that has elapsed at the end of the
reporting period
(c) Long-duration construction & supply contracts
Long-duration construction & supply contracts are
analysed to determine combination of contracts
and identification of performance obligations and
accordingly transaction price is allocated amongst
performance obligations based on stand-alone
selling prices. Performance obligations, in long-
duration construction & supply contracts, generally
includes turnkey related activities towards design /
engineering / supply of equipment / construction
/ commissioning and operation & maintenance
related activities which are satisfied over time with
the customer receiving benefits from the activities
being performed by the Company.
When the progress towards complete satisfaction
of performance obligations of a long-duration
construction & supply contract can be estimated
reliably, revenue is recognised by reference to
the stage of completion of the contract activity at
the end of the reporting period, measured based
on the proportion of contract costs incurred for
work performed to date relative to the estimated
total contract costs, because the customer
simultaneously receives and consumes the benefits
provided by the Company. Contract costs excludes
costs that do not depict the Company's progress in
satisfying the performance obligation.
When the outcome of performance obligations
of a long-duration construction & supply contract
cannot be estimated reliably, but the Company
expects to recover the costs incurred in satisfying
the performance obligation, contract revenue is
recognised only to the extent of the contract costs
incurred until such time that it can reasonably
measure the outcome of the performance obligation.
Contract costs are recognised as expenses in the
period in which they are incurred.
(ii) Government grants
Grants from the government are recognised where
there is a reasonable assurance that the Company will
comply with all attached conditions and the grant shall
be received.
Government grants relating to income are deferred and
recognised in the profit or loss over the period necessary
to match them with the costs that they are intended to
compensate and presented either within other operating
income/other income or net of related costs.
Government grants relating to the purchase of property,
plant and equipment are deducted from its gross value
and are recognised in profit or loss on a systematic and
rational basis over the expected useful lives of the related
assets by way of reduced depreciation.
Government grants that are receivable as compensation
for expenses or losses already incurred or for the purpose
of giving immediate financial support to the Company
with no future related costs are recognised in profit or
loss in the period in which they become receivable.
The Government grants by way of a benefit of a
Government loan at a below market rate of interest is
measured as the difference between the proceeds
received and the fair value of the loan based on prevailing
market interest rates.
See note 43 for disclosures and treatment of government
grants in financial statements.
(iii) Leases
The Company's lease assets classes primarily consist of
leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of a
contract. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control
the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified
asset; (ii) the Company has substantially all of the
economic benefits from use of the asset through the
period of the lease; and (iii) the Company has the right to
direct the use of the asset.
At the date of commencement of the lease, the
Company recognises a right-of-use (“ROU”) assets and
a corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
twelve months or less (short-term leases) and low value
leases. The ROU assets are initially recognised at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses. ROU assets are depreciated from
the commencement date on a straight-line basis over the
shorter of the lease term and useful life of the underlying
asset (see note 2(vii) below) and is also evaluated for
impairment (see note 2(v) below). The lease liability is
measured at amortised cost at the present value of
the future lease payments. The lease term includes
(a) the non-cancellable period of the lease; (b) the
period covered by an option to extend the lease, if it is
reasonably certain that such option shall be exercised;
and (c) the period covered by an option to terminate the
lease, if it is reasonably certain that such option shall
not be exercised. Lease liabilities are remeasured with
a corresponding adjustment to the related ROU assets
if the Company changes its assessment concerning the
right to exercise its option of extending or terminating the
lease provided to it under the relevant arrangement.
For short-term and low value leases as mentioned above,
the Company recognises the lease payments as an
operating expense on a straight-line basis over the term
of the lease.
(iv) Foreign currency translation
(a) Functional and presentation currency
The financial statements are presented in Indian
rupee ('), which is the Company's functional and
presentation currency unless stated otherwise.
(b) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
that approximates the actual rate at the date of
respective transactions. Foreign exchange gains
or losses resulting from the settlement of such
transactions, from the translation of monetary assets
and liabilities denominated in foreign currencies at
year end exchange rates as well as the change in
the hedged item attributable to the hedged foreign
exchange risk which are designated under a fair
value hedge, are recognised in profit or loss in the
period in which they arise except for:
• foreign exchange gains or losses on settlement
or translation of foreign currency borrowings
that are directly attributable to acquisition,
construction or production of a qualifying asset,
which are included in cost of those assets when
they are regarded as an adjustment to interest
costs on those foreign currency borrowings.
• foreign exchange gains or losses in respect of
certain qualifying cash flow hedges which are
deferred in equity.
Foreign exchange gains or losses which are regarded as
an adjustment to borrowing costs are presented in the
statement of profit and loss, within finance costs. Foreign
exchange gains or losses related to certain qualifying
cash flow hedges are presented in other comprehensive
income on a net basis. All other foreign exchange gains
and losses are presented in the statement of profit and
loss on a net basis within other income or other expenses,
as the case may be.
(v) Impairment of non-financial assets
Non-financial assets are tested for impairment whenever
events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value
less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions
are taken into account. If no such transactions can be
identified, an appropriate valuation model is used.
For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of
the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets that suffered
an impairment are reviewed for possible reversal of the
impairment at the end of each reporting period. When
an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate
of its recoverable amount, so however that the increased
carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss
been recognised for the asset in prior years. A reversal
of an impairment loss is recognised immediately in profit
or loss.
(vi) Income tax
Income tax expense represents the sum of the tax
currently payable and deferred tax. Current and deferred
tax are recognised in profit or 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. Where current
tax or deferred tax arises from the initial accounting for
a business combination, the tax effect is included in the
accounting for the business combination.
(a) Current tax
The tax currently payable is based on taxable profit
for the year. Taxable profit differs from ‘profit before
tax' as reported in the statement of profit and loss
because of items of income or expense that are
taxable or deductible in other years and items that
are never taxable or deductible. The Company's
current tax is calculated using tax rates that have
been enacted or substantively enacted by the end
of the reporting period.
(b) Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding
tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary
differences, the carry forward of unused tax credits
and unused tax losses to the extent that it is
probable that taxable profits will be available against
which those deductible temporary differences, the
carry forward of unused tax credits and unused tax
losses can be utilised. Such deferred tax assets
and liabilities are not recognised if the temporary
difference arises from the initial recognition of assets
and liabilities in a transaction (other than a business
combination) that affects neither the taxable profit
nor the accounting profit and does not give rise to
equal taxable and deductible temporary differences.
In addition, deferred tax liabilities are not recognised
if the temporary difference arises from the initial
recognition of goodwill.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the
reporting period.
The measurement of deferred tax liabilities and
assets reflects the tax consequences that would
follow from the manner in which the Company
expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets
and liabilities.
(vii) Property, plant and equipment
Property, plant and equipment are tangible items that
are held for use in the production or supply of goods
and services, rental to others or for administrative
purposes and are expected to be used during more than
one period. The cost of an item of property, plant and
equipment is recognised as an asset if and only if 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. Freehold land is carried
at cost. All other items of property, plant and equipment
are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Cost comprises
purchase price after deducting trade discounts/rebates,
government grants related to assets and including import
duties and non-refundable purchase taxes, borrowing
costs, any costs that is directly attributable to the bringing
the asset to the location and condition necessary for it to
be capable of operating in the manner intended by the
management and costs of dismantling/removing the item
and restoring the site on which it was located under an
obligation. Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset, as
appropriate, 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.
Each part of item of property, plant and equipment,
if significant in relation to the total cost of the item, is
depreciated separately. Further, parts of plant and
equipment that are technically advised to be replaced
at prescribed intervals/period of operation, insurance
spares and cost of inspection/overhauling are depreciated
separately based on their specific useful life provided
these are of significant amounts commensurate with
the size of the Company and scale of its operations. The
carrying amount of any equipment/inspection/overhauling
accounted for as separate asset or if otherwise significant,
is derecognised when replaced. All other repairs and
maintenance costs are charged to profit or loss during
the reporting period in which they are incurred.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of
an item of property, plant and equipment is determined
as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit
or loss.
Transition to Ind AS
On transition to Ind AS, the Company has elected to
continue with the carrying value of all of its property, plant
and equipment recognised as at 1 April 2015 (transition
date) measured as per the previous GAAP and use that
carrying value as the deemed cost of the property, plant
and equipment.
Depreciation methods, estimated useful lives and
residual value
Depreciation commences when the assets are available
for their intended use. Depreciation is calculated using
the straight-line method to allocate their cost, net of their
residual values, over their estimated useful lives.
The management has estimated the useful lives and
residual values of all property, plant and equipment and
adopted useful lives as stated in Schedule II along with
residual values of 5% except for the following:
• On the basis of technical assessment and
past experience:
o t he useful lives of mill rollers, instrumentation
and control devices installed at sugar plants is
considered at ten years as against prescribed
life of twenty five years in respect of continuous
process plant.
o mobile phones costing ' 5,000/- or more are
depreciated over two years.
o patterns, tools, Jigs etc. are depreciated over
three years.
o machinery spares are depreciated over a life
ranging from five to ten years.
• Assets costing less than ' 5,000/- are fully
depreciated in the year of purchase.
Fixture and fittings and improvements to leasehold buildings
not owned by the Company are amortised over the unexpired
lease period or estimated useful life of such fixture, fittings and
improvements, whichever is lower.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for on a
prospective basis.
(viii) Investment property
Property that is held for long-term rental yields or for
capital appreciation or both, is classified as investment
property. Investment property is stated at cost less
accumulated depreciation and accumulated impairment
losses, if any. Investment property is measured initially
at its cost, including related transaction costs and,
where applicable, borrowing costs. Cost comprises
purchase price after deducting trade discounts/rebates,
government grants related to assets and including duties
and taxes, borrowing costs, any costs that is directly
attributable to the bringing the asset to the location and
condition necessary for it to be capable of operating
in the manner intended by management and costs of
dismantling/removing the item and restoring the site on
which it was located under an obligation. Subsequent
expenditure is capitalised to the asset's carrying amount
only when it is probable that future economic benefits
associated with the 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.
An investment property is derecognised upon disposal or
when the investment property is permanently withdrawn
from use and no future economic benefits are expected
from the disposal. Any gain or loss arising on derecognition
of the property (calculated as the difference between the
net disposal proceeds and the carrying amount of the
asset) is included in profit or loss in the period in which
the property is derecognised.
I nvestment property being building is depreciated using
the straight-line method over their estimated useful lives
as stated in Schedule II at 30 years along with residual
values of 5%.
Transition to Ind AS
On transition to Ind AS, the Company has elected to
continue with the carrying value of all of its investment
properties recognised as at 1 April 2015 (transition date)
measured as per the previous GAAP and use that carrying
value as the deemed cost of investment properties.
(ix) Inventories
(a) Finished goods and work-in-progress are valued at
lower of cost and net realisable value. The cost of
finished goods and work-in-progress is computed
on weighted average basis and includes raw material
costs, direct cost of conversion and proportionate
allocation of indirect costs incurred in bringing the
inventories to their present location and condition.
Finished goods and work-in-progress are written
down if their net realisable value declines below the
carrying amount of the inventories and such write
downs of inventories are recognised in profit or loss.
When reasons for such write downs ceases to exist,
the write downs are reversed through profit or loss.
(b) Inventories of raw materials & components, stores &
spares and stock-in-trade are valued at lower of cost
and net realisable value. Raw materials and other
items held for use in the production of inventories are
not written down below cost if the finished goods in
which they will be incorporated are expected to be
sold at or above cost. Write down of such inventories
are recognised in profit or loss and when reasons
for such write downs ceases to exist, such write
downs are reversed through profit or loss. Cost of
such inventories comprises of purchase price and
other directly attributable costs that have been
incurred in bringing the inventories to their present
location and condition. By-products used as raw
material are valued at transfer price linked with net
realisable value. Cost for the purpose of valuation of
raw materials & components, stores & spares and
stock-in-trade is considered on the following basis :
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