Note 1: 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 except where a newly issued accounting standard
is initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy hitherto
in use.
(a) Basis of preparation and presentation
(i) Compliance with Ind AS
The financial statements comply in all material
aspects with Indian Accounting Standards (Ind
AS) notified under Section 133 of the Companies
Act, 2013 (the Act), Companies (Indian Accounting
Standards) Rules, 2015 (as amended) and other
relevant provisions of the Act.
(ii) Historical cost convention
The financial statements have been prepared on
a historical cost basis except for certain assets
and liabilities (including derivative instruments)
that are measured at fair values at the end of each
reporting period, as explained in the accounting
policies below.
Historical cost is generally based on the fair 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, regardless of whether
that price is directly observable or estimated using
another valuation technique. In estimating the
fair value of an asset or a liability, the Company
takes into account the characteristics of the asset
or liability if market participants would take those
characteristics into account when pricing the asset
or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these
financial statements is determined on such a basis,
except for leasing transactions that are within the
scope of Ind AS 116 Leases, and measurements
that have some similarities to fair value but are not
fair value, such as net realisable value in Ind AS 2
Inventories or value in use in Ind AS 36 Impairment
of Assets.
All amounts disclosed in the Standalone financial
statements and notes have been rounded off to
the nearest ' million (000,000) and decimals there
of as per the requirement of division II of Schedule
III, unless otherwise indicated. (0.00 represents
amounts less than ' 0.01 million due to rounding
off).
(b) 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. Revenue from Contracts
is measured at transaction price net of variable
consideration. Transaction price are net of returns, trade
allowances, rebates, other similar allowances, goods &
services tax and amounts collected on behalf of third
parties, if any.
The disclosures of significant accounting judgements,
estimates and assumptions relating to revenue from
contracts with customers are provided in Note 43.
Recognising revenue from major business activities
(i) Sale of goods
Revenue from the sale of goods is recognised at
point in time when controls of promised goods are
transferred to the customer generally on delivery of
the goods. The normal credit term is 0 to 90 days
upon delivery on case to case basis.
Warranty obligations
The Company typically provides warranties for
general repairs of defects that existed at the time
of sale, as required by law. These assurance-type
warranties are accounted for under Ind AS 37
Provisions, Contingent Liabilities and Contingent
Assets. Refer to the accounting policy on warranty
provisions in note 2 (iii) below.
(ii) Rendering of services
Revenue from a contract to provide services is
recognised when the outcome of a performance
obligation involving the rendering of services can
be estimated reliably. Satisfaction of performance
obligation of the contract is determined as follows:
• Erection and commissioning/service revenue
is recognised by reference to the stage of
completion of the erection & commissioning/
service, determined based on technical
estimate of completion of physical proportion
of the contract work;
• Operation and maintenance revenue is
recognised 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.
(iii) Interest income
Interest income from a financial asset is recognised
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 that asset's
net carrying amount on initial recognition.
(iv) Construction contracts
When the outcome of a construction 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, except where
this would not be representative of the stage of
completion. Variations in contract work, claims
and incentive payments are included to the extent
that the amount can be measured reliably and its
receipt is considered probable.
When the outcome of a construction contract
cannot be estimated reliably, contract revenue is
recognised to the extent of contract costs incurred
that it is probable will be recoverable. Contract
costs are recognised as expenses in the period in
which they are incurred.
When it is probable that total contract costs will
exceed total contract revenue, the expected loss
is recognised as an expense immediately.
When contract costs incurred to date plus
recognised profits less recognised losses exceed
progress billings, the surplus is shown as amounts
due from customers for contract work. For
contracts where progress billings exceed contract
costs incurred to date plus recognised profits
less recognised losses, the surplus is shown as
the amounts due to customers for contract work.
Amounts received before the related work is
performed are included in the Balance Sheet,
as a liability, as advances received. Amounts
billed for work performed but not yet paid by the
customer are included in the Balance Sheet under
trade receivables.
(v) Royalties
I ncome from royalty is recognised as per the
contractual arrangement with the Licensee
upon supply of turbine manufactured with the
technical know-how provided by the Company
to the Licensee (provided that it is probable that
the economic benefits will flow to the Company
and the amount of revenue can be measured
reliably).
(vi) Rental income
The Company's policy for recognition of revenue
from operating leases is described in note
1(c) below.
(vii) Export incentives
Export incentives are recognized as income when
the Company is entitled to the incentive as per
the terms of the scheme in respect of the exports
made and where it is probable that the Company
will collect such incentive proceeds.
(c) Leases
Company as a lessee
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.
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease
payments and right-of-use assets representing the right
to use the underlying assets.
(i) Right-of-use assets
The Company recognises right-of-use (ROU)
assets at the commencement date of the lease
(i.e., the date the underlying asset is available for
use). ROU assets are measured at cost, less any
accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease
liabilities. The cost of ROU assets includes the
amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or
before the commencement date less any lease
incentives received. ROU assets are depreciated
on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets,
as follows:
• Office Premises: 2- 10 Years
• Vehicles: 5 years
(ii) Lease Liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured at
the present value of lease payments to be made
over the lease term. The lease payments include
fixed payments less any amounts expected to be
paid under residual value guarantees.
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.
(iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease
recognition exemption to its short-term leases of
premises taken on rent and office equipment (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). It also applies the
lease of low-value assets recognition exemption to
leases of office equipment that are considered to
be low value. Lease payments on short-term leases
and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Company as a lessor
Lease income from operating leases where the
Company is a lessor is recognised in income on
a straight-line basis over the lease term unless
the receipts are structured to increase in line
with expected general inflation to compensate
for the expected inflationary cost increases. The
respective leased assets are included in the
Balance Sheet based on their nature.
(d) Foreign currency translation
(i) Functional and presentation currency
The financial statements are presented in Indian
rupee ('), which is Company's functional and
presentation currency unless stated otherwise.
(ii) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement
of such transactions and from the translation of
monetary assets and liabilities denominated in
foreign currencies at year end exchange rates
are recognised in the Statement of Profit and Loss
in the period in which they arise and these are
deferred in equity if they relate to qualifying cash
flow hedges.
Foreign exchange gains and losses are presented
in the Statement of Profit and Loss on a net basis
within other gains/(losses).
(e) 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. 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
impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
I f, at the reporting date there is an indication that a
previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the asset is
reflected at the recoverable amount. Impairment losses
previously recognised are accordingly reversed in the
Statement of Profit and Loss.
(f) Borrowing costs
Borrowing costs consist of interest and other costs
that an entity incurs in connection with the borrowing
of funds and are expensed in the period in which they
are incurred.
(g) Income tax
I ncome tax expense represents the sum of the tax
currently payable and deferred tax.
(i) 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.
(ii) 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
(other than in a business combination) of assets
and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit. 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.
(iii) Current and deferred tax for the year
Current and deferred tax 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. 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. The
Company offsets current tax assets and current tax
liabilities, where it has a legally enforceable right to
setoff the recognised amounts and where it intends
either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
(h) Property, plant and equipment
Property, plant and equipment are tangible items that
are held for use in the production or supply for 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 shall be 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. Cost
includes expenditure that is directly attributable to the
acquisition of the items. 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 is derecognised when replaced. All other repairs
and maintenance 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 the
Statement of Profit and Loss.
Depreciation methods, estimated useful lives and
residual value
Depreciation commences when the assets are ready
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 which are
as follows:
The residual value of property, plant and equipment has
been considered 5% or less of the original cost of assets
as applicable.
• On the basis of technical assessment involving
technology obsolescence and past experience:
o patterns, tools, jigs, fixtures etc. are
depreciated over three years.
o machinery spares are depreciated over a life
ranging from three to five years.
• Assets costing less than ' 5,000/- are fully
depreciated in the year of purchase.
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.
The property, plant and equipment acquired under
finance leases is depreciated over the asset's useful life
or over the shorter of the asset's useful life and the lease
term if there is no reasonable certainty that the Company
will obtain ownership at the end of the lease term.
(i) Intangible assets
Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life
and amortisation 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.
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of
an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of
the asset, are recognised in the Statement of Profit and
Loss when the asset is derecognised.
Research and development costs
Research costs are expensed as incurred. Development
expenditures on an individual project are recognised as
an intangible asset when the Company can demonstrate:
• the technical feasibility of completing the intangible
asset so that the asset will be available for use
or sale;
• its intention to complete and its ability and intention
to use or sell the asset;
• how the asset will generate probable future
economic benefits;
• the availability of adequate technical, financial and
other resources to complete the development and
to use or sell the asset; and
• the ability to measure reliably the expenditure
attributable to asset during its development.
The amount initially recognised for intangible assets
is the sum of the expenditure incurred from the date
when the intangible asset first meets the recognition
criteria listed above. Where no intangible assets
can be recognised, development expenditure is
recognised in the Statement of Profit and Loss in the
period in which it is incurred. Subsequent to initial
recognition, such intangible assets are reported at
cost less accumulated amortisation and accumulated
impairment losses, on the same basis as of acquired
intangible assets.
(j) Inventories
(i) I nventories of raw materials, components, stores
and spares are valued at cost. Cost of such
inventory includes cost of purchases and other
costs incurred in bringing the inventories to their
present condition. Cost for the purpose of valuation
of such inventories is determined on weighted
average basis.
(ii) Finished goods and work-in-progress are valued
at lower of cost and net realizable value. The cost
of finished goods and work-in-progress 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. The cost of finished goods and
work-in-progress is determined using the specific
cost method. Net realisable value is the estimated
selling price in the ordinary course of business
less any applicable cost of conversion from their
existing state to a finished condition and directly
attributable selling expenses.
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