3 Significant accounting policies
a) Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1 - Presentation of Financial Statements based on the
nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash
equivalents.
Operating cycle for the business activities of the company covers the duration of the specific project/ contract/ product line/
service including the defect liability period wherever applicable and extends up to the realisation of receivables (including retention
monies) within the agreed credit period normally applicable to the respective lines of business.
b) 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.
i. Financial Assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit
or loss, transaction costs that are attributable to the acquisition of the financial asset. Trade receivables are initially measured at
transaction price. Regular way purchase and sale of financial assets are accounted for at trade date.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
• Amortised cost
• Fair value through other comprehensive income (FVT OCI)
• Fair value through profit or loss (FVTPL)
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its
business model for managing financial assets.
A financial asset is measured at amortised 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.
The effective interest rate (EIR) amortisation is included in finance income in the profit or loss.
Financial assets at FVT OCI
A financial asset is measured at FVT OCI if it is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling 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.
Financial assets included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value
movements are recognized in the other comprehensive income (OCI).
Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are measured at FVTPL.
Financial assets included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit &
Loss.
Other equity investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for
those equity investments for which the Company has elected to present the value changes in 'Other Comprehensive Income'.
Investments in Subsidiaries, Associates and Joint-Ventures
The Company has accounted for its equity instruments in Subsidiaries, Associates and Joint-Ventures at cost except where
Investments are accounted for at cost shall be accounted in accordance with Ind AS 105, wherein they are classified as assets
held for sale.
Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109.
ii. Financial liability
Initial recognition and measurement
Financial liabilities are initially recognised at fair value plus any transaction cost that are attributable to the acquisition of the financial
liabilities except financial liabilities at fair value through profit or loss which are intially measured at fair value.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in following categories:
• Financial liabilities through profit or loss (FVTPL)
• Financial liabilities at amortised cost
Financial liabilities through FVTPL
A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest
expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and
any gain or loss on derecognition are recognised in profit or loss.
Interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. For trade and
other payables maturing within one year from the balance sheet date, the carrying amounts approximates fair value due to the
short maturity of these instruments.
Financial guarantee contract
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.
Derecognition
A financial liability (or a part of a financial liability) is derecognized from the Company's Balance Sheet when the obligation
specified in the contract is discharged or cancelled or expires.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the
Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.
c) Property, Plant and Equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated
depreciation and accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its
purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any
directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and
removing the item and restoring the site on which it is located. Borrowing costs directly attributable to the acquisition or
construction of those qualifying property, plant and equipment, which necessarily take a substantial period of time to get ready for
their intended use, are capitalised.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate
components of property, plant and equipment.
Assets retired from active use and held for disposal are stated at the lower of their net book value and net realisable value and
shown under 'Other current assets'.
A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and
disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognised in statement of profit or loss.
Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are
considered as pre - operative expenses and disclosed under Capital Work - in - Progress.
ii. Subsequent expenditure
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure
will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
iii. Depreciation and amortisation
Tangible Assets
Depreciation on fixed assets is provided based on useful life of the assets as prescribed in Schedule - II to the Companies Act,
2013.
Intangible Assets
These are amortized over the best estimates of its useful economic life as decided by the management.
d) Intangible Assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and any
accumulated impairment losses. They are amortised over the best estimates of its useful economic life as decided by the
management. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal.
e) Inventories
i) Stock of construction materials, stores and spares and fuel (except for those relating to Construction activities) are valued at
cost (weighted average basis) or net realizable value, whichever is lower.
ii) Cost of construction materials, stores, spares and fuel used in construction activities are valued at cost (weighted average
basis).
iii) Work-in-progress is valued at cost and reflects the work done but not certified.
iv) The cost of inventories comprises all cost of purchase, cost of conversion and other incidental cost incurred in bringing the
inventories to their present location and condition.
v) Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and
estimated cost necessary to make the sale.
f) Impairment
i. Impairment of financial instruments: Financial Assets
Expected credit losses are recognized for all financial assets subsequent to initial recognition other than financials assets in
FVTPL category.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit losses for
all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly
since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial
asset increases significantly since its initial recognition. The Company's trade receivables do not contain significant financing
component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected
cash shortfall.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
ii. Impairment of non-financial assets
The Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication of
impairment. For impairment testing, assets that do not generate independent cash inflows are grouped together into
cash-generating units (CGUs). Each CGU represents the smallest Company of assets that generates cash inflows that are largely
independent of the cash inflows of other assets or CGUs. If any such indication exists the recoverable amount of an asset or CGU is
estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's carrying amount exceeds its
recoverable amount. The recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use
is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current
market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
g) Employee Benefits
i. Short-term employee benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by
employees are recognised as an expense during the period when the employees render the services.
ii. Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company makes specified monthly contributions
towards Provident Fund, ESI and Medical. The Company's contribution is recognised as an expense in the Statement of Profit and
Loss during the period in which the employee renders the related service.
iii. Defined benefit plans
I. Gratuity
Liability on account of Gratuity is:
- Covered through recognized gratuity fund managed by Life Insurance Corporation of India and contributions are charged to
revenue; and
- Balance if any, is provided on the basis of valuation of the liability by an Independent Actuary as at the year end.
II. Leave Encashment
Liability for leave encashment is treated as a long term liability and is provided on the basis of valuation by an Independent
Actuary as at the year end.
Re-measurement of defined benefit plans in respect of post-employment are charged to the Other Comprehensive Income.
|