B. Material accounting policies
a. Statement of compliance
The Company ’ s financial statements have been prepared
in accordance with the provisions of the Companies
Act, 2013( Act’) and the Indian Accounting standards
(“Ind AS") notified under the Companies (Indian
Accounting Standard) Rules, 2015 and amendments
thereto issued by Ministry of Corporate Affairs under
section 133 of the Companies Act, 2013. In addition,
the guidance notes announcements issued by Institute
of Chartered Accountants of India (ICAI) are also
applied except where compliance with other statutory
promulgationsrequire a different treatment.
b. Basis of Preparation:
The financial statements have been prepared on accrual
basis and under the historical cost convention except
for certain financial instruments which are measured
at fair value at the end of each reporting period, as
explained in the accounting policies mentioned below.
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 Schedule III to the
Companies Act, 2013. The Company has ascertained
its operating cycle as 12 months for the purpose of
current and non-current classification of assets and
liabilities.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Functional and presentation currency
The financial statements including notes thereon are
presented in Indian Rupees (“Rupees" or “INR"),
which is the Company’s functional and presentation
currency. All amounts disclosed in the financial
statements including notes thereon have been rounded
off to the nearest lacsupto two places of decimalof
Rupees as per the requirement of Schedule III to the
Act, unless stated otherwise.
c. Use of Estimates, Judgments and Assumptions
The preparation of financial statements in accordance
with Ind AS requires management to make judgments,
estimates and assumptions that affect the application
of accounting policies and the reported amount
of assets, liabilities, income and expenses. Actual
results may differ from these estimates. 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 in any future periods affected.
All the assets and liabilities have been classified as
current or non-current as per the company’s normal
operating cycle of twelve months and other criteria
set out in Schedule III to the Companies Act, 2013.
Significant areas of estimation, uncertainty and
critical judgements in applying accounting policies
that have significant effect on amount recognized in
the financial statements are:
i. Allowance for bad and doubtful trade receivable.
ii. Recognition and measurement of provision and
contingencies.
iii. Depreciation/ Amortisation and useful lives
of Property, plant and equipment / Intangible
Assets.
iv. Recognition of deferred tax.
v. Income Taxes.
vi. Measurement of defined benefit obligation.
vii. Impairment of Non-financial assets and financial
assets.
d. Inventories
Inventories are valued at lower of cost and net realisable
value, except scrap are valued at net realisable value.
Cost of inventory is arrived at by using Weighted
Average Price Method. Cost of inventory generally
comprises of cost of purchase, cost of conversion and
other cost incurred in bringing the inventory to their
present location and condition.
e. Revenue
Recognition
The company recognised revenue i.e. account for a
contract with a customer only when all of thefollowing
criteria are met:
(a) the parties to the contract have approved the
contract (in writing, orally or in accordance
with other customary business practices) and are
committed to perform their respective obligations;
(b) the entity can identify each party’s rights
regarding the goods or services to be transferred;
(c) the entity can identify the payment terms for the
goods or services to be transferred;
(d) the contract has commercial substance (ie the
risk, timing or amount of the entity’s future cash
flows is expected to change as a result of the
contract); and
(e) it is probable that the entity will collect the
consideration to which it will be entitled in
exchange for the goods or services that will be
transferred to the customer. In evaluating whether
collectability of an amount of consideration
is probable, an entity shall consider only the
customer’s ability and intention to pay that amount
of consideration when it is due. The amount of
consideration to which the entity will be entitled
may be less than the price stated in the contract
if the consideration is variable because the entity
may offer the customer a price concession.
Measurement
When (or as) a performance obligation is satisfied,
company recognise as revenue the amount of the
transaction price (which excludes estimates of variable
consideration that are constrained) that is allocated to
that performance obligation.
The transaction price is the amount that the entity
expects to be entitled to in exchange for transferring
promised goods or services to a customer, excluding
amounts collected on behalf of third parties (for
example, some sales taxes). The consideration
promised may include fixed amounts, variable
amounts, or both.
(i) Revenuerecognition Sale ofPower
Revenue from sale of Power is recognized at
point in timebasis on acceptance by Electricity
Distribution Company/Consumers of units
generated and after giving allowance for wheeling
and transmission loss.
(ii) Rendering of Services
Revenue from rendering of services is recognized
over time as and when the customer receives
the benefit of the company’s performance and
the Company has an enforceable right to receive
payment for services transferred.
Unbilled revenue represents value of services
performed in accordance with the contract terms
but not billed.
(iii) Sale of Solar products
Revenue from turnkey contracts is recognised
over time to the extent of performance obligation
satisfied and control is transferred to the
customer. Contract revenue is recognised at
allocable transaction price which represents the
cost of work performed on the contract plus
proportionate margin, using the percentage of
completion method. Percentage of completion is
the proportion of cost of work performed to-date,
to the total estimated contract costs.
(iv) Sale of Electric Vehicle
Revenue is recognised when control of vehicles
have been transferred to the customer; at an
amount that reflects the consideration which the
Company expects to be entitled in exchange for
those goods.
(v) Other operational revenue represents income
earned from the activities incidental to the
business and is recognized when the performance
obligation is satisfied and right to receive
the income is established as per the terms of
thecontract.
(vi) Dividend and Interest income
Interest income is recognized on accrual basis
using the effective interest method. Dividend
income is recognised in profit or loss on the date
on which the company’s right to receive payment
is established.
(vii) Renewable Energy Certificate
Revenue from sale of Renewable Energy
Certificate is accounted for as and when sold.
f. Property, Plant and Equipment
(i) Property, plant and equipment
Property, Plant and Equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses, (if any), Free hold land is
measured at cost.
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, acquisition or construction
cost including borrowing costs, any costs directly
attributable to bringing the asset to the location and
condition necessary for it to be capable of operating
in the manner intended by management and the initial
estimate of the costs of dismantling and removing the
item and restoring the site on which it is located.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of
property, plant and equipment is recognised in
statement of profit or loss.
The Company has adopted to elect to continue
with the carrying value for all of its property,
plant and equipment as recognized in the financial
statements as at the date of transaction to Ind AS,
measured as per the previous GAAP and use that
as its deemed cost as at the date of transition i.e.
1st April, 2016.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the company and cost of which can be reliable
measured.
(iii) Capital work in progress
Assets under erection/installation are shown
as Capital work in progress , Expenditure
during construction period are shown as pre¬
operative expenses to be capitalized on erection/
installations of the assets.
(iv) Depreciation
Depreciation on Property, plant and equipment
is provided in the manner specified in Schedule
II to the Companies Act, 2013 except based on
technical evaluation the useful life of Solar power
generation plant is considered 25 years which
is different from that prescribed in schedule II
of the Act. Depreciation of Property, plant and
equipment is the difference between Original
cost / revalued amount and the estimated residual
value and is charged to the statement of profit
and loss over the useful life on straight line basis.
The estimated useful life of property, plant and
equipment and estimated residual value is taken
as prescribed under Schedule II to the Companies
Act, 2013.
Depreciation on additions during the year is
provided on pro rata basis with reference to date
of addition/installation. Depreciation on assets
disposed /discarded is charged up to the date on
which such asset is sold.Freehold land and Assets
held for sale are not depreciated.
The estimated useful lives, residual value and
depreciation method are reviewed at the end of
each balance sheet date, any changes therein are
considered as changes in estimate and accordingly
accounted for prospectively. Gains and losses on
disposal are determined by comparing proceeds
with carrying amounts. These are included in the
statement of Profit and Loss.
Leasehold Land with lease period of 30 years is
amortized over the period of lease.
g. Intangible assets
Identifiable Intangible assets are recognised when it
is probable that future economic benefits attributed
to the asset will flow to the Company and the cost
of the asset can be reliably measured. Gains or losses
arising from derecognition of an intangible asset are
measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are
recognised in the statement of profit and loss when the
asset is derecognised.
i. Recognition and measurement
Intangible assets are held at cost less accumulated
amortisation and impairment losses. Intangible
assets developed or acquired with finite useful
life are amortised on straight line basis over the
useful life of asset.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only when
it is probable that future economic benefits
attributable to the assets will flow to the company
and the cost of the assets can be reliable measured.
All other expenditure, including expenditure on
internally generated goodwill and brands, when
incurred is recognised in statement of profit or
loss.
iii. Amortisation
Amortisation is calculated to write off the cost
of intangible assets less their estimated residual
values using the straight-line method over their
estimated useful lives and is generally recognised
in statement of profit and loss.
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjustedprospectively, if required.Intangible
assets - Computer software are amortized over a
period of 3 years.
h. Impairment of non-financial asset
The company assesses at each reporting date whether
there is any objective evidence that a non-financial
asset or a group of non-financial assets are impaired.
If any such indication exists, the company estimates
the amount of impairment loss. For the purpose of
assessing impairment, the smallest identifiable group
of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows
from other assets or group of assets is considered as
cash generating unit. If any such indication exists, an
estimate of the recoverable amount of the individual
asset/cash generating unit is made.
An impairment loss is calculated as the difference
between an asset’s carrying amount and recoverable
amount. Losses are recognized in profit or loss and
reflected in an allowance account. 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
recognized, then the previously recognized impairment
loss is reversed through profit or loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that
would have been in place had there been no impairment
loss been recognized for the asset (or cash-generating
unit) in prior years. A reversal of an impairment loss
is recognized immediately in Statement of Profit and
Loss, taking into account the normal depreciation/
amortization.
i. Foreign currency transactions and translations
(i) All transactions in foreign currency are recorded
at the rates of the exchange prevailing on the
dates when the relevant transactions took place;
any gain/ loss on account of the fluctuations in the
rate of exchange is recognized in the statement of
Profit and Loss.
(ii) Monetary items in the form of loans, current
assets and current liabilities in foreign currencies
at the close of the year are converted in the Indian
currency at the appropriate rate of exchange
prevailing on the dates of the Balance Sheet.
Resultant gain or loss on account of fluctuation
in the rate of exchange is recognized in the
statement of Profit and Loss.
(iii) Non-monetary assets and liabilities that are
measured at fair value in a foreign currency
are translated in to functional currency at the
exchange rate when the fair value was determined.
Non-monetary items that are measured in terms
of historical cost in a foreign currency are not
translated.
(iv) In respect of the Forward Exchange Contracts
entered into to hedge foreign currency risks,
the difference between the Forward Rate and
Exchange Rate at the inception of the contract is
recognized as income or expense.
j. Government grants
Government grants are recognised where there is
reasonable assurance that the grant will be received,
and all attached conditions will be complied with. When
the grant relates to revenue item, it is recognised as
income on a systematic basis over the periods that the
related costs, for which it is intended to compensate,
are expensed. When the grant relates to an asset, it
is recognised as income in equal amounts over the
expected useful life of the related asset.
When the Company receives grants of non-monetary
assets, the asset and the grant are recorded at fair
value amounts and released to profit or loss over the
expected useful life in a pattern of consumption of the
benefit of the underlying asset i.e. by equal annual
instalments. When loans or similar assistance are
provided by governments or related institutions, with
an interest rate below the current applicable market
rate, the effect of this favorable interest is regarded
as a government grant. The loan or assistance is
initially recognised and measured at fair value and
the government grant is measured as the difference
between the initial carrying value of the loan and the
proceeds received. The loan is subsequently measured
as per the accounting policy applicable to financial
liabilities.
The Company has chosen to present grants related to
an asset item as other income in the statement of profit
and loss.
k. Employee benefits
Ý Defined Contribution plan
Provident fund is a defined contribution scheme. The
Company has no obligation, other than the contribution
payable to the provident fund. The Company
recognizes contribution payable to the provident fund
scheme as an expense when an employee renders the
related service.
Ý Defined benefit plan
Thecompany pays gratuity to the employees who have
completed 5 Years of service with company at the
time when the employee leaves the company as per
the payment of gratuity act 1972
The cost of providing benefits under the defined
benefit plan is determined using the actuarial valuation
on projected unit credit method made at the end of
each financial year.
Remeasurement, comprising of actuarial gains and
losses, the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit
liability and the return on plan assets (excluding
amounts included in net interest on the net defined
benefit liability), are recognised immediately in the
balance sheet with a corresponding debit or credit to
retained earnings through OCI in the period in which
they occur. Remeasurement of the net defined benefit
liability (asset) recognised in other comprehensive
income shall not be reclassified to profit or loss in a
subsequent period.
The Company recognises the following changes in the
net defined benefit obligation as an expense in the
statement of profit and loss:
Service costs comprising current service costs, past-
service costs; and Net interest expense or income
Ý Short term employee benefits
The undiscounted amount of short term employee
benefits expected to be paid in exchange for services
rendered by employees is recognized during the period
when the employees renders the services. These
benefits include compensated absence also.
Ý Long term employee benefits
Compensated absences which are not expected to
occur within twelve months after the end of the period
in which the employee renders the related services are
recognised as a liability using the actuarial valuation
on projected unit credit method made at the end of
financial year.
l. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying asset that
necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part
of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur.
Borrowing costs consist of interest and amortization
of ancillary costs incurred in connection with the
arrangement of borrowed funds. Borrowing cost also
includes exchange differences to the extent regarded
as an adjustment to the borrowing costs.
m. Tax Expenses
Tax expense or credit comprises of current income tax
and deferred tax.
Ý Current tax
Current income-tax expense or credit is measured
at the amount expected to be paid to the taxation
authorities in accordance with the Income-tax Act,
1961. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively
enacted, at the reporting date.
Current income tax relating to items recognised
outside profit or loss is recognised outside profit or
loss (either in OCI or in equity). Current tax items are
recognised in correlation to the underlying transaction
either in OCI or directly in equity.
Current tax assets and liabilities are offset only if, the
Company:
a. has a legally enforceable right to set off
the recognised amounts; and
b. intends either to settle on a net basis, or
to realise the asset and settle the liability
simultaneously.
Ý 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 to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences 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 that affects
neither the taxable profit nor the accounting profit.
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. Unrecognised deferred tax
assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax
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.
Deferred tax assets include Minimum Alternative
Tax (MAT) paid in accordance with the tax laws in
India, which is likely to give future economic benefits
in the form of availability of set off against future
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.
Deferred tax assets and liabilities are offset only if:
a) the entity has a legally enforceable right
to set off current tax assets against current
tax liabilities; and
b) the deferred tax assets and the deferred
tax liabilities relate to income taxes levied
by the same taxation authority on the same
taxable entity.
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