1.5 Summary of Material Accounting policies
(a) Property, Plant and Equipment (PPE)
PPE are stated at cost, net of recoverable taxes, discount, government grants/subsidies and rebates, etc. less
accumulated depreciation and impairment loss, if any. Such cost includes purchase price, borrowing cost (if
capitalisation criteria are met) and any cost directly attributable to bringing the assets to its working condition for its
intended use.
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. The carrying amount of any component accounted for as a separate asset is
derecognised when replaced.
Spare parts in the nature of PPE are capitalised and depreciated over their remaining useful lives.
Capital work-in-progress comprises of PPE that are not ready for their intended use at the end of reporting period and
are carried at cost comprising direct costs, related expenses, other directly attributable costs and borrowing costs (if
capitalisation criteria is met).
Gains or losses arising from de-recognition of PPE is measured as the difference between the net disposable
proceeds or net realisable value, as the case may be, and the carrying amount (net books value) of the asset and are
recognised in the Statement of Profit and Loss when the asset is derecognised.
Advances paid towards acquisition of PPE and outstanding at each reporting date is classified as capital advances
under other non-current assets and the assets not ready to use on or before the reporting date are disclosed under
Capital Work-In-Progress (CWIP).
(b) Investment Property
The Company has certain investments in Buildings which are classified as Investment Property as per the requirement
of Ind AS 40. The same is held generally to earn rental income or for capital appreciation or both. The Investment
Property has been recognised at cost less accumulated depreciation and impairment, if any. The same has been
disclosed separately in the financial statements along with requisite disclosure about fair valuation of such Investment
Property at the year end.
(c) Intangible Assets
Intangible assets (mainly comprise of license fees and associated implementation costs incurred for Software) are
measured initially at cost only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost can be measured reliably. After initial recognition, an intangible asset is carried at its cost,
less accumulated amortisation and accumulated impairment losses, if any.
(d) Non-Current Assets (or disposal groups) classified as held for sale:
Non-Current Assets held for sale are presented separately in the Balance Sheet when the following criteria are met:
• The Company is committed to selling the asset;
• The assets are available for sale immediately;
• An active plan of sale has commenced; and
• Sale is expected to be completed within 12 months.
Assets held for sale and disposal groups are measured at the lower of their carrying amount and fair value less cost
to sell. Assets held for sale are no longer amortised or depreciated.
(e) Depreciation/Amortisation
Depreciation on PPE is provided on straight line method at the rates determined based on the useful lives of respective
assets as prescribed in the Schedule II of the Companies Act, 2013 and/or useful life reviewed and assessed by the
Company based on technical evaluation of relevant class of assets, as detailed below:
(ii) Plant and Equipment which were acquired for a specific project are depreciated over the tenure of the project.
Depreciation on fixed assets added/disposed-off/discarded during the year is provided on pro-rata basis with
respect to the month of addition/disposal/discarding.
Right-of-use Assets (Land) is amortised on a straight line basis over the period of Lease (99 Years).
Right-of-use Assets (Building under operating Lease) is amortised on a straight line basis over the period of
lease term (3 to 9 Years).
Intangible Assets are measured at cost and amortised so as to reflect the pattern in which the asset’s economic
benefits are reasonably expected to flow to the Company. Accordingly, the useful lives of Intangible Assets have
been estimated as five years.
Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted, if
considered appropriate.
(f) Impairment of Non-Financial Assets
Assessment is done at each reporting date as to whether there is any indication that an asset (PPE and Intangible)
may be impaired. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating
unit (CGU) is made. Recoverable amount is higher of an asset’s or cash generating unit’s net selling price and its
value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful life. For the purpose of assessing impairment, 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. 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
groups of assets, is considered as a cash generating unit (CGU). An asset or CGU whose carrying value exceeds its
recoverable amount is considered impaired and is written down to its recoverable amount. Assessment is also done
at each reporting date as to whether there is any indication that an impairment loss recognised for an asset in prior
accounting periods may no longer exist or may have decreased.
(g) Government Grants and Subsidies
Grants and subsidies (including industrial investment promotion incentives linked to fixed capital investment in Property,
Plant and Equipment, etc.) from the Government(s) are recognised when there is reasonable assurance that the
conditions attached to them will be complied and grants/subsidies will be received. Government subsidies/incentives
inextricably based upon and linked to fixed capital investments in Property, Plant and Equipment for setting up a new
industrial undertaking or for substantial expansion/technological upgradation/ diversification of an existing industrial
undertaking where no repayment is stipulated are deducted to the extent of carrying amount of Property, Plant and
Equipment and balance, if any, credited to the Statement of Profit and Loss.
Export benefits availed as per prevalent schemes are considered accrued and accounted for as such in the year in
which the goods are exported subject to the condition that there exists no significant uncertainty with regard to their
ultimate collection or availment.
Cost comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their
present location and condition. Net realisable value is the estimated selling price in the ordinary course of business,
less estimated cost of completion and estimated cost necessary to make the sale.
(i) Fair Value Measurement
The Company measures financial instruments such as investments (other than equity investments in subsidiaries,
joint venture and associates) and derivatives at fair value at each balance sheet date.
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 fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either:
(i) In the principal market for the asset or liability, or
(ii) In the absence of a principal market, in the most advantageous market for the asset or liability to which the
Company has access at that date.
All assets and liabilities for which fair value is measured or disclosed in the standalone financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable;
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For the purpose of Fair value disclosure, the Company has determined classes of assets and liabilities on the basis
of nature, characteristics and risks of the assets or liabilities and the level of the fair value hierarchy as explained
above.
Management determines the policies and procedures for both recurring fair value measurement, such as derivative
instruments and unquoted financial assets and for non-recurring measurement, such as assets held for disposal.
(j) 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.
(1) Financial Assets
(a) Initial recognition and measurement
All financial assets are recognised initially at fair value. In the case of financial assets not recorded at fair
value through profit and loss (FVTPL) transaction costs that are directly attributable to the acquisition or
issue of financial assets are adjusted to the fair value on initial recognition. However, trade receivables that
does not contain a significant financing component are measured at transaction price.
(b) Subsequent measurement
Financial Assets other than Equity Instruments
(i) Financial Assets Carried at Amortised Cost:
A financial asset is subsequently 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 principal outstanding. Interest income from such financial asset is included in other income
using the effective interest rate (“EIR”) method.
(ii) Financial Assets at Fair Value through Other Comprehensive Income (FVTOCI):
A financial asset is subsequently measured at fair value through other comprehensive income 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 principal outstanding. They are
subsequently measured at each reporting date at fair value, with all fair value movements recognised in
Other Comprehensive Income (OCI). On Derecognition of the asset, cumulative gain or loss previously
recognised in Other Comprehensive Income is reclassified from the OCI to Statement of Profit and
Loss.
(iii) Financial Asset at Fair Value through Profit or Loss (FVTPL):
A financial asset which is not classified in any of the above categories is measured at fair value through
profit and loss.
Equity Instruments
(i) Investment in subsidiaries, Joint Venture Entity and Associates
The Company has accounted for its Investments in Subsidiaries, Joint venture entity and Associates at
cost less allowance of impairment, if any.
(ii) Other Equity Investments
All other equity investments are measured at fair value. Equity Investments, which are held for trading
are classified as Fair value through the Statement of Profit and Loss. For equity investments other than
held for trading, the Company has exercised irrevocable option to recognise fair value changes in
‘Other Comprehensive Income’ (“OCI”) save & except passive long-term investments in a power producer
company for sourcing of renewable energy which are measured at cost by treating it as fair value
through Profit and Loss (FVTPL) as per the governing terms and conditions of the Power Purchase
Agreement (Refer Note No.5). The Company makes such election on an instrument-by-instrument
basis for those investments which are strategic and are not intended for sale. If the Company decides
to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognised in the OCI. Gain/ losses on disposal of such investments are transferred from
OCI to Retained Earnings.
(c) Derecognition of Financial Instruments
The Company derecognises financial assets 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.
(d) Impairment of Financial Assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial
assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance.
The Company determines expected credit losses after taking into account the past history of recovery, risk
of default of the counterparty, existing market conditions, etc and after considering all reasonable and
supporting information including that which are forward looking, while assessing credit risk. The impairment
methodology is applied on individual customer basis and depends on whether there has been a significant
increase in the credit risk since initial recognition. The Company reviews its carrying value of investments in
subsidiaries, associates and joint ventures, when there is indication for impairment. If the recoverable amount
is less than its carrying amount, the impairment loss is accounted for.
(2) Financial Liabilities
(a) Recognition and Initial Measurement:
Financial liabilities are classified, at initial recognition, as at fair value through profit or loss, loans and
borrowings, payables or as derivatives, as appropriate. All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
(b) Subsequent Measurement:
Financial liabilities are measured subsequently at amortised cost or FVTPL. A financial liability is classified
as 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 rate method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in the Statement
of Profit and Loss.
(c) Derecognition:
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires.
(3) Offsetting Financial Instruments:
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the
asset and settle the liability simultaneously.
(4) Derivative Financial Instruments:
The Company enters into derivative financial instruments viz. foreign exchange forward contracts, interest rate
swaps and cross currency swaps to manage its exposure to interest rate and foreign exchange rate risks.
Derivatives are initially recognised at fair value on the date when 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
recognised in the Statement of Profit and Loss immediately.
(k) Income Taxes
Tax expense comprises current income tax and deferred tax. Current income tax expense is measured at the amount
expected to be paid to the concerned tax authorities in accordance with the governing provisions of the Income-tax
Act, 1961as amended, modified and notified from time to time. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at the reporting date. The Company uses estimates and
judgements based on the relevant rulings in the areas of allocation of revenue, costs, allowances and disallowances
which are exercised while determining the provisions for Income Tax.
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets
are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, the carry forward of unused tax credits and unused tax losses can be utilised. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognised based
upon the likely timing and the level of future taxable profits together with future tax planning strategies. Accordingly,
the Company exercises its judgement to reassess the carrying amount of deferred tax assets at the end of reporting
period. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted
at the reporting date.
Income tax (Current and Deferred) is recognised in the Statement of Profit and Loss except to the extent it relates to
the items recognised directly in equity or other comprehensive income.
Current tax assets and Current tax liabilities are offset, if a legally enforceable right exists to set off the recognised
amounts and where it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
(l) Revenue from Contract with Customer
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 entitled in exchange for those goods or services.
The Company satisfies a performance obligation and recognises revenue over time, if one of the following criteria is
met:
(i) The Company’s performance does not create an asset with an alternate use to the Company and the Company
has as an enforceable right to payment for performance completed to date.
(ii) The Company’s performance creates or enhances an asset that the customer controls as the asset is created or
enhanced.
(iii) The customer simultaneously receives and consumes the benefits provided by the Company’s performance as
the Company performs.
For performance obligations where one of the above conditions are not met, revenue is recognised at the point in
time at which the performance obligation is satisfied.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of
variable consideration) allocated to that performance obligation. The transaction price of the goods sold and services
rendered is net of variable consideration. Variable consideration includes volume discounts, price variations, liquidated
damages, incentives, etc. The Company estimates the variable consideration with respect to above based on an
analysis of accumulated historical experience and also underlying contractual terms and conditions. Revenue is
recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue and costs,
if applicable, can be measured reliably. Taxes (Goods & Services Tax) collected on behalf of the government are
excluded from revenue.
Revenue from Sale of Goods
Performance obligation in case of Revenue from sale of goods is satisfied at a point in time and is recognised when
control of goods is transferred to the customers. Generally, control is transferred upon shipment of goods to the
customer or when the goods is made available to the customer, provided transfer of title to the customer occurs and
the Company has not retained any significant risks of ownership or future obligations with respect to the goods
shipped.
Revenue from Turnkey Projects/ Contracts
Performance Obligation in case of revenue from Turnkey Projects/Contracts is satisfied over the period of time, since
the customer controls the assets as they are created and the Company has enforceable right to payment for
performance completed to date. Revenue from Turnkey Projects/Contracts, where the outcome can be estimated
reliably is recognised under the percentage of completion method by reference to the stage of completion of contract
activity. The stage of completion is determined on the basis of work certified which is based upon Company’s effort
or input to the satisfaction of performance obligation. The estimates of contract costs and the revenue thereon are
reviewed periodically by the management and the cumulative effect of any changes in the estimates, if any, is
recognised in the period in which such changes are determined. Where it is probable that contract expenses will
exceed total revenue from a contract, the expected loss is recognised immediately as an expense in the Statement
of Profit and Loss.
If contract revenue recognised is in excess of interim/progressive billing, the same is recognised as “Contract Asset”.
Similarly, if interim/progressive billing exceeds contract revenue, the same is recognised as “Contract Liabilities”.
Prepayments from customers are recognised as liabilities. Retention money receivable from project customers does
not contain any significant financing element, these are retained for satisfactory performance of the contract.
Revenue from turnkey projects/contracts executed under joint operations (in terms of Ind AS-111 “Joint Arrangements”),
is recognised on the same basis as adopted in respect of contracts independently executed by the Company.
Export benefits availed as per the prevalent schemes are accrued each year in which the goods are exported and
when no significant uncertainty exist regarding the ultimate collection.
Services Income (mainly on account of operation and maintenance of IRU networks) is recognised over the period as
per the terms and conditions of the contract.
Interest income is recognised on time proportion basis. Dividend income is recognised when the right to receive
payment is established.
(m) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction, production or development of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale. All
other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred. Transaction
cost in respect of long term borrowing are amortised over the tenure of respective loans using Effective Interest Rate
(EIR) method.
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