NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India. The applicable mandatory Accounting Standards (as amended) specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule, 2014 of India have been followed in preparation of these financial statements.
(b) Use of estimates
The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Differences between the actual results and the estimates are recognised in the period in which the same are known/materialised.
(c) Revenue Recognition
(i) Sales
1) Sale of Goods;
In case of sale of goods, revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
2) Sale of Services;
In case of Completed service contract revenues are recognised immediately when the service is provided and approved by the contractee, whereas in case of Proportionate completion of contract revenue is recognised proportionately by reference to the performance of each act.
The collection of Goods and Service Tax by company on behalf of government are not economic benefits to the Company and hence they are excluded from the revenue and in case of services, the revenue is recognised when the benefits are transferred.
(ii) Interest Income
Interest income is recognized on accrual basis except when realization of such income is uncertain.
(iii) Dividend
Dividend income is recognized when the right to receive payment is established.
(iv) Insurance Claims
Insurance and other claims are recognised only when it is reasonably certain that the ultimate collection will be made.
(d) Property Plant and Equipment:
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress. PPE are stated at cost, net of tax/duty credit availed, if any, after reducing accumulated depreciation and accumulated impairment losses, if any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction cost (net of applicable tax credit, if any), any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and decommissioning costs. Direct costs are capitalized until the asset is ready for its intended use and includes borrowing cost capitalised in accordance with the Company's accounting policy.
Depreciation of PPE commences when the assets are ready for their intended use. Depreciation is provided on the cost of PPE (other than properties under construction) less their residual values, using straight line method (SLM) over the useful life of the PPE as stated in the Schedule II to the Companies Act, 2013. Useful Life of each class of PPE as prescribed under Part C of Schedule II to Companies Act.
(e) Intangible Assets and amortisation
Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized over the estimated period of benefit, not exceeding ten years.
(f) Impairment of Assets
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets under development includes the cost of assets. Intangible assets are amortized over the estimated period of benefit, not exceeding ten years.
(h) Investments
Investments are either classified as current or long term based on the management intention at the time of purchase. Current investments are stated at lower of cost or fair value. Long term investments are shown at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
However, when there is decline, other than temporary in the value of long term investment, the carrying amount is reduced to recognize the decline.
(i) Borrowing Costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets up to the date the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
(j) Employee Benefits
a) Post employment benefits
i) Defined Contribution plan
The company's contribution plan to defined contribution plan paid/payable for the year is charged to the Statement of Profit and loss.
ii) Defined Benefit plan
The Liabilities towards defined benefit schemes are determined using the Projected Unit Credit Method. Actuarial valuations under the Projected Unit Credit Method are carried out at the balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognized immediately to the extent of benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as reduced by the plan assets.
b) Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognized in the period in which the employee renders the related service. The Company recognizes the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability. These benefits include salary, wages, bonus, performance incentives etc.
c) 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 recognized on the basis of unutilized leave balances at the end of the year.
(k) Taxes on Income
Tax expense for the year comprises current tax and deferred tax.
(i) Current Tax
The provision for taxation is ascertained on the basis of assessable profits computed in accordance with the provisions of the Income-tax Act, 1961.
(ii) Deferred Tax
Deferred tax assets and liabilities are recognized on timing differences, being the differences between taxable incomes and accounting income, that originate in one period and are capable of reversal in one or more subsequent periods using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets, other than on unabsorbed depreciation and carried forward losses, are recognised only if there is reasonable certainty that they will be realised in the future. Deferred tax assets in respect of unabsorbed depreciation and carry forward losses are recognized if there is virtual certainty that there will be sufficient future taxable income available to realize such losses. Deferred Tax assets are reviewed at each balance sheet date for their realisability.
(I) Leases
Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to Statement of Profit and Loss.
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