3.9 Provisions, Contingent Liabilities, Contingent Assets and Commitments
I) General
Provisions are recognized when the Company has a present obligation
legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of
the obligation. If the effect of the time value of money is material,
provisions are discounted using equivalent period government securities
interest rate. Unwinding of the discount is recognized in the Statement of
Profit and Loss as a finance cost. Provisions are reviewed at each balance
sheet date and are adjusted to reflect the current best estimate.
II) Contingencies
Contingent liabilities are disclosed when these is a possible obligation
arising from past events, the existence of which will be confirmed only
by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Company or a present
obligation that arises from past events where it is either not probable that
an outflow of resources will be required to settle or a reliable estimate of
the amount cannot be made. Information on contingent liability is
disclosed in the Notes to the Financial Statements.
A contingent asset is a possible asset that arises from past events and
whose existence will be confirmed only by the occurrence or non¬
occurrence of one or more uncertain future events not wholly within the
control of the entity, Contingent assets are not recognized, but are
disclosed in the notes. However, when the realization of income is
virtually certain, then the related asset is no longer a contingent asset, but
it is recognized as an asset.
3.10 Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Par value of the equity share is recorded as share capital and the amount
received in excess of the par value is classified as share premium.
3.11 Revenue recognition
Sale of goods
Revenue from the sale of goods is recognized when the significant risks
and rewards of ownership of the goods have passed to the buyer, usually
on delivery of the goods. Revenue is recognized at the fair value of
consideration received or receivable and represents the net invoice value
of goods supplied to third parties after deducting discounts, volume
rebates and outgoing sales tax and are recognized either on delivery or
on transfer of significant risk and rewards of ownership of the goods.
Revenue is inclusive of excise duty.
Sale of Services
Revenue recognition of services depends as the service is performed. This
is further divided into two ways:
(a) Proportionate Completion Method: This method of accounting
recognizes revenue in the statement of profit & loss proportionately with
the degree of completion of each service.
Here the service completion consists of the execution of more than one
act. Revenue is recognized with the completion of each such act.
(b) Completed Service Contract Method: This method of accounting
recognizes revenue in the statement of profit & loss only when the
rendering of services under a contract is completed or substantially
completed.
Generally we follow proportionate completion method for recognition.
Interest income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
3.12 Employee benefits
Short term employee benefits:
Short - term employee benefits are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid if
the Company has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably
Long-term employee benefits:
The Company's net obligation in respect of long team employee benefits
is the amount of future benefit that employees have earned in return for
their service in the current and prior periods. That benefit is discounted
to determine its present value. Re-measurement is recognized in
Statement of Profit and Loss in the period in which they arise.
Post-employment benefits-Defined contribution plans:
The Company's contributions to defined contribution plans are charged
to the income statement in the period to which they relate. Once the
contributions have been paid, the Company has no further payment
obligations. Prepaid contributions are recognized as an asset to the extent
that a cash refund or a reduction in the future payments is available.
Termination benefits
Termination benefits are employee benefits provided in exchange for the
termination of an employee's employment as a result of either:
(a) An entity's decision to terminate an employee's employment before the normal
retirement date; or
(b) An employee's decision to accept an offer of benefits in exchange for the
termination of employment.
3.13 Taxes
Income tax expense comprises current and deferred tax. It is recognized
in statement of profit and loss except to the extent that it relates to a
business combination, or items recognized directly in equity or in other
comprehensive income.
Management periodically evaluates positions taken in the tax returns
with respect to situations in which applicable tax regulations are subject
to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if, the Company:
• has a legally enforceable right to set off the recognized amounts;
and
• Intends either to settle on a net basis, or to realize the asset and
settle the liability simultaneously.
The company has opted for taxation under section 115BAC of the
Income Tax Act, 1961, as introduced by the Finance Act, 2020, with
effect from the assessment year 2024-25. Accordingly, the company has
recognized the provision for income tax and deferred tax assets and
liabilities based on the rates prescribed in the said section. The
company has also disclosed the impact of this option on its current and
deferred tax expenses and its earnings per share in the notes to
accounts. The option under section 115BAC is irrevocable and the
company will continue to be taxed at the rates specified in this section
unless it withdraws from the option in a future year.
3.14 Earning per Share
As per Ind AS 33 "Earning Per Share", Basic earnings per share are
computed by to the shareholders' and weighted average number of shares
outstanding during the year. The weighted average numbers of shares
also includes fixed number of equity shares that are issuable on
conversion of compulsorily convertible preference shares, debentures or
any other instrument, from the date consideration is receivable (generally
the date of their issue) of such instruments. Diluted earnings per share is
computed using the net profit for the year attributable to the shareholder'
and weighted average number of equity and potential equity shares
outstanding during the year including share options, convertible
preference shares and debentures, except where the result would be anti¬
dilutive. Potential equity shares that are converted during the year are
included in the calculation of diluted earnings per share, from the
beginning of the year or date of issuance of such potential equity shares, to
the date of conversion.
4. Critical accounting estimates, assumptions and judgments
a. Property, plant and equipment
The Company regularly reviews the estimated useful lives of
property, plant and equipment based on factors such business plan
and strategies, expected level of usage and future technological
development. Future results of operations could be materially affected
by changes in these estimates brought about by changes in the factors
mentioned above. A reduction of estimated lives of property, plant
and equipment would increase the recorded depreciation and
decrease the value of property, plant and equipment.
b. Intangibles
Internal technical or user team assesses the remaining useful lives of
Intangible assets. Management believes that assigned useful lives are
reasonable.
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