2. Material Accounting Policies
A) Basis of Preparation and Presentation of Financial Statements
The financial statements of Bhudevi Infra Projects Limited (the Company) have been prepared and
presented in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies
(Indian Accounting Standards) Rules 2015, as amended and as per other relevant provisions of the
Act. The presentation of financial statements is based upon Ind AS Schedule III of Companies Act,
2013.
Except for the changes below, the Company has consistently applied accounting policies to all applicable
periods. Ind AS 116 Leases:
Effective April 1,2019, the Company has adopted Ind AS 116 Leases and applied to its Lease contracts
existing on April 1, 2019, using the modified retrospective method and has taken the cumulative
adjustment to retained earnings, on the date of initial application. The Company has evaluated the
effect of this amendment on the financial statements and concluded that there is no significant impact.
Basis of Measurement
These financial statements have been prepared on the historical cost convention and on an accrual
basis, except for the following material items in the balance sheet:
All assets and liabilities are classified into current and non-current based on the operating cycle of less
than twelve months or based on the criteria of realization/settlement within twelve months period
from the balance sheet date.
Use of estimates and judgments:
The preparation of financial statements in conformity with Ind AS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are
based on historical experiences and various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected. In particular, the areas involving critical estimates or Judgments are:
Depreciation and amortization: Depreciation and amortization is based on management estimates
of the future useful lives of certain class of property, plant and equipment and intangible assets.
Provision and contingencies: Provisions and contingencies are based on the Managements best estimate
of the liabilities based on the facts known at the balance sheet date.
Fair valuation: Fair value is the market based measurement of observable market transaction or
available market information. All financial instruments are measured at fair value as at the balance
sheet date, as provided in Ind AS 109 and 113. Being a critical estimate, judgment is exercised to
determine the carrying values. The fair value of financial instruments that are unlisted and not traded
in an active market is determined at fair values assessed based on recent transactions entered into with
third parties, based on valuation done by external appraisers etc.,
Functional and presentation currency
These financial statements are presented in Indian rupees, which is also the functional currency of the
Company. All financial information presented in Indian rupees has been rounded to the nearest Lakhs.
Current and noncurrent classification
All the assets and liabilities have been classified as current or noncurrent as per the Company’s normal
operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013and Ind AS 1,
Presentation of financial statements.
B) Classification of assets and liabilities as current and non-current
Assets:
An asset is classified as current when it satisfies any of the following criteria:
a. It is expected to be realized in,
b. or is intended for sale or consumption in, the Company’s normal operating cycle;
c. It is held primarily for the purpose of being traded;
d. It is expected to be realized within twelve months after the reporting date; or
e. It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting date.
Liabilities: A liability is classified as current when it satisfies any of the following criteria:
a. It is expected to be settled in the Company’s normal operating cycle;
b. It is held primarily for the purpose of being traded;
c. It is due to be settled within twelve months after the reporting date; or
d. The Company does not have an unconditional right to defer settlement of the liability for at least
twelve months after the reporting date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current assets/ liabilities include the current portion of noncurrent assets/ liabilities respectively.
All other assets/ liabilities are classified as noncurrent. Deferred tax assets and liabilities are
always disclosed as non-current.
Foreign Currency Transactions:
Transactions in foreign currencies are translated to the respective functional currencies of entities
within the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated into the functional currency at
the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were translated on initial recognition
during the period or in previous financial statements are recognized in the statement of profit and loss
in the period in which they arise.Non-monetary assets and liabilities denominated in a foreign currency
and measured at historical cost are translated at the exchange rate prevalent at the date of transaction,
if any.
C) Property, plant and equipment: Recognition and measurement
Property, Plant and Equipment are stated at cost of acquisition or construction less accumulated
depreciation and impairment loss, if any. Cost includes expenditures that are directly attributable to
the acquisition of the asset i.e., freight, duties and taxes applicable and other expenses related to
acquisition and installation. The cost of self-constructed assets includes the cost of materials and other
costs directly attributable to bringing the asset to a working condition for its intended use. Borrowing
costs that are directly attributable to the construction or production of a qualifying asset are capitalized
as part of the cost of that asset.
Directly attributable costs include:
a. Cost of Employee Benefits arising directly from Construction or acquisition of PPE.
b. Cost of Site Preparation.
c. Initial Delivery & Handling costs.
d. Professional Fees and
e. Costs of testing whether the asset is functioning properly, after deducting the net proceeds from
selling any items produced while bringing the asset to that location and condition (such as samples
produced when testing equipment).
When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing
the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized
net within in the statement of profit and loss.
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will
flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are
recognized in the statement of profit and loss as incurred.
Items of property, plant and equipment acquired through exchange of non-monetary assets are measured
at fair value, unless the exchange transaction lacks commercial substance or the fair value of either the
asset received or asset given up is not reliably measurable, in which case the asset exchanged is
recorded at the carrying amount of the asset given up.
Depreciation and Amortization:
Depreciation is recognized in the statement of profit and loss on a straight line basis over the estimated
useful lives of property, plant and equipment based on Schedule II to the Companies Act, 2013
(Schedule), which prescribes the useful lives for various classes of tangible assets. For assets acquired
or disposed of during the year, depreciation is provided on pro - rata basis. Land is not depreciated.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted
prospectively, if appropriate. The estimated useful lives are as follows:
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting
date is disclosed as capital advances under other noncurrent assets. The cost of property, plant and
equipment not ready to use before such date are disclosed under capital work-in-progress. Assets not
ready for use are not depreciated.
The Company assesses at each balance sheet date, whether there is objective evidence that an asset or
a group of assets is impaired. An assets carrying amount is written down immediately to its recoverable
amount if the assets carrying amount is greater than its estimated recoverable amount. Recoverable
mount is higher of the value in use or fair value less cost to sell.
D) 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.
a) Financial Assets
1) Initial Recognition and measurement
All financial assets are recognized 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. Purchases or sales of financial assets that require delivery of assets within
a time frame established by regulation or convention in the market place (regular way trades) are
recognized on the trade date, i.e., the date that the Company commits to purchase or sell the
asset.
2) Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
Financial Assets at Amortized Cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within
a business model with an objective to hold these assets 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. Interest income from these
financial assets is included in finance income using the effective interest rate (EIR) method. Impairment
gains or losses arising on these assets are recognized in the Statement of Profit and Loss.
Financial Assets Measured at Fair Value
Financial assets are measured at fair value through OCI if these financial assets are held within a
business model with an objective to hold these assets in order to collect contractual cash flows or to
sell these 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.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest revenue and foreign exchange gains and losses which are recognized in the
Statement of Profit and Loss.
Impairment of Financial Assets
In accordance with Ind AS 109, expected credit loss (ECL) model for measurement and recognition of
impairment loss on the trade receivables or any contractual right to receive cash or another financial
asset that result from transactions that are within the scope of Ind AS
18. As Company trade receivables are realized within normal credit period adopted by the company,
hence the financial assets are not impaired.
De-recognition of Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognized (i.e., removed from the Company’s balance sheet) when:
The rights to receive cash flows from the asset have expired, or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a pass-through
arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the
asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of
ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to
the extent of the Company’s continuing involvement. In that case, the Company also recognizes an
associated liability. The transferred asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Company has retained.
b) Financial Liabilities
• Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value i.e., loans
and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge,
as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings including
bank overdrafts, financial guarantee contracts.
• Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized
cost using the EIR method. Gains and losses are recognized in the statement of profit and loss when the
liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the
statement of profit and loss.
Fair value measurement
The Company classifies the fair value of its financial instruments in the following hierarchy, based on
the inputs used in their valuation:
i) Level 1: The fair value of financial instruments quoted in active markets is based on their quoted
closing price at the balance sheet date.
ii) Level 2: The fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques using observable market data. Such valuation techniques include discounted
cash flows, standard valuation models based on market parameters for interest rates, yield curves or
foreign exchange rates, dealer quotes for similar instruments and use of comparable arms length
transactions
iii) Level 3: The fair value of financial instruments that are measured on the basis of entity specific
valuations using inputs that are not based on observable market data (unobservable inputs).
Derivative financial instruments and hedging activities:
A derivative is a financial instrument which changes value in response to changes in an underlying
asset and is settled at future date. Derivatives are recognized at fair value at the end of reporting period
and are subsequently re-measured at their fair value at each reporting period. The method of recognizing
the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged. The Company designates certain derivatives as either:
a. hedges of the fair value of recognized assets or liabilities (fair value hedge); or
b. hedges of a particular risk associated with a firm commitment or a highly probable forecasted
transaction (cash flow hedge);
The Company documents at the inception of the transaction the relationship between hedging instruments
and hedged items, as well as its risk management objectives and strategy for undertaking various
hedging transactions. The Company also documents its assessment, both at hedge inception and on an
on-going basis, of whether the derivatives that are used in hedging transactions are effective in offsetting
changes in cash flows of hedged items.
Movements in the hedging reserve are accounted in other comprehensive income and are shown within
the statement of changes in equity. The full fair value of a hedging derivative is classified as a non¬
current asset or liability when the remaining maturity of hedged item is more than 12 months and as a
current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded
in the Statement of Profit and Loss, together with any changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk.
(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges is recognized in other comprehensive income. The ineffective portion of changes in the
fair value of the derivative is recognized in the statement of profit and loss. Gains or losses accumulated
in equity are reclassified to the statement of profit and loss in the periods when the hedged item affects
the statement of profit and loss.
When a hedging instrument expires or swapped or unwound, or when a hedge no longer meets the
criteria for hedge accounting, any accumulated gain or loss existing in statement of changes in equity
is recognized in the Statement of Profit and Loss.
When a forecasted transaction is no longer expected to occur, the cumulative gains/losses that were
reported in equity are immediately transferred to the statement of profit and loss.
Fair value measurement
Fair value of financial assets and liabilities is normally determined by references to the transaction
price or market price. If the fair value is not reliably determinable, the Company determines the fair
value using valuation techniques that are appropriate in the circumstances and for which sufficient
data are available, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
De-recognition of Financial Liabilities
Financial liabilities are de-recognized when the obligation specified in the contract is discharged,
cancelled or expired. When an existing financial liability is replaced by another from the same lender
on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as de-recognition of the original liability and recognition of a new
liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and
Loss.
E) Inventories
Inventories consist of raw materials, stores and spares, work-in-progress and finished goods and are
measured at the lower of cost and net realizable value. The cost of all categories of inventories is based
on the weighted average method. Cost includes expenditures incurred in acquiring the inventories,
production or conversion costs and other costs incurred in bringing them to their existing location and
condition. In the case of finished goods and work-in-progress, cost includes an appropriate share of
overheads based on normal operating capacity. Stores and spares, that do not qualify to be recognized
as property, plant and equipment, consists of packing materials, engineering spares (such as machinery
spare parts) and consumables which are used in operating machines or consumed as indirect materials
in the manufacturing process. Net realizable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and selling expenses.
F) Impairment of non-financial assets
Intangible assets and property, plant and equipment, Intangible assets and property, plant and equipment
are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e.
the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows that are largely independent of those from other
assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs. If
such assets are considered to be impaired, the impairment to be recognized in the statement of profit
and loss is measured by the amount by which the carrying value of the assets exceeds the estimated
recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if
there has been a change in the estimates used to determine the recoverable amount. The carrying
amount of the asset is increased to its revised recoverable amount, provided that this amount does not
exceed the carrying amount that would have been determined (net of any accumulated amortization or
depreciation) had no impairment loss been recognized for the asset in prior years.
G) Cash and Cash Equivalents
Cash and bank balances comprise of cash balance in hand, in current accounts with banks.
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