1. Corporate Information
BKV Industries Limited ('the company') is a public limited company in India having its registered office at Guntur, in the State of Andhra Pradesh engaged in the aqua culture business. However, the company gave its aqua farm situated at Isakapally for lease for seven years from July, 2020. The address of its registered office is Bommidala House 5-87-15A, Lakshmipuram Main Road, Guntur -522007. The Company's shares are listed at BSE Limited. The financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 28th May 2024.
1.2. Significant Accounting Policies
The financial statements have been prepared in accordance with Ind AS notified under section 133 of the Companies Act, 2013 (Companies (Indian Accounting Standards) Rules, 2015) and other relevant provisions of the Act.
1.3. Basis of Accounting and Preparation of Financial Statements
The Financial Statements of the Company, comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of Cash Flow for year ended March 31, 2024 and notes to the Financial Statements, including a summary of significant accounting policies and other explanatory information.
Basis of Preparation & compliance with Ind AS
The financial statements have been prepared in accordance with Ind AS notified and revised under section 133 of the Companies Act, 2013 (Companies (Indian Accounting Standards) Rules, 2015) as amended from time to time) and presentation requirements of Division II of Schedule III and other relevant provisions of the Act. The Financial Statements have been prepared under the historical cost convention on an accrual basis excepting certain financial instruments which are measured in terms of relevant Ind AS at fair value/ amortized costs at the end of each reporting period and the defined benefit asset/(liability) is recognised as the present value of defined benefit obligation less fair value of plan assets. Accounting policies have been consistently applied except where a newly issued Indian Accounting Standard is initially adopted or a revision to an existing Indian Accounting Standard requires a change in the accounting policy hitherto in use. The Company has prepared the financial statements on the basis that it will continue to operate as a going concern. The Standalone Financial Statements are presented in Indian Rupees, which is a functional currency of the company, and all values are rounded off to the nearest Rs. In Lakhs with two decimals and negative numbers disclosed in brackets.
Current and non-current classification:
The Company presents assets and liabilities in the Balance Sheet based on Current/Non-Current classification as per Schedule III division II of Act. An asset is treated as Current when it is:
i) Expected to be realised or intended to be sold or consumed in normal operating cycle;
ii) Held primarily for trading;
iii) Expected to be realised within twelve months after the reporting period, or
iv) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is treated as Current when:
i) It is expected to be settled in normal operating cycle;
ii) Held primarily for trading;
iii) It is due to be settled within twelve months after the reporting period, or
iv) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The Company has considered 12 months as its normal operating cycle.
Use of estimates and judgement
The preparation of standalone financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management's evaluation of relevant facts and circumstances as on the date of financial statements. The actual outcome may diverge from these estimates. Estimates and assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Fair Value Measurement
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 under current market conditions.
1.3.1 Property Plant and Equipment (PPE)
Property, Plant and Equipment are stated at cost of acquisition, construction and subsequent improvements thereto less accumulated depreciation and impairment losses, if any.
Cost includes purchase price of assets or its construction cost including inward freight and other expenses incidental to acquisition or installation and adjustment for exchange differences wherever applicable and 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 for its use.
For eligible assets, interest and other costs incurred on/ related to borrowings to finance such assets or fixed assets during construction period and related pre-operative expenses are capitalized.
The component of assets is capitalized only if the life of the components varies significantly and whose cost is significant in relation to the cost of the respective asset. The carrying amount of any component accounted for as separate asset is derecognized when replaced.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Capital Work in progress includes preoperati've and development expenses, equipment to be installed, construction and erection materials, advances etc., net of accumulated impairment losses, if any. Such items are classified to the appropriate categories of PPE when completed and ready for intended use.
Depreciation and Amortization
Depreciation on PPE is provided as per Schedule II of the Companies Act, 2013 on Written Down Value method, over the useful life of Property (excluding the freehold land), Plant, and Equipment at all locations of the Company.
No depreciation is charged on Free hold land. Depreciation on Property, Plant and Equipment commences when the assets are ready for their intended use. The residual value for all the above assets are retained at 5% of the cost. On tangible fixed assets added / disposed off during the year, depreciation is charged on pro-rata basis for the period for which the asset was purchased and used. Depreciation methods, useful lives, residual values are reviewed and adjusted as appropriate, at each reporting date.
1.3.2 Intangible Assets
Intangible assets are stated at cost comprising of purchase price incurred less accumulated amount of amortization and impairment losses. Such assets are amortized over the useful life using straight line method and assessed for impairment whenever there is an indication of the same.
1.3.3 Derecognition of Tangible and Intangible assets
An item of PPE is derecognized upon disposal or when no future economic benefits are expected to arise from its use or disposal. Gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
1.3.4 Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the lessee is classified as finance lease. A lease that no substantial transfer of risk and reward of the property to the lessee Company, throughout the period of lease such lease is classified as operating lease.
Company as a lessee:
The Company at the commencement of the lease contract recognizes a Right-of-Use (RoU) asset at cost and corresponding lease liability, except for leases with term of less than twelve months (short term leases) and low-value assets. For these short term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the lease term. The cost of the right-of-use assets comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the inception date of the lease plus any initial direct costs, less any lease incentives received. Subsequently, the right-of-use assets are measured at cost less any accumulated depreciation and accumulated impairment losses, if any. The right of use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right of use assets. The estimated useful lives of right of use assets are determined on the same basis as those of property, plant and equipment. The Company applies Ind-AS 36 to determine whether a RoU asset is impaired and accounts for any identified impairment loss as described in the impairment of non-financial assets. For lease liabilities at the commencement of the lease, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease.
Company as a lessor:
Lessor accounting under Ind AS 116 is substantially unchanged compared to IndAS17. The company has only operating lease and accounts the same as follows:
The company has classified it's lease of farm to a company, as operating lease, as the company does not transfer substantially all the risks and rewards incidental to ownership of it's farm assets. The company continued to present the underlying farm assets other than those of land and buildings under Property, Plant and Equipment. Farm assets of land and buildings given on operating lease, have been included in the Investment Properties. Lease income is recognized on a straight-line basis over the non-cancellable lease term, unless there is another systematic basis, which is more representative than of the time pattern of the lease. However, as per the lease agreement lease terms are as follows: a. The Company has extended 7 years lease of Farm with all assets located in the farm from July 2020 onwards to the company. b. the lease rent is agreed to increase by 10% every two years. c. Lease rent to be paid in advance every year. d. Company had agreed to provide the fencing in the boundary of the land, wherever required. The company completed the boundary fencing as agreed in the lease agreement and costs incurred have been capitalized under Investment Property and further, the company didn't take any assets on lease.
1.3.5 Investment Properties:
Recognition and Initial Measurement
Investment properties are properties held to earn rentals or for capital appreciation or both. Investment properties are measured initially, at cost including the transaction costs, to bring the asset to it's working condition for the intended use.
Subsequent Measurement (Depreciation and useful lives).
Subsequent costs are recognized in the assets carrying amount or recognized as separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and fair value of the property is disclosed in the notes. Fair values are determined on an annual evaluation performed by registered valuer. Investment properties are stated at cost less depreciation and accumulated impairment of loss, if any subsequently. Depreciation is provided on written down value method, as per the useful life of the assets as prescribed under Schedule II of the Companies Act, 2013.
De-recognition
Investment properties are de-recognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between net disposal proceeds and the carrying amount is recognized in the Statement of Profit and Loss in the period of de-recognition.
1.3.6 Impairment of Non-Financial Assets
At each reporting date, the Company assesses whether there is any indication based on internal/external factors, that an asset may be impaired. If any such indication exists, the recoverable amount of the asset or the cash generating unit is estimated. If such recoverable amount of the asset or cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount and the reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If, at the reporting date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed, and the asset is reflected at the recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss.
1.3.7 Financial Assets and Financial Liabilities Initial recognition and measurement
Financial assets and financial liabilities are recognized are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Trade receivables are recognized at their transaction value as the same do not contain significant financing component. Trade payables in respect of the amount due on account of goods or services purchased in the normal course of business and are recognized at their transaction value and services availed value as the same do not contain significant financing component.
Non-derivative financial assets Subsequent measurement
Financial assets carried at amortized cost financial asset is measured at the amortized cost, if both the following conditions are met. The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method.
Financial Assets at Fair Value Through Other Comprehensive Income (FVTOCI) - Includes assets that are held within in a business model where the objective is both collecting contractual cash flows and selling the financial assets along with the contractual terms giving rise on specified dates to cash flows that are solely payments principal and interest on principal amount outstanding. The election is made on instrument by instrument basis.
Financial assets at Fair Value Through Profit or Loss (FVTPL) - Financial assets at FVTPL include financial assets that are designated at FVTPL upon initial recognition and financial assets that are not measured at amortized cost or at fair value through other comprehensive income. The election is made on instrument by instrument basis.
As there are no investments made by the company in the categories under FVTPL and FVTOCI, the question of election of such a measurement during the period of reporting did not arise.
Impairment and Derecognition of Financial Assets: All financial assets are reviewed for impairment at least at each reporting date to identify whether there is any evidence of impairment of a financial asset or group of financial assets.
In accordance with Ind AS 109, the Company uses "Expected Credit Loss" (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
• The 12 months expected credit losses (expected credit loses that results from those default events on the financial instrument that are possible within 12 months after the reporting date): or
• Full lifetime expected credit losses (expected credit losses that results from all possible default events over the life of the financial instrument).
For other assets, the Company uses 12-month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
Non-derivative financial liabilities
Borrowings, trade payables and other financial liabilities are initially recognized at the value of the respective contractual obligations. Any discount or premium on redemption / settlement is recognized in the Statement of Profit and Loss as finance cost over the life of the liability using the effective interest method and adjusted to the liability figure disclosed in the Balance Sheet.
Equity Instruments
Equity Instruments are recognized at the value of the proceeds net of direct costs of the capital issue.
Subsequent measurement
Subsequent to initial recognition, all non-derivative financial liabilities are measured at amortized cost using the effective interest rate method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognized in statement of profit and loss.
The effective interest rate is the rate that discounts estimated future cash payments or receipts (including all fees and transaction costs and other premiums or discounts) through the expected life of the Financial Asset or Financial Liability to the gross carrying amount of the financial asset or to the amortized cost of financial liability or where appropriate a shorter period to the net carrying amount on initial recognition.
De-recognition of financial instruments.
The Company derecognizes a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for recognition under Ind AS 109.
A Financial liability (or apart of a Financial Liability) is derecognized from the Company's Balance Sheet when the obligations specified in the contract is discharged or cancelled or expires.
Derivative Financial instruments and hedge accounting
Derivative financial instruments are accounted for at FVTPL except for derivatives designated as hedging instruments in cash flow hedge relationships, which require a specific accounting treatment. To qualify for hedge accounting, the hedging relationship must meet strict conditions with respect to documentation, strategy and economic relationship of the hedged transaction. For the reporting periods under review, the Company do not have any derivative instruments including forward currency contracts, and hence question of derivative and hedge accounting does not arise.
Offsetfng of Financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis and to realize the assets and settle the liabilities simultaneously.
1.3.8 Inventories
Inventories are valued at lower of cost or net realizable value. Cost of inventories is ascertained on 'weighted average' basis. Net Realizable Value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to make the sale.
Cost in respect of raw materials and stores and spares includes all expenses incurred in bringing the material to the location and excludes the credit availed with respect to duties and taxes. Cost in respect of finished goods represents prime cost and includes appropriate portion of overheads. Cost in respect of process stock represents, cost incurred up to the stage of completion, including the landed cost of raw materials.
The company doesn't have inventories during the reporting period, hence not applicable.
1.3.10. Provisions, Contingent Liabilities and Contingent Assets Provisions
Provisions involving substantial degree of estimation in measurement are recognized when there is a legal or constructive obligation as a result of past events and it is probable that there will be an out flow of resources and a reliable estimate can be made of the amount of obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, considering the risks and uncertainties surrounding the obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for onerous contracts.
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The Company at the end of every reporting period conducts the onerous contract test per the provisions of Ind AS 37 by comparing the remaining costs to be incurred under the contract with the related revenue of the contract. Where the costs of a contract exceed the related revenue of the contract, the Company makes a provision for the difference.
Contingent Liabilities
Contingent liabilities are not recognized and are disclosed by way of notes to the financial statements when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or one or more uncertain future events not wholly with in the control of the Company or when there is a present obligation that arises from past events where it is either not probable that an out flow of resources will be required to settle the same or a reliable estimate of the amount in this respect cannot be made.
Contingent assets are not recognized but disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
1.3.11 Employee Benefits
Short term obligations
Employee benefits are accrued in the year in which services are rendered by the employees. Short term employee benefits are recognized as an expense in the statement of profit and loss for the year in which the related service is rendered and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
Post-employment obligation
Contribution to defined contribution plans such as Provident Fund, ESI, Compensated Absences, are not applicable to the company, as the number of employees is lower than the prescribed limit under the respective Acts.
The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972 as well as accordance with the rules of the Company. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation, or termination of employment, of an amount based on the respective employee's salary and the tenure of Employment. The liability or asset is recognized in the Balance Sheet in respect of defined benefit gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, if any. The defined benefit obligation is calculated annually by the Actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash out flows by reference to market yields at the end of the reporting period on the government bonds that have terms approximating to the terms of the related obligation. The company do not have any plan assets for meeting the gratuity liability.
Remeasurement gain and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period they occur, directly in other comprehensive income net of taxes. They are included in retained earnings through OCI in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in statement of profit and loss.
1.3.12 Revenue from contracts with customers
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 to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
Revenue from sale of goods
Revenue from sale of components is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).
Trade Receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within one year and therefore are all classified as current. Where the settlement is due after one year, they are classified as non-current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
Contract Assets
A contract asset is the entity's right to consideration in exchange for goods or services that the entity has transferred to the customer. A contract asset becomes a receivable when the entity's right to consideration is unconditional, which is the case when only the passage of time is required before payment of the consideration is due. The impairment of contract assets is measured, presented, and disclosed on the same basis as trade receivables.
Contract Liability
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
Impairment
An impairment is recognised to the extent that the carrying amount of receivable or asset relating to contracts with customers (a) the remaining amount of consideration that the Company expects to receive in exchange for the goods or services to which such asset relates; less (b) the costs that relate directly to providing those goods or services and that have not been recognised as expenses.
Lease income
Lease income is recognized on a straight-line basis over the non-cancellable lease term, unless the there is another systematic basis which is more representative than the time pattern of the lease. Revenue from lease rentals is disclosed net of indirect taxes, if any. Sale of services
Revenues from fixed-price and fixed-time frame contracts, where the performance obligations are satisfied over time and where there is no uncertainty as to measurement or collectability of consideration, are recognised to the extent the Company has rendered the services, as per the contractual arrangements. Revenue is measured at the fair value of the consideration received or receivable in exchange for transferring the promised services, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Other Income Interest income
Interest is recognised using the effective interest rate (EIR) method, as income for the period in which it occurs. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, security deposit, prepayment etc.) but does not consider the expected credit losses.
Dividend Income
Dividends Revenue is recognized when the Company's right to receive the payment is established.
1.3.13 Borrowing Costs
Borrowing costs directly attributable to the acquisition and/or construction of a qualifying asset are capitalized during the period of time that is necessary to complete and prepare the asset for its intended use or sale. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other borrowing costs are charged to the statement of profit and loss as incurred.
1.3.14 Taxes on Income
Income tax expense representing the sum of current tax expenses and the net charge of the deferred taxes is recognized in the income statement except to the extent that it relates to items recognized directly in equity or other comprehensive income. Current income tax is provided on the taxable income and recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit. 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 realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised for all deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
As there is substantial carry forward depreciation losses, and it is not probable that there will be taxable profits, in the near future, hence, no current tax and deferred tax asset is recognized by the company.
1.3.15 Foreign Currency Transactions and Derivatives
Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing on the date of the transactions. Foreign currency monetary assets and liabilities at the year-end are translated at the year-end exchange rates. Nonmonetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate as at the date of transaction and are not re-translated. The gain or loss on decrease/ increase in reporting currency due to fluctuations in foreign exchange rates, in case of monetary assets and liabilities in foreign currency, are recognized in the Statement of Profit and Loss.
1.3.16 Segment Reporting
Operating segments are identified and reported taking into account the different risk and return, organization structure and internal reporting system. However, the company during the period under reporting have only one segment of lease income from the farm, and accordingly, Company has the single segment as per the requirements of Ind AS 108 - Operating Segments. All assets are located in India and revenue of the Company is earned in India hence, there is single geographic segment.
1.3.17 Earnings Per Share
Basic earnings per share are computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as at the beginning of the period unless issued at a later date.
1.3.18 Events after the reporting period
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorization for issue. Non- adjusting events are events that are indicative of
conditions that arose after the end of the reporting period. Non-adjusting events after the reporting date are not accounted but disclosed. No adjusting or significant events have occurred between 31st March 2024 and the reporting date and the date of authorization.
1.3.19 Cash Flow Statement
Cash flows are reported using the indirect method, whereby the profit/(loss) and tax is adjusted for the effects of transactions of non- cash nature and any deferrals or accruals of past or future cash receipts or payments. The Cash flows from operating, investing and financing activities of the Company are segregated based on available information.
For this purpose, cash comprises of cash on hand and demand deposits with banks. Cash equivalents are short term balances with original maturity of three months or less from the date of acquisition, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
1.4. Significant management judgement in applying accounting policies and estimation uncertainty.
1.4.1. The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions about the recognition and measurement that affect the reported amounts of revenues, expenses, assets and liabilities and the related disclosures.
1.4.2 Recognition of deferred tax assets - The Company uses judgement to determine the amount of deferred tax that can be recognised, based upon the likely timing and the level of future taxable profits and business developments. it is not probable that there will be taxable profits, in the near future, hence, no current tax and deferred tax asset is recognized by the company.
1.4.3 Evaluation of indicators for impairment of non- financial assets in assessing impairment, management has estimated economic usefulness of the assets, the recoverable amount of each asset or cash- generating units based on expected future cash flows and use of an interest rate to discount them. Estimation of uncertainty relates to assumption about economically future operating cash flows and the determination of a suitable discount rate.
1.4.4 Classification of leases - The Company entered into leasing arrangement for farm assets. The classification of the leasing arrangement as operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term.
1.4.5 Impairment of financial assets at each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit loss on outstanding financial assets. The company has been keeping it's surplus funds temporarily in short-term deposits with the Banks, however, at the year end, all the deposits are uncashed and bank balances considered under cash and cash equivalents which are subject to an insignificant risk of changes in value.
1.4.6 Provisions at each balance sheet date basis the management judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding contingent liabilities. However, the actual future outcome may be different from this judgement. However, the company do not have any contingent liabilities as at the year end.
1.4.7 Useful life of depreciable assets -Management reviews it's estimates of the useful lives of Property Plant, and Equipment, Investment Property and Intangible Assets at each reporting date, based on expected utility of the assets.
1.4.8 Defined benefit obligation (DBO) - Management's estimate of the DBO is based on a number of underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
1.4.9 Fair value measurements -Management applies valuation techniques to determine the fair value of financial instruments where active market quotes are not available. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management based its assumptions on observable data as far as possible but where it is not available, the management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction on the reporting date.
1.5 Recent pronouncements
As on the date of release of these financial statements, MCA has not issued any standards/amendments to accounting standards which are effective from 1st April 2024.
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