2. Significant Accounting Policies
a. Basis of Preparation of Accounts: -
The financial statements of the Company have been prepared in accordance with the Generally
Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards
specified under Section 133 of the Companies Act, 2013, read with relevant rules there under and
other accounting principles generally accepted in India. The financial statements have been
prepared on accrual basis under the historical cost convention. The accounting policies adopted in
the preparation of the financial statements are consistent with those followed in the previous year.
Previous year's figures were re-grouped/re-classified wherever necessary.
b. Use of Estimates
The preparation of the financial statements in conformity with Indian GAAP requires the
Management to make estimates and assumptions considered in the reported amounts of assets and
liabilities (including contingent liabilities) and the reported income and expenses during the year.
The Management believes that the estimates used in preparation of the financial statements are
prudent and reasonable. Future results could differ due to these estimates and the differences
between the actual results and the estimates are recognised in the periods in which the results are
known/materialise.
c. Cash and Cash Equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term
balances (with an 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.
d. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit/loss before 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 the available information.
e. Tangible/Intangible Fixed Assets:
An item is classified as fixed asset only if it satisfies the recognition criteria stated in AS 11(i.e.) is
probable that future economic benefits will flow to the company and the cost of such item could be
measured. Stores and Spares fulfilling the above conditions are also classified as fixed assets. Fixed
assets are initially recognized at its purchase price including all costs directly attributable to bring
the asset in a ready to use condition. All subsequent cost incurred such as day to day running
expenses, repair and maintenance expenses are treated as revenue expenses except when such
expenditure satisfied the recognition criteria stated above. Cost Model is followed after initial
recognition i.e. Fixed Assets are carried at cost less accumulated
depreciation/amortization/impairment.
Depreciation: Fixed assets are depreciated using the Written Down Value method. Useful lives of
assets necessary for calculation of depreciation rates are taken as specified in Schedule II of
Companies Act, 2013.
Intangible assets are amortized on written down value method over their estimated useful life or 4
years, whichever is lower.
The estimated useful life of the intangible assets and the amortization period are reviewed at the end
of each financial year and the amortization period is revised to reflect the changed pattern, if any.
Fixed assets retired from active use and held for sale are stated at the lower of their net book value
and net realizable value and are disclosed separately.
Capital Work-in-Progress: Projects under which tangible fixed assets are not yet ready for their
intended use and other capital work-in-progress are carried at cost, comprising direct cost, related
incidental expenses and attributable borrowing costs.
f. Impairment of Assets
The carrying value of assets/cash generating units at each balance sheet date is reviewed for
impairment if any indication of impairment exists. If the carrying amount of the assets exceeds the
estimated recoverable amount, impairment is recognized for such excess amount. The impairment
loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at
revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value based on an appropriate
discount factor.
When there is indication that an impairment loss recognized for an asset (other than a revalued
asset) in earlier accounting periods no longer exists or may have decreased, such reversal of
impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was
previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not
recognized.
g. Leases:
Where the Company as a lessor leases asset under finance leases, such amounts are recognized as
receivables at an amount equal to the net investment in the lease and the finance income is
recognized based on a constant rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards
of ownership vest in the Company are classified as finance leases. Such leases are capitalized at the
inception of the lease at the lower of the fair value and the present value of the minimum lease
payments and a liability is created for an equivalent amount. Each lease rental paid is allocated
between the liability and the interest cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially
vest with the lessor are recognized as operating leases. Lease rentals under operating leases are
recognized in the Statement of Profit and Loss on a straight-line basis, over the lease term.
h. Inventories
Items of inventories are measured at lower of cost and net realisable value after providing for
obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of
inventories comprises of cost of purchase and other costs net of recoverable taxes incurred in
bringing them to their respective present location andcondition.
Valuation of work in progress: -
Work in Progress has been valued on basis of the incurred costs less the cost of progressive billing of
the projects.
i. Taxes on Income
The tax expense for the period comprises current and deferred tax. Tax is recognized in Statement of
Profit and Loss, except to the extent that it relates to items recognized in the reserves directly. In
such cases, the tax is also recognized in the reserves.
- Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at
the Balance sheet date.
- Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and
liabilities in the 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. The
carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting
period.
j. Finance Cost
Borrowing costs include exchange differences arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly
attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready
for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All
other borrowing costs are charged to the Statement of Profit and Loss for the period for which they
are incurred.
k. Provisions
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.
l. Revenue recognition
Revenue from sale of goods is recognized when the significant risks and rewards of ownership have
been transferred to the buyer, recovery of the consideration is probable, the associated cost can be
estimated reliably, there is no continuing effective control or managerial involvement with the
goods, and the amount of revenue can be measured reliably.
Revenue from rendering of services is recognized when the performance of agreed contractual task
has been completed. Revenue from sale of goods is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of payment and excluding
taxes or duties collected on behalf of the government.
Interest income
Interest income and guarantee commission is accounted on an accrual basis.
Dividends
Revenue is recognized when the Company's right to receive the payment has been established.
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