Note 1: Significant Accounting Policies & Notes on financial statements
i. Business
The Central Provinces Railways Company Limited is public limited listed company. The Company operates in the business of transportation through railways & Trading business.
ii. Income
a) Financial statements are prepared under historical cost convention on accrual basis in accordance with the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013.
b) Income from Railway represents the net earnings received from Central Railway in terms of the Contracts for the Construction and Working of the Ellichipur Murtajapur Yeotamal Railway and Pulgaon-Arvi Railway.
c) Income from Central Railways shown in their books of accounts is Rs.6,64,703/- as certified by the management, being the Company's share of income for the period 01.04.2017 to 31.03.2018 has been adjusted by the Central Railway against expenditure claimed to have been incurred by them for and on account of the company’s liability towards repairs, rehabilitation, renewals & replacements of the railway assets. The Company has disowned the liability on the ground that these liabilities being in the nature of replacement are to borne by the Central Railway, as per the contract. However, the Company has thought it is prudent not to account for the aforesaid amount of Rs. Rs.6,64,703/ adjusted in the aforesaid manner by Central Railway. In the past also company has followed this policy of recognition of revenue and there is no change in the policy on this account.
iii. Inventories:
Shares held are considered as stock-in-trade; in case of quoted shares the same are valued at lower of cost & market value.
iv. Fixed Assets
Fixed assets are stated at historical cost of acquisition less depreciation.
v. Depreciation
Under the terms of the agreement with the Government, the working agency namely Central Railway, is responsible for maintaining and renewing the railway. The assets shown as fixed capital expenditure on railway construction account in Schedule '5' annexed are in the physical possession of the Central Railway. In view of the legal opinion obtained in the past that the extent of depreciation under Section 205 and 350 of the Companies Act, 1956 in respect of these assets is nil, the Company has, consistent with the past practice not provided for any depreciation on these assets. However, the Central Railway have in their letter addressed to the Company raised various legal issues such as liability of the Company for certain expenditure incurred by them, provision for depreciation in respect of the assets in their possession etc. The Company is seeking legal opinion in the matter. The issues when resolved may have impact on various items disclosed in the accounts.
vi. Revenue Recognition
All income and expenditure items having a material bearing on the financial statement are recognized on accrual basis.
vii. Provisions and Contingencies
A provision is recognized when there is a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
A disclosure for a contingent liability is made when there is a possible or present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Contingent Assets are neither recognized nor disclosed in the financial statements.
viii. Taxes on Income
a) Provision for is made on the basis of the estimated taxable income as per the provisions of the Income Tax Act,1961 and the relevant Finance Act, after taking into consideration judicial pronouncements and opinions of the Company's tax advisors.
b)Deferred tax is recognized, subject to the consideration of prudence on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.
ix. Impairment of Assets
Where carrying amount of fixed assets exceeds the recoverable amount on the reporting date, the carrying amount is reduced to the recoverable amount. The recoverable amount is measured as the higher of the net selling price and the value is use determined by the present value of estimated future cash flow.
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