3. Significant Accounting Policies:
3.1 Property, Plant & Equipments
Recognition and initial measurement
Property, Plant & Equipment are initially recognized at their
cost of acquisition.
The cost of acquisition includes freight, installation cost,
duties & taxes (other than those subsequently recoverable
from taxing authorities such as the Goods and Services Tax
for which Input Tax Credit is availed by the Company) including
borrowing costs for qualifying assets, if capitalization criteria
are met, and other incidental expenses, identifiable with the
asset or part of common expenses of the company indirectly
attributable to the same, incurred during the installation /
construction stage in order to bring the assets to their
working condition for intended use. Any trade discount and
rebates are deducted in arriving at the purchase price.
Cost incurred subsequent to putting an item of PPE into
operation such as repair and maintenance costs are usually
recognized in statement of profit or loss as incurred.
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 Company.
Subsequent measurement (depreciation and useful
lives)
Property, Plant and Equipment are subsequently measured
at cost less accumulated depreciation and impairment
losses, if any. Freehold Land, if any, is not depreciated.
Depreciation is recognized so as to write-off the cost of
assets less their residual values over their useful lives.
Depreciation on property, plant and equipment has been
provided using straight line method using rates determined
based on management's assessment of useful economic
lives of the asset and the actual usage of the asset.
Following are the estimated useful lives of various category
of assets used which are aligned with useful lives defined in
schedule II of Companies Act, 2013:
The residual values, useful lives and methods of depreciation
of property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
For the Property, Plant and Equipment Block being carried
forward with balances appearing from the Pre-NCLT / RP
period at the time of takeover by the new management,
depreciation @ 20% of applicable depreciation is presently
being provided. Reference is invited to Note 4 to these
Financial Statements
Derecognition
An item of property, plant and equipment and any significant
part initially recognized is de- recognized upon disposal or
when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on de-recognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is
recognized in the statement of profit and loss, when the
asset is de-recognized.
3.2 Capital work-in-progress (CWIP)
Costs incurred for PPE not ready for use or in the course
of construction of being ready for intended use as at the
reporting date are disclosed as capital work-in progress.
At the point when an item is started to be operated for its
intended use, the accumulated costs are transferred to the
appropriate category of PPE and depreciation is commenced.
3.3 Investment property
Property that is held for long term rental yield or for capital
appreciation or both, and that is not occupied by the
Company, is classified as Investment property. Investment
properties measured initially at cost including related
transitions cost and where applicable borrowing cost.
Subsequent to initial recognition, Investment Properties are
measured in accordance with Ind AS 16. 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 Company. All other repairs and maintenance
costs are expensed when incurred.
An Investment Property is de-recognized upon disposal or
when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on de-recognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is recognized in the statement of profit and loss, upon de¬
recognition.
3.4 Intangible assets
Recognition and Measurement
Intangible assets are recognized when the asset is
identifiable, is within the control of the company, it is
probable that the future economic benefits that are
attributable to the asset will flow to the company and cost
of the asset can be reliably measured.
Intangible assets acquired by the company that have finite
useful lives are measured at cost.
Expenditure on research activities is recognized in the
statement of profit and loss as incurred. Development
expenditure is capitalized only if the expenditure can be
measured reliably, the product or process is technically
and commercially feasible, future economic benefits are
probable and the company intends to and has sufficient
resources to complete development and to use or sell
the asset.
Subsequent expenditure is capitalized only when it increases
the future economic benefits embodied in the specific asset
to which it relates.
Subsequent Measurement
Intangible assets are stated at their cost less accumulated
amortization and any accumulated impairment losses.
Intangible assets with indefinite useful lives are not
amortized, but are tested for impairment annually, either
individually or at the cash-generating unit level.
Amortisation
Amortisation is calculated over the cost of the asset, or
other amount substituted for cost, less its residual value.
Amortisation is recognised in statement of profit and loss
on a straight-line basis over the estimated useful lives of
intangible assets from the date that they are available for
use, since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in
the asset.
3.5 Intangible Assets under Development
Costs incurred for Intangible Assets not ready for use or in
the course of development of being ready for intended use
as at the reporting date are disclosed as intangible assets
under development. At the point when an item is started to
be operated for its intended use, the accumulated costs are
transferred to the appropriate category of Intangible Assets
and amortization is commenced as relevant to that category.
3.6 Leases
The Company determines whether an arrangement contains
a lease at the inception of the Contract by assessing whether
the fulfilment of a transaction is dependent on the use of a
specific asset and whether the transaction conveys the right
to control the use of that asset to the Company in return
for payment.
To assess whether a contract conveys the right to control the
use of an identified asset, the Company assessees whether:
• the Contract involves use of an identified asset
• the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and
• the Company has the right to direct the use of the asset.
The Company as lessee
The Company recognizes right of-use asset representing
its right to use the underlying asset for the lease term at
the lease commencement date. The cost of the right-of-
use asset measured at inception comprises of the amount
of initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date
plus any indirect costs less any lease incentives.
The right-of-use assets are subsequently measured at cost
less any accumulated depreciation, accumulated impairment
losses, if any and adjusted for any re- measurement of
the lease liability. The right-of-use assets are depreciated
using the straight-line method from the commencement
date over the shorter of lease term or useful life of right-
of-use asset.
Right-of-use assets are tested for impairment whenever
there is any indication that their carrying amounts may not
be recoverable. Impairment loss, if any, is recognized in the
statement of profit and loss.
Lease liability is measured at the present value of the lease
payments that are not paid at the commencement date of
the lease. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses incremental borrowing rate.
The lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease liability,
reducing the carrying amount to reflect the lease payments
made and remeasuring the carrying amount to reflect any
reassessment or lease modifications.
The Company recognizes the amount of the re-measurement
of lease liability as an adjustment to the right-of-use asset.
Where the carrying amount of the right-of-use asset
is reduced to zero and there is a further reduction in the
measurement of the lease liability, the Company recognizes
any remaining amount of the re-measurement in statement
of profit and loss.
Variable lease payments not included in the measurement of
the lease liabilities are expensed to the statement of profit
and loss in the period in which the events or conditions
which trigger those payments occur.
Certain lease arrangements include options to extend
or terminate the lease before the end of the lease term.
The right-of-use assets and lease liabilities include these
options when it is reasonably certain that such options
would be exercised.
The Company accounts for each lease component within the
contract as a lease separately from non-lease components
of the contract and allocates the consideration in the
contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
In a sale and lease back transaction, the Company measures
right-of-use asset arising from the leaseback as the
proportion of the previous carrying amount of the asset that
relates to the right-of-use retained. The gain or loss that the
company recognizes in the statement of profit and loss is
limited to the proportion of the total gain or loss that relates
to the rights transferred to the buyer.
Right of use asst and Lease Liability are presented separately
in the Balance Sheet and lease payments are classified as
Financing Cash Flows.
The Company follows the above accounting policies where
it is a lessee for all leases except where the term is twelve
months or less or the leases are of very low value. For these
short term or low value leases, the Company recognizes the
lease payments as on operating expense on a straight-line
basis over the term of the lease.
The Company as lessor
Operating lease:
Rental income from operating leases is recognised in the
statement of profit and loss on a straight- line basis over the
term of the relevant lease unless another systematic basis is
more representative of the time pattern in which economic
benefits from the leased asset is diminished. Initial direct
costs incurred in negotiating and arranging an operating
lease are added to the carrying value of the leased asset
and recognised on a straight-line basis over the lease term.
Finance Lease:
When assets are leased out under a finance lease, the
present value of minimum lease payments is recognised as a
receivable. The difference between the gross receivable and
the present value of receivable is recognised as unearned
finance income. Lease income is recognised over the term
of the lease using the net investment method before tax,
which reflects a constant periodic rate of return.
3.7 Impairment of Non-Financial Assets
At each reporting date, the Company reviews the carrying
amounts of its non-financial assets to determine whether
there is any indication of impairment. If any such indication
of impairment exists, then the asset's recoverable
amount is estimated. For impairment testing, assets are
grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or cash
generating units (CGUs).
The recoverable amount of an asset or CGU is the greater of
its value in use and its fair value less costs to sell. Value in
use is based on the estimated future cash flows, discounted
to their present value using a discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset or CGU. An impairment
loss is recognised if the carrying amount of an asset or CGU
exceeds its estimated recoverable amount. Impairment
losses are recognised in the Statement of Profit and Loss.
An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount.
Such a reversal is made only to the extent that the asset's
carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
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