30. MATERIAL ACCOUNTING POLICIES:
GENERAL INFORMATION:
Dredging Corporation of India Limited ("DCIL"/ "the
Company") is a Public limited Company incorporated and
domiciled in India and has its Registered Office at Delhi and
Corporate Office at Visakhapatnam. The Regional/Project
offices are situated in different parts of the Country like
Haldia, Kolkata, Cochin, Chennai, Mumbai etc. The Company's
Securities are primarily listed on the BSE and NSE Limited.
The primary objective is catering to the dredging requirements
of Ports, Navy etc., both in India and abroad. The principal
activities of the Company comprise of providing the services of
Capital Dredging, Maintenance Dredging, Beach Nourishment,
Land Reclamation, Shallow and Inland water Dredging, Project
Management Consultancy, Marine Construction.
1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS:
1.1 STATEMENT OF COMPLIANCE:
These financial statements prepared in accordance
with applicable Indian Accounting Standards
("Ind AS") notified under the Companies (Indian
Accounting Standards) Rules, 2015, as amended
from time to time and other accounting principles
generally accepted in India.
1.2 ACCOUNTING CONVENTION AND BASIS OF
MEASUREMENT:
The Financial Statements have been prepared on
the historical cost convention and on an accrual
basis, except for the following material items that
have been measured at fair values as required by
the relevant Ind AS:
i) Certain Financial Assets and Liabilities (refer
accounting policy on financial instruments);
ii) Defined benefit and other long-term
employee benefits
(Refer accounting policy on Employee Benefits);
1.3 FUNCTIONAL AND PRESENATATION CURRENCY:
The financial statements are presented in Indian
rupees, which is the functional currency of the
Company and the currency of the primary economic
environment in which the Company operates. All
financial information presented in Indian rupees
has been rounded off to the nearest lakh of rupees
except share and per share data.
2. USE OF ACCOUNTING JUDGMENTS, ESTIMATES AND
ASSUMPTIONS:
The preparation of the financial statements in conformity
with IndAS requires management to make estimates,
judgments and assumptions that affect the application of
accounting policies and the reported amounts of assets
and liabilities, revenues and expenses and the disclosures
of contingent assets and liabilities. Actual results may
differ from those estimates.
Estimates and underlying assumptions are reviewed
on a periodic basis. Revisions to accounting estimates
are recognized in the period in which the estimates are
revised and in any affected future periods.
Information about critical judgements in applying
accounting policies, as well as estimates and assumptions
in respect of the following areas, that have most
significant effect on the carrying amounts within the next
financial year are included in the relevant notes.
i) Useful lives of property, plant, equipment.
ii) Measurement of defined benefit obligations.
iii) Measurement and likelihood of occurrence of
provisions and contingencies.
3. REVENUE RECOGNITION:
a) Revenue from contracts with customers that
meet the recognition criteria under paragraph
9 of Ind AS 115 is recognised, when (or as) a
performance obligation is satisfied by transferring
a promised service to a customer, for the amount
of the transaction price that is allocated to
that performance obligation based on internal
assessment/survey.
b) Transaction price is determined at fair value of
the consideration received or receivable and is
reduced for allowances wherever applicable as
per the contract.
c) Satisfaction of a performance obligation and
recognition of revenue at a point in time or over
time in respect of Dredging Activities is recognised
when, transfer of control of a service are made and,
if one of the following criteria is met:
i) the customer simultaneously receives and
consumes the benefits of dredging service
provided by the DCIL.
ii) DCIL's performance creates or enhances an
asset (for example, Capital Dredging) that
the customer controls as the asset is created
or enhanced; or
iii) DCIL's performance does not create an asset
with an alternative use and DCIL has an
enforceable right to payment for performance
completed to date.
d) Claims against outside agencies other than those
specified in clause (e) below are accounted for on
certainty of realization.
e) In respect of hull and machinery insurance claims,
the claim is accounted as claims recoverable from
underwriters on submission of average adjuster
report to the underwriter under operational
income. Necessary adjustments are made to the
claims recoverable account as and when the
actual claims are received from the underwriters.
In respect of other insurance claims, the same are
accounted for on realization /settlement of the
same by the underwriters and is accounted under
operational income.
f) Interest income is recognized on an accrual basis
using the applicable interest rate.
g) All other revenue is recognised on certainty
of realization.
4. OPERATIONAL EXPENSES:
a) All operational expenses are charged to revenue
under accrual basis.
b) Final adjustments to insurance premium paid
are considered in accounts on the basis of final
demands/refunds received.
c) Expenses on account of general average claims/
damages to ships are written off in the year in which
they are incurred.
5. PROPERTY, PLANT & EQUIPMENT:
a) Property, plant and equipment are measured at
cost, less accumulated depreciation and impairment
losses, if any.
b) The Cost of Property, Plant and Equipment includes
those incurred directly for the construction or
acquisition of the asset, and directly attributable to
bringing it to the location and condition necessary
for it to be capable of operating in the manner
intended by the management and includes the
present value of expected cost for dismantling /
restoration wherever applicable.
c) Depreciation on cost of tangible assets less their
2% residual value for Dredgers, Ancillary craft and
buildings (other than freehold land, properties
under construction, Computers, Furniture and
Office Equipment's and other operational assets)
including those on leasehold premises is provided
for under straight line method over the useful life
of assets specified in Part C of Schedule II to the
Companies Act, 2013 and in the manner specified
therein. Assets costing less than H 5,000/- are fully
depreciated in the year of acquisition / purchase.
d) Depreciation methods, useful lives and residual
values are reviewed at each reporting date and
accounted for as change in accounting estimate.
e) In respect of the following categories of assets,
their useful life has been assessed based on
technical advice, considering the nature of
the asset, its estimated usage, the operating
f) An item of property, plant and equipment is de¬
recognized upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset and the resultant gain or
loss is recognized in statement of profit and loss.
g) Each component / part of an item of property, plant
and equipment with a cost that is significant in
relation to the total cost of the item is depreciated
separately only when it has a different useful life.
The gain or loss arising from de-recognition of an
item of property, pl ant a nd equ ipment is inclu ded
in statement of profit or loss when the item
is derecognized.
h) Dry Dock Expenses: The expenditure incurred
on account of Dry Dock of vessels (together with
spares consumed) is capitalised to Property,
Plant and Equipment. Dry Dock expenditure is
amortized over a period from the date of dry dock
completion to the next due date of docking survey
as certified by IRS
>. BORROWING COSTS:
a) Borrowing costs (including Exchange differences
arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the
interest costs) incurred for obtaining assets which
take substantial period to get ready for their intended
use are capitalized to the respective assets wherever
the costs are directly attributable to such assets and
in other cases by applying weighted average cost of
borrowings to the expenditure on such assets.
b) As per the transitional provisions given in the
notification issued by the Ministry of Corporate
Affairs, Government of India dated 31st Mar, 2009
read with the notification dated 9th August, 2012,
the Company has opted for adjusting the exchange
difference on the long-term foreign currency
monetary items to the cost of the assets acquired
out of these foreign currency items.
c) Other borrowing costs are treated as
expense for the year.
d) Significant transaction costs in respect of long¬
term borrowings are amortized over the tenor
of respective loans using effective interest
rate (EIR) method.
7. FOREIGN CURRENCY TRANSACTIONS:
a) Transactions relating to non-monetary items and
purchase and sale of goods/services denominated
in foreign currency are recorded at the prevailing
exchange rate or a rate that approximates to the
actual rate on the date of transaction.
b) Assets & liabilities in the nature of monetary items
denominated in foreign currencies are translated
and restated at exchange rates prevailing at the end
of the reporting period.
c) Exchange differences arising on account of
settlement / conversion of foreign currency
monetary items are recognized as expense or
income in the period in which they occur.
d) Foreign currency gains and losses are reported
on a net basis.
8. INVENTORIES:
a) Stock of spares and stores is valued at lower
of periodic weighted average cost and net
realizable value.
b) Stores / Spares/ fuel / lubricants issued /
delivered to crafts are charged off to statement
of Profit and Loss, as and when consumed by
respective crafts. However, spares consumed in
Dry Dock are capitalised vide Policy on Property
Plant & Equipment.
c) Service works in Progress are valued at lower of
cost and net realizable value.
9. FINANCIAL INSTRUMENTS (Financial Assets and Financial
Liabilities):
a) All financial instruments are recognized initially at
fair value. The classification of financial Instruments
depends on the objective of the business model for
which it is held and the contractual cash flows that
are solely payments of principal and interest on the
principal amount outstanding.
b) Subsequent measurement of Non- Derivative
Financial Instruments:
i) Security Deposits, cash and cash equivalents,
employee and other advances, trade
receivables and eligible current and non¬
current financial assets are classified as
financial assets under this clause.
ii) Loans and borrowings, trade and other
payables including deposits collected from
various parties and eligible current and non¬
current financial liabilities are classified as
financial liabilities under this clause.
iii) Financial instruments are subsequently carried
at amortized cost wherever applicable using
Effective Interest Rate (EIR) method less
impairment loss.
c) Impairment:
i) Financial Assets:
• Financial assets that are debt instruments,
are measured at amortized cost wherever
applicable for e.g., loans, debt securities,
deposits, and bank balance.
• Trade receivables - The Company follows
'simplified approach' for recognition
of impairment loss allowance on trade
receivables which do not contain a
significant financing component. The
application of simplified approach does not
require the company to track changes in
credit risk. Rather, it recognizes impairment
loss allowance based on lifetime Expected
Credit Loss (ECL) at each reporting date,
right from its initial recognition
ii) Non- Financial Assets:
• The company assesses at each reporting
date whether there is any objective
evidence that a non-financial asset or a
group of non-financial assets is impaired.
If any such indication exists, the Company
estimates the amount of impairment loss.
10. EMPLOYEE BENEFITS:
a) Short Term Benefits
(i) All employee benefits falling due within twelve
months of rendering the service are classified
as short-term employee benefits. The cost of
the benefits like salaries, wages, medical, leave
travel assistance, short term compensated
absences, bonus, exgratia, etc. is recognised
as an expense in the period in which the
employee renders the related service.
b) Post-Employment Benefits
i) Defined Contribution Plans:
The contribution paid / payable under
provident fund scheme, and employee post¬
retirement medical benefits, pension (NPS)
scheme is recognised as expenditure on the
undiscounted amount of obligations of the
company to contribute to the plan.
ii) Defined Benefit Plans:
The Company's obligation towards Gratuity is
a defined benefit plan. The present value of the
estimated future cash flows of the obligation
under such plan is determined based on
actuarial valuation using the Projected Unit
Credit (PUC) method. Any difference between
the interest income on plan assets and the
return actually achieved and any changes in
the liabilities over the year due to changes
in actuarial assumptions or experienced
adjustments within the plan are recognized
immediately in other comprehensive income
and subsequently not reclassified to the
statement of profit and loss.
All defined benefit plan obligations are
determined based on valuation as at the end
of the reporting period, made by independent
actuary using the PUC Method. The
classification of the Company's net obligation
into current and non-current is as per the
actuarial valuation report.
Hi) Other Long-Term Benefit Plans:
The obligation for long term employee
benefits such as long term compensated
absences, is determined and recognised
in the manner similar to that stated in the
defined benefit plan.
c) Provision for Gratuity, Provident fund, Post¬
retirement Medical and Pension benefits are funded
with separate Trusts formed for the purpose.
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