Note 1.1 : SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Accounting
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act), [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
All assets and liabilities have been classified as current and non-current as per the company’s normal operating cycle and other criteria's set out in Ind AS and the Schedule III to the Companies Act, 2013.
Based on the nature of products/services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained it’s operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.
Tax assets (including MAT credit entitlement) are classified as non-current assets.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services on the transaction date. The financial statements have been prepared on a historical cost basis, except for certain financial assets and financial liabilities and defined benefit plan that are measured at fair value
b) Functional and presentation currency
These Financial statements are presented in Indian Rupees (INR), which is also the company's functional currency. All the amounts have been rounded off to the nearest hundreds unless otherwise indicated
c) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns and excluding taxes and duties collected on behalf of the government. The Company recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the activities as described below:
Sale of Services
i. Revenue from imparting the Drone training and other Management Advisory services as per the agreement between the company and clients whether oral or written.
ii. Income from other services rendered is recognised based on agreements/ arrangements with the customers as the service is performed/rendered.
Unbilled revenue represents service rendered but not yet billed.
Sale of Goods & Commodity Trading
Revenue from sale of goods is recognised when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and the amount of revenue can be measured reliably. Here goods are drones Assembled by the company Dividend, Interest and Other Income
i. Dividend income is recognised when the right to receive the dividend is unconditionally established .
ii. Interest income from a financial asset is recognised when it is probable that the economic benefit will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
iii. In respect of other heads of income the company accounts the same on accrual basis.
d) Property, Plant and equipments (PPE) and Depreciation
Property, plant and equipment are stated at historical cost net of accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the assest's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits asssociated with the item will flow to the company and the cost of the asset can be measured reliably. All general repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation and useful life of assets
Depreciation on assets is provided using Written down value method on pro rata basis over their estimated useful economic lives as given below. The useful life is taken as prescribed in Schedule II to the Companies Act, 2013 except where the estimated useful economic life has been assessed to be lower based on technical obsolescence, nature of assets, estimated usage of the assets, operating conditions of the asset and manufacturers warranties, maintenance and support period, etc. The assets are depreciated based on the estimated useful life as per below:
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals of assets are determined by comparing proceeds with carrying amount. These are included in statement of profit and loss.
The company has changed the usefule life of Drones from 7 years to 5 years. The details of the same is given in Note : 1.2 (ii)
e) Intangible Assets and Amortisation
Intangible assets acquired separately are measured on initial recognition at cost. Cost includes all direct costs relating to acquisition of Intangible assets and borrowing cost relating to qualifying assets. Subsequently, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles are not capitalised.
f) Inventories
Completed Inventories if any are stated at the lower of cost and net realisable value.
g) Employee Benefits Short-term obligations
Liabilities for salaries and wages, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employee’s services up to the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The company recognise provision for such obligations.
Defined Benefit Plan
In accordance with the local laws and regulations, all the employees of company are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out yearly as at the reporting date, by an independent qualified actuary using the projected unit-credit method.
The obligation towards the said benefits is recognised in the balance sheet, at the present value of the defined benefit obligations. The present value of the said obligation is determined by discounting the estimated future cash outflows, using
interest rates of government bonds. The interest income / (expense) are calculated by applying the above mentioned discount rate to the defined benefit obligations liability. The net interest expense on the net defined benefit liability is recognised in the statement of profit and loss. However, the related re-measurements of the net defined benefit liability are recognised directly in the other comprehensive income in the period in which they arise. The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions). Re-measurements are not re-classified to the statement of profit and loss in any of the subsequent periods.
h) Foreign Currency Transactions Functional and presentation currency
Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). These financial statements are presented in Indian Rupee (INR), which is company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are reinstated into the functional currency using exchange rates at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
i) Impairment of Non Financial Assets
Non-Financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit or Loss
j) Taxes on Income
Taxes on Income comprises current and deferred tax. Tax is recognised in profit or loss except to the extent that it relates to an item recognised directly in equity or in other comprehensive income
i. Current Tax Expenses
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous year (disclosed separately on the face of statement of profit and loss). The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (tax laws) enacted or substantively enacted by the reporting date.
Tax assets and tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the assets and settle the liability on a net basis or simultaneously
ii. Deferred Tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits wiII be available against which they can be used. The Company recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised. Deferred tax assets so recognised are reviewed at each reporting date and are increased /reduced.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities
Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset tax liabilities and tax assets and they relate to income taxes levied by the same tax authority.
Minimum Alternative Tax (‘MAT’) credit is recognised as an asset to the extent it is allowable as per Income Tax Act over the specified period. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent it is no longer be allowable as per Income Tax Act and charged to the Statement of Profit and Loss.
k) Provisions and Contingent Liabilities
The Company recognizes a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources or the outflow cannot be measured reliably. When there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is provided.
l) Financial Instruments
Initial recognition and Measurement:
Financial Instruments (assets and liabilities) are recognised when the Company becomes a party to a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, other than those designated as fair value through profit or loss (FVTPL), are added to or deducted from the fair value of the financial assets or financial liabilities, as instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Subsequent measurement: i) Financial Assets :
Financial assets are subsequently classified as measured at:
- Amortised cost
- Fair Value through Profit & Loss (FVTPL)
- Fair Value through Other Comprehensive Income (FVTOCI)
The above classification is being determined considering the:
- the entity’s business model for managing the financial assets and
- the contractual cash flow characteristics of the financial asset.
Financial assets are not reclassified subsequent to their recognition, except if and in the period the company changes its business model for managing financial assets.
(i) Measured at amortised cost:
Financial assets are subsequently measured at amortised cost, if these financial assets are held within a business module whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified date to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Measured at fair value through profit or loss (FVTPL):
Financial assets other than equity instrument are measured at FVTPL unless it is measured at amortised cost or at FVTOCI on initial recognition. Such financial assets are measured at fair value with all changes in fair value, including interest income and dividend income if any, recognised in the Statement of Profit and Loss.
(iii) Measured at fair value through other comprehensive income (FVTOCI):
Financial assets are measured at FVTOCI, if these financial assets are held within a business model whose objective is achieved by both collecting contractual cash flows that give rise on specified dates to solely payments of principal and interest on the principal amount outstanding and by selling financial assets. Fair value movements are recognized in the other comprehensive income (OCI). Interest income measured using the Effective Interest Rate method and impairment losses, if any are recognised in the Statement of Profit and Loss. On derecognition, cumulative gain or loss previously recognised in OCI is not reclassified from the equity.
Equity instruments:
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income. The cumulative gain or loss is not reclassified to Statement of Profit and Loss on disposal of the investments.
Dividends on these investments in equity instruments are recognised in Statement of Profit and Loss when the Company’s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised in Statement of Profit and Loss are included in the ‘Other income’ line item.
Impairment of Financial Assets :
The Company recognises a loss allowance for Expected Credit Losses (ECL) on trade receivable, financial assets that are measured at amortised cost and at FVOCI other than investment in Subsidiaries. The credit loss is difference between all contractual cash flows that are due to an entity in accordance with the contract and all the cash flows that the entity expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate. This is assessed on an individual or collective basis after considering all reasonable and supportable including that which is forward looking.
The Company’s trade receivables or contract revenue receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall, being simplified approach for recognition of impairment loss allowance.
The Company recognizes impairment loss allowance based on the lifetime ECL at each reporting date right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
For financial assets other than trade receivables, the Company recognises 12-months expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. If, in a subsequent period, credit quality of the instrument improves such that there is no longer significant increase in credit risks since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12 months ECL. The impairment losses and reversals are recognised in Statement of Profit and Loss. For equity instruments and financial assets measured at FVTPL, there is no requirement of impairment testing.
Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers rights to receive cash flows from an asset, it evaluates if and to what extent it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(ii) Financial Liabilities
Financial liabilities measured at amortised cost are subsequently measured at using Effective Interest Rate (EIR) method. Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of Profit and Loss.
Loans & Borrowings:
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using Effective Interest Rate (EIR) method. Gains and losses are recognized in profit & loss when the liabilities are derecognized as well as through EIR amortization process.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
(iii) Offsetting 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 recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
m) Fair value measurement
The Company measures financial instruments (Other than investment in associates and subsidiaries) such as investments at fair value at each balance sheet date. 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(a) In the principal market for the asset or liability, or
(b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
(i) Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
(ii) Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
(iii) Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
n) Cash and Cash Equivalents:
Cash and Cash equivalents include Cash and Cheques in hand, bank balances, demand deposits with banks with an original maturity of less than three months or less, which are subject to insignificant risk of change in value.
o) Borrowing Cost:
Borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
p) Earnings Per Share:
Basic earnings per shares are calculated by dividing the net profit or loss after tax for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
q) Segment Reporting
Operating segments are reported in a manner consistent with the reporting provided to the chief operating decision maker. In this case segement reporting is not applicable and hence not reported
Note 1.2 : Use of Estimates and Judgements
In the application of the Company’s accounting policies, which are described in Note 1.1 , the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
In the following areas the management of the Company has made critical judgements and estimates:
i) Fair Value of financial instrument
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 / assets. Managers ent bases its assumptions on observable data as far as possible which may not always be available. In that case, management uses the best relevant information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.
ii) Estimation of Useful life of Property, Plant and Equipment
Th e 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.
Changes in useful life of Fixed Assets:
The company has changed the useful life of Drones from 7 years to 5 Years. The Reason of this is as the company is majorly involved in the droae pilot training activitie s and insitu tional training1 activities. Hence, because of thi s there will be the major wear and tear. Hence, the useful life of the drones should be reduced to 5 years from 7 years which was there in the last year. The company has passed the board resolution for giving effect of the same. As per IND AS, the change in useful life of fixed assets is considered as change in the accounting estimates. Hence, the effect of the same has not been given retrospectively. The effect has been given the prospectively. Becuase of the change in useful of life of drones, the Depreciation Rate has been increased to 45.07% on WDV banis
iii) Defined Benefit Obligation
The Compasy’s obligat i on on occ ount of gratuity is d ete rmined based on act uaria l valuations. An a ctuaria1 val uatio n involves making various assumptioos th at may differ from actual develop meets in the futnre. The se include the d rtermination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, this liability is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases are based on expected future inflation rates.
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