4. Material accounting policy information
and significant judgements, estimates
and assumptions
4.1 Material accounting policy information
a) Property, Plant and Equipment
Property, plant and equipment including
Capital work in progress held for use in
the production or/and supply of goods or
services, or for administrative purposes, are
stated at cost, except assets acquired under
Schemes of Arrangement, which are stated
at fair values as per the Schemes, net of
accumulated depreciation and accumulated
impairment losses, if any. The initial cost
at cash price equivalent of property, plant
and equipment acquired comprises its
purchase price, including import duties
and non-refundable purchase taxes, and
directly attributable cost of bringing the
assets to its working condition and location.
Such cost includes the cost of replacing part
of the Property, plant and equipment and
borrowing costs for long term construction
projects if the recognition criteria are met.
The Company incurs expenditure on certain
enabling assets (electrification infrastructure)
which are necessary to provide services
to its customers and such expenditure is
capitalized as property, plant and equipment.
When significant parts of property, plant
and equipment are required to be replaced
in intervals, the Company recognizes such
parts as separate component of assets with
specific useful lives and provides depreciation
over their useful life. 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 entity and the cost of the
item can be measured reliably. The carrying
amount of the replaced part is derecognized.
All other repair and maintenance costs are
recognised in the Statement of Profit and
Loss as incurred.
The present value of the expected cost
for the decommissioning of the asset
after its use is included in the cost of the
respective asset if the recognition criteria
for a provision are met. Refer note 4.2(e)
regarding significant accounting judgements,
estimates and assumptions and provisions
for further information about the recorded
decommissioning provision.
An item of property, plant and equipment
and any significant part initially recognised
is derecognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated
as the difference between the net disposal
proceeds and the carrying amount of the
asset) is recognised in the Statement of Profit
and Loss when the asset is derecognised.
Assets are depreciated to the residual values
on a straight-line basis over the estimated
useful lives. Depreciation on property, plant
and equipment starts when asset is available
for use. Estimated useful lives of the assets
are as follows:
The existing useful lives and residual value
of tangible assets are different from the
useful lives as prescribed under Part C of
Schedule II to the Companies Act, 2013 and
the Company believes that this is the best
estimate on the basis of technical evaluation
and actual usage period.
The existing residual values of tangible
assets are different from 5% as prescribed
under Part C of Schedule II to the Companies
Act, 2013 and the Company believes that
this is the best estimate on the basis of
actual realization.
The assets' residual values, depreciation
method and useful lives are reviewed
at each financial year end or whenever
there are indicators for impairment and
adjusted prospectively.
On transition to Ind AS, the Company has
elected to continue with the carrying value
of all its property, plant and equipment
(including assets acquired under Schemes
of Arrangement) except with an adjustment
in decommissioning cost recognised as at
April 1, 2015 measured as per the previous
GAAP and use that carrying value as the cost
of the property, plant and equipment.
b) Intangible Assets
Intangible assets are recognized when the
entity controls the asset, it is probable that
future economic benefits attributed to the
asset will flow to the entity and the cost of
the asset can be reliably measured.
At initial recognition, the separately acquired
intangible assets are recognised at cost.
Intangible assets with finite useful lives are
carried at cost less accumulated amortisation
and accumulated impairment losses, if any.
Intangible assets are amortised over the
useful economic life and assessed for
impairment whenever there is an indication
that the intangible asset may be impaired.
The amortisation period and the amortisation
method for an intangible asset are reviewed
at least at the end of each financial year.
Changes in the expected useful life or the
expected pattern of consumption of future
economic benefits embodied in the asset
are considered to modify the amortisation
period or method, as appropriate, and are
treated as changes in accounting estimates.
The amortisation expense on intangible
assets is recognised in the Statement of Profit
and Loss unless such expenditure forms part
of carrying value of another asset.
Software is capitalized at the amounts paid
to acquire the respective license for use
and is amortised over the period of license,
generally not exceeding three years.
Gains or losses arising from derecognition
of an intangible asset are measured as the
difference between the net disposal proceeds
and the carrying amount of the asset and are
recognised in the Statement of Profit and
Loss when the asset is derecognised.
c) Impairment of non-financial assets
The Company assesses at each reporting
date, whether there is an indication that
an asset may be impaired. If any indication
exists, or when annual impairment testing for
an asset is required, the Company estimates
the asset's recoverable amount. An asset's
recoverable amount is the higher of an
asset's or cash-generating unit's (CGU) fair
value less costs of disposal and its value in
use. Recoverable amount is determined for
an individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets or
group of assets. When the carrying amount
of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and
is written down to its recoverable amount.
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. In determining fair value less costs
of disposal, recent market transactions are
taken into account. If no such transactions
can be identified, an appropriate valuation
model is used. Impairment losses, if any, are
recognized in the statement of profit and
loss as a component of depreciation and
amortisation expense.
A previously recognised impairment loss is
reversed only if there has been a change in the
assumptions used to determine the asset's
recoverable amount since the last impairment
loss was recognised. The reversal is limited to
the extent the carrying amount of the asset
does not exceed its recoverable amount,
nor exceed the carrying amount that would
have been determined, net of depreciation or
amortisation, had no impairment loss been
recognised for the asset in prior years. Such a
reversal is recognized in the Statement of
Profit and Loss when the asset is carried
at the revalued amount, in which case the
reverse is treated as a revaluation increase.
d) Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current/
non-current classification. An asset is treated
as current when it is:
• Expected to be realised or intended
to be sold or consumed in normal
operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve
months after the reporting period, or
• Cash or cash equivalent unless restricted
from being exchanged or used to settle
a liability for at least twelve months after
the reporting period
Current assets include the current portion
of non-current assets. All other assets are
classified as non-current.
A liability is current when:
• It is expected to be settled in normal
operating cycle
• It is held primarily for the purpose of
trading
• It is due to be settled within twelve
months after the reporting period, or
• There is no unconditional right to defer
the settlement of the liability for at least
twelve months after the reporting period
Current liabilities include the current portion
of long-term liabilities. The Company
classifies all other liabilities as non-current.
Deferred tax assets and liabilities are
classified as non-current assets and liabilities.
The operating cycle is the time between
the acquisition of assets for processing and
their realisation in cash and cash equivalents.
The Company has identified twelve months
as its operating cycle.
e) Leases
The Company assesses whether a contract
contains a lease, at the inception of a
contract. A contract is, or contains, a lease
if the contract conveys the right to control
the use of an identified asset for a period
of time in exchange for consideration.
To assess whether a contract conveys the
right to control the use of an identified
asset, the Company assesses whether (i)
the contract involves the use of an identified
asset (ii) the Company has substantially all
of the economic benefits from use of the
asset through the period of the lease and
(iii) the Company has the right to direct the
use of the asset.
Company as a lessee
The Company recognizes right-of-use
asset (ROU) representing its right to use
the underlying asset for the lease term
and a corresponding lease liability at the
lease commencement date. The cost of the
right-of-use asset measured at inception
shall comprise of the amount of the initial
measurement of the lease liability adjusted
for any lease payments made at or before
the commencement date less any lease
incentives received, plus any initial direct
costs incurred. The right-of-use asset is
subsequently measured at cost less any
accumulated depreciation, accumulated
impairment losses, if any and adjusted for
any remeasurement of the lease liability.
The right-of-use asset is depreciated from
the commencement date on a straight-line
basis over the shorter of the lease term
and useful life of the underlying 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 recognised in the
statement of profit and loss.
The Company measures the lease liability 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 an incremental borrowing
rate. For leases with reasonably similar
characteristics, the Company may adopt the
incremental borrowing rate for the entire
portfolio of leases. The lease payments
shall include fixed payments, variable
lease payments, residual value guarantees,
exercise price of a purchase option where the
Company is reasonably certain to exercise
that option and payments of penalties for
terminating the lease, if the lease term
reflects the lessee exercising an option to
terminate the lease. 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
or to reflect revised in-substance fixed
lease payments.
The Company recognises 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
the statement of profit and loss.
The Company has elected not to recognize
ROU and lease liabilities for short term leases
that have a lease term of twelve months or
less and leases of low value assets. The lease
payments associated with these leases are
recognized as an expense on a straight-line
basis over the lease term.
The Company has elected to recognize the
asset retirement obligation liability as part
of the cost of an item of property, plant and
equipment in accordance with Ind AS 16,
Property, plant and equipment.
Company as a lessor
At the inception date, leases are classified
as a finance lease or an operating lease.
Leases are classified as finance leases when
substantially all of the risks and rewards of
ownership transfer from the Company to
the lessee. Amounts due from lessees under
finance leases are recorded as receivable
at the Company's net investment in the
leases. Finance lease income is allocated to
accounting periods so as to reflect a constant
periodic rate of return on the net investment
outstanding in respect of the lease.
Leases where the Company does not
transfer substantially all the risks and
rewards incidental to ownership of the
assets are classified as operating leases.
Lease rentals under operating leases are
recognized as income on a straight-line basis
over the lease term. Contingent rents are
recognized as revenue in the period in which
they are earned.
f) Share-based payments
The Company issues equity-settled and
cash-settled share-based options to certain
employees. These are measured at fair value
on the date of grant.
The fair value determined at the grant date
of the equity-settled share-based options is
expensed over the vesting period, based on
the Company's estimate of the shares that
will eventually vest.
The fair value determined on the grant date
of the cash settled share based options is
expensed over the vesting period, based
on the Company's estimate of the shares
that will eventually vest. At the end of each
reporting period, until the liability is settled,
and at the date of settlement, the fair value of
the liability is recognized, with any changes
in fair value pertaining to the vested period
recognized immediately in the Statement of
Profit and Loss.
At the vesting date, the Company's estimate
of the shares expected to vest is revised
to equal the number of equity shares that
ultimately vest.
Fair value is measured using Black-Scholes
framework by an independent valuer and
is recognized as an expense, together
with a corresponding increase in equity/
liability as appropriate, over the period
in which the options vest using the
graded vesting method. The expected life
used in the model is adjusted, based on
management's best estimate, for the effects
of non-transferability, exercise restrictions
and behavioral considerations. The expected
volatility and forfeiture assumptions are
based on historical information.
Where the terms of share-based payments are
modified, the minimum expense recognized
is the expense as if the terms had not been
modified, if the original terms of the award
are met. An additional expense is recognized
for any modification that increases the
total fair value of the share-based payment
transaction or is otherwise beneficial to
the employee as measured at the date
of modification.
Where an equity-settled award is cancelled,
it is treated as if it is vested on the date
of cancellation, and any expense not yet
recognized for the award is recognized
immediately. This includes any award where
non-vesting conditions within the control
of either the entity or the employee are not
met. However, if a new award is substituted
for the cancelled award and designated as
a replacement award on the date that it is
granted, the cancelled and new awards
are treated as if they were a modification
of the original award, as described in the
previous paragraph.
The dilutive effect of outstanding options, if
any, is reflected as additional share dilution in
the computation of diluted earnings per share.
g) Cash and cash equivalents
Cash and cash equivalents in the balance
sheet comprise cash at banks and in hand
and short-term deposits with an original
maturity of three months or less, which are
subject to an insignificant risk of changes in
value. Bank overdrafts that are repayable
on demand and form an integral part of the
Company's cash management are included as
a component of cash and cash equivalents for
the purpose of the Statement of Cash Flows.
h) Financial instruments
A financial instrument is any contract that
gives rise to a financial asset of one entity
and a financial liability or equity instrument
of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or
loss, transaction costs that are attributable
to the acquisition of the financial asset.
However, trade receivables that do not
contain a significant financing component
are measured at transaction price.
Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in
four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through
other comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity
instruments at fair value through Profit
or Loss (FVTPL)
• Equity instruments measured at fair
value through other comprehensive
income (FVTOCI)
Debt instruments at amortised cost
This category applies to the Company's
trade receivables, unbilled revenue,
security deposits etc.
A 'debt instrument' is measured at the
amortised cost if both the following
conditions are met:
a) The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows and
b) Contractual terms of the asset give
rise on specified dates to cash flows
that are solely payments of principal
and interest (SPPI) on the principal
amount outstanding
After initial measurement, such financial
assets are subsequently measured at
amortised cost using the effective interest rate
(EIR) method. Amortised cost is calculated
by taking into account any discount or
premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR
amortisation is included in finance income in
the Statement of Profit and Loss. The losses
arising from impairment are recognised in
the Statement of Profit and Loss.
Debt instrument at fair value through other
comprehensive income (FVTOCI)
A 'debt instrument' is classified at FVTOCI if
both of the following criteria are met:
a) The objective of the business model
is achieved both by collecting
contractual cash flows and selling the
financial assets, and
b) The asset's contractual cash flows
represent SPPI.
Debt instruments included within the
FVTOCI category are measured initially as
well as at each reporting date at fair value.
Fair value movements are recognized in
the other comprehensive income (OCI).
However, the Company recognizes interest
income, impairment losses and reversals
in the Statement of Profit and Loss.
On derecognition of the asset, cumulative
gain or loss previously recognised in OCI is
reclassified from the equity to the Statement
of Profit and Loss.
I nterest earned whilst holding FVTOCI debt
instrument is reported as interest income.
The Company does not have any debt
instrument which is required to be classified
in this category.
Debt instrument at fair value through profit
or loss (FVTPL)
FVTPL is a residual category for debt
instruments. Any debt instrument, which
does not meet the criteria for categorization
at amortized cost or at FVTOCI, is
classified at FVTPL.
Debt instruments included within the FVTPL
category are measured at fair value with
all changes recognized in the Statement of
Profit and Loss. This category applies to
the Company's investment in government
securities, mutual funds, taxable bonds and
non-convertible debentures.
In addition, the Company may elect to
designate a debt instrument, which otherwise
meets amortized cost or FVTOCI criteria, as
at FVTPL. However, such election is allowed
only if doing so reduces or eliminates a
measurement or recognition inconsistency
(referred to as 'accounting mismatch').
The Company does not have any debt
instrument which is required to be classified
in this category.
Derivative instrument
The Company uses derivative financial
instruments, such as forward currency
contracts to hedge its foreign currency risk.
These derivative financial instruments are
initially recognised at fair value on the date
when the derivative contract is entered into
and are subsequently re-measured at fair
value at the end of each reporting period.
Any changes in fair value are recognised in the
statement of profit and loss. Derivatives are
carried as financial assets when the fair value
is positive and as financial liabilities when
their fair value is negative.
The Company does not hold derivative
financial instruments for speculative purposes.
Equity investment in subsidiary
Equity investment in subsidiary is carried at
cost less impairment, if any.
Equity investments measured at fair
value through profit or loss (FVTPL) or at
fair value through other comprehensive
income (FVTOCI)
All equity investments within the scope of Ind
AS 109, Financial Instruments, are measured
at fair value. Equity instruments which are
held for trading are measured at FVTPL.
For equity instruments not held for trading
are measured at FVTOCI.
De-recognition:- A financial asset (or,
where applicable, a part of a financial
asset) is primarily derecognised
(i.e. removed from the Company's
balance sheet) when:
a) The contractual rights to receive cash
flows from the asset have expired, or
b) The Company has transferred its
contractual rights to receive cash flows
from the financial asset or has assumed
an obligation to pay the received cash
flows in full without material delay to
a third party under a 'pass-through'
arrangement; and either (a) the
Company has transferred substantially
all the risks and rewards of the asset, or
(b) the Company has neither transferred
nor retained substantially all the risks and
rewards of the asset, but has transferred
control of the asset.
Impairment of financial assets
In accordance with Ind AS 109, Financial
Instruments, the Company applies expected
credit loss (ECL) model for measurement
and recognition of impairment loss on the
financial assets that are debt instruments
and are initially measured at fair value with
subsequent measurement at amortised cost.
The Company follows 'simplified approach'
for recognition of impairment loss allowance
for trade receivables.
The application of a simplified approach
does not require the Company to track
changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime
ECLs at each reporting date, right from its
initial recognition.
For recognition of impairment loss on other
financial assets and risk exposure, the
Company determines whether there has
been a significant increase in the credit risk
since initial recognition. If credit risk has
not increased significantly, twelve month
ECL is used to provide for impairment
loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in the
subsequent period, credit quality of the
instrument improves such that there is no
longer a significant increase in credit risk
since initial recognition, then the entity
reverts to recognising impairment loss
allowance based on a twelve month ECL.
ECL is the difference between all contractual
cash flows that are due to the Company 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 EIR.
Financial Liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings
or payables, as appropriate.
All financial liabilities are recognised initially
at fair value and, in the case of loans and
borrowings and payables, net of directly
attributable transaction costs. The Company's
financial liabilities include borrowings, trade
and other payables, security deposits, lease
liabilities etc.
Subsequent measurement
The measurement of financial liabilities
depends on their classification, as
described below:
Financial liabilities at fair value through
profit and loss (FVTPL)
Financial liabilities at fair value through profit
or loss include financial liabilities held for
trading and financial liabilities designated
upon initial recognition as at fair value
through profit or loss. Financial liabilities
are classified as held for trading if they are
incurred for the purpose of repurchasing
in the near term.
Financial liabilities designated upon initial
recognition at fair value through profit or
loss are designated as such at the initial date
of recognition, and only if the criteria in Ind
AS 109, Financial Instruments, are satisfied.
For liabilities designated as FVTPL, fair
value gains/ losses attributable to changes
in own credit risk are recognized in OCI.
These gains / losses are not subsequently
transferred to the Statement of Profit and
Loss. However, the Company may transfer
the cumulative gain or loss within equity.
All other changes in fair value of such liability
are recognised in the statement of profit
and loss. The Company does not have any
financial liability which is required to be
classified in this category.
Financial liabilities at amortised cost
This category includes security deposit
received, trade payables etc. After initial
recognition, such liabilities are subsequently
measured at amortised cost using the EIR
method. Gains and losses are recognised in
the Statement of Profit and Loss when the
liabilities are derecognised as well as through
the EIR amortisation process. Amortised cost
is calculated by taking into account any
discount or premium on acquisition and fees
or costs that are an integral part of the EIR.
The EIR amortisation is included as finance
costs in the Statement of Profit and Loss.
De-recognition
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 de-recognition
of the original liability and the recognition
of a new liability. The difference in the
respective carrying amounts is recognised in
the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification
of financial assets and liabilities on initial
recognition. After initial recognition, no
reclassification is made for financial assets
which are equity instruments and financial
liabilities. For financial assets which are debt
instruments, a reclassification is made only
if there is a change in the business model
for managing those assets. Changes to the
business model are expected to be infrequent.
The Company's senior management
determines change in the business model as
a result of external or internal changes which
are significant to the Company's operations.
Such changes are evident to external parties.
A change in the business model occurs
when the Company either begins or ceases
to perform an activity that is significant to
its operations. If the Company reclassifies
financial assets, it applies the reclassification
prospectively from the reclassification date,
which is the first day of the immediately
next reporting period following the change
in business model. The Company does not
restate any previously recognised gains,
losses (including impairment gains or
losses) or interest.
The Company has not reclassified any
financial assets and financial liabilities after
initial recognition.
Offsetting of 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.
i) Revenue recognition
The Company earns revenue primarily
from rental services by leasing of passive
infrastructure and energy revenue by the
provision of energy for operation of sites.
Revenue is recognized when the Company
satisfies the performance obligation by
transferring the promised services to
the customers. Services are considered
performed when the customer obtains
control, whereby the customer gets the
ability to direct the use of such services
and substantially obtains all benefits from
the services. When there is uncertainty as
to measurement or ultimate collectability,
revenue recognition is postponed until such
uncertainty is resolved.
Revenue towards satisfaction of a
performance obligation is measured at the
amount of transaction price adjusted with
variable consideration, if any is allocated to
that performance obligation. Revenue also
excludes taxes collected from the customers.
In order to determine if it is acting as
principal or as an agent, the entity shall
determine whether the nature of its promise
is a performance obligation to provide the
specified services itself (i.e. the entity is a
principal) or to arrange for those services to
be provided by the other party (i.e. the entity
is an agent) for all its revenue arrangements.
Service revenue
Service revenue includes rental revenue for
the use of sites, recoveries of rates and taxes
(e.g. municipal taxes relating to the sites) and
energy revenue for the provision of energy
for operation of sites.
Rental revenue is recognized as and when
services are rendered on a monthly basis as
per the contractual terms prescribed under
master service agreement entered with
customer. The Company has ascertained
that the lease payments received are straight
lined over the period of the contract.
Exit Charges on site exit and equipment
de-loading is recognised when uncertainty
relating to such exit and de-loading is
resolved and it is probable that a significant
reversal relating to recoverability of these
charges will not occur.
When the Company receives an upfront
reimbursement from its customer towards
recovery of capital expenditure, the upfront
consideration received is deferred and
recognised as revenue over the period
of the contract.
Energy revenue is recognized over the
period on a monthly basis upon satisfaction
of performance obligation as per contracts
with the customers. The transaction price is
the consideration received from customers
based on prices agreed as per the contract
with the customers. The determination of
standalone selling prices is not required
as the transaction prices are stated in
the contract based on the identified
performance obligation.
Unbilled revenue represents revenues
recognized for the services rendered for the
period falling after the last invoice raised to
customers till the period end. These are billed
in subsequent periods based on the prices
specified in the master service agreement
with the customers, whereas invoicing in
excess of revenues are classified as unearned
revenues. The Company collects GST on
behalf of the government and therefore, it
is not an economic benefit flowing to the
Company, hence it is excluded from revenue.
Sale of goods / equipment and related
services:
The Company recognises revenues from
sale of products measured at the amount
of transaction price (net of variable
consideration), when it satisfies its
performance obligation at a point in time
which is when products are delivered to
customer, which is when control including
risks and rewards and title of ownership pass
to the customer, collectability of the resulting
receivables is reasonably assured and when
there are no longer any unfulfilled obligation.
Use of significant judgements in revenue
recognition
The Company's contracts with customers
include promises to transfer services to a
customer which are energy and rentals.
Rentals are not covered within the scope of
Ind AS 115, Revenue from Contracts with
Customers, hence identification of distinct
performance obligation within Ind AS 115,
Revenue from Contracts with Customers, do
not involve significant judgement.
Judgement is required to determine
the transaction price for the contract.
The transaction price could be either a
fixed amount of customer consideration or
variable consideration with elements such
as discounts, service level credits, waivers
etc. The estimated amount of variable
consideration is adjusted in the transaction
price only to the extent that it is highly
probable that a significant reversal in the
amount of cumulative revenue recognised
will not occur and is reassessed at the end of
each reporting period.
I n evaluating whether a significant revenue
reversal will not occur, the Company considers
the likelihood and magnitude of the revenue
reversal and evaluates factors which result
in constraints such as historical experience
of the Company with a particular type of
contract, and the regulatory environment in
which the customers operate which results in
uncertainty which is less likely to be resolved
in the near future.
The Company provides a volume discount
to its customers based on the slab defined
in the revenue contracts. The contract also
contains clause on Service Level Penalty/
rewards in case the Company is not able
to maintain uptime level mentioned in the
agreement. These discount/penalties are
called variable consideration.
There is no additional impact of variable
consideration as per Ind AS 115, Revenue from
Contracts with Customers, since maximum
discount is already being given to customers
and the same is deducted from revenue.
There is no additional impact of SLA penalty
as the Company already estimates SLA
penalty amount and the same is provided
for at each month end. The SLA penalty
is presented as net off with revenue in the
Statement of profit and loss.
Determination of standalone selling price
does not involve significant judgement
for the Company. The Company exercises
judgement in determining whether the
performance obligation is satisfied at a point
in time or over a period of time. The Company
considers the indicators on how customer
consumes benefits as services are rendered
in making the evaluation. Contract fulfillment
costs are generally expensed as incurred.
The assessment of this criteria requires the
application of judgement, in particular when
considering if costs generate or enhance
resources to be used to satisfy future
performance obligations and whether costs
are expected to be recovered.
j) Finance income
Finance income comprises of interest income
on funds invested, changes in the fair value
of financial assets at fair value through
profit or loss, and that are recognised in the
Statement of Profit and Loss and interest
income on delayed payment from operators.
Interest income for changes in the fair
value of financial assets is recognised as
it accrues in the Statement of Profit and
Loss, using the effective interest rate (EIR)
which is the rate that exactly discounts the
estimated future cash receipts through the
expected life of the financial instrument or
a shorter period, where appropriate, to the
net carrying amount of the financial asset.
Interest on delayed payment from operators
is recognized as income when uncertainty
relating to amount receivable is resolved
and it is probable that a significant reversal
relating to this amount will not occur.
k) Other income
Other income includes interest income,
interest on income tax refund, gain on sale of
property, plant and equipment etc. Any gain
or loss arising on derecognition of property,
plant and equipment is calculated as the
difference between the net disposal proceeds
and the carrying amount of the asset.
l) Finance cost
Finance costs comprise Borrowing cost,
interest expense on lease obligations,
accretion of interest on site restoration
obligation and security deposits received.
m) Income taxes
The income tax expense comprises
of current and deferred income tax.
Income tax is recognised in the statement
of profit and loss, except to the extent that
it relates to items recognised in the other
comprehensive income or directly in equity,
in which case the related income tax is also
recognised accordingly.
The current tax is calculated on the basis of
the tax rates, laws and regulations, which
have been enacted or substantively enacted
as at the reporting date. The payment made
in excess / (shortfall) of the Company's
income tax obligation for the period are
recognised in the balance sheet as current
income tax assets / liabilities. Any interest
related to accrued liabilities for potential tax
assessments are not included in Income tax
charge or (credit), but are rather recognised
within finance costs. The management
periodically evaluates positions taken in
the tax returns with respect to situations in
which applicable tax regulations are subject
to interpretation and establishes provisions
where appropriate.
Current tax assets and current tax liabilities
are off set against each other and the resultant
net amount is presented in the balance sheet
where the Company has a legally enforceable
right to set off the recognized amounts and
where the Company intends either to settle
on a net basis, or to realize the asset and
settle the liability simultaneously.
Deferred tax is recognised, using the balance
sheet approach, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying values in the
financial statements. However, deferred
tax is not recognised if it arises from initial
recognition of an asset or liability in a
transaction other than a business combination
that at the time of the transaction affects
neither accounting nor taxable profit or loss.
A deferred tax liability is recognised based
on the expected manner of realisation
or settlement of the carrying amount of
assets and liabilities and deferred tax assets
are recognised only to the extent that it
is probable that future taxable profit will
be available against which the temporary
differences can be utilised. The unrecognised
deferred tax assets / carrying amount
of deferred tax assets are reviewed at
each reporting date for recoverability and
adjusted appropriately.
Deferred tax is determined using tax rates
(and laws) that have been enacted or
substantively enacted by the reporting date
and are expected to apply when the related
deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets and liabilities are off-set
against each other and the resultant net
amount is presented in the balance sheet, if
and only when, (a) the Company currently
has a legally enforceable right to set-off the
current income tax assets and liabilities, and
(b) when it relates to income tax levied by
the same taxation authority.
Further, the Company periodically evaluates
positions taken in the tax returns with
respect to situations in which applicable tax
regulations are subject to interpretation.
The Company considers whether it is
probable that a taxation authority will
accept an uncertain tax treatment. If the
Company concludes it is probable that the
taxation authority will accept an uncertain
tax treatment, it determines the taxable
profit (tax loss), tax bases, unused tax losses,
unused tax credits or tax rates consistently
with the tax treatment used or planned to be
used in its income tax filings. If the Company
concludes it is not probable that the taxation
authority will accept an uncertain tax
treatment, the Company reflects the effect
of uncertainty in determining the related
taxable profit (tax loss), tax bases, unused
tax losses, unused tax credits or tax rates.
The Company reflects the effect of uncertain
tax positions in the overall measurement
of tax expense and are based on the most
likely amount or the expected value arrived
at by the Company which provides a better
prediction of the resolution of uncertainty.
Significant judgments are involved in
determining the provision for income
taxes, including amount expected to
be paid/recovered for uncertain tax
positions. Uncertain tax positions are
monitored and updated as and when new
information becomes available, typically
upon examination or action by the taxing
authorities or through statute expiration and
judicial precedent.
n) Inventories
I nventories are valued at the lower of cost
and net realisable value. Cost includes cost
of purchase and other costs incurred in
bringing the inventories to their present
location and condition. Cost is determined
using a weighted average method.
Net realisable value is the estimated selling
price in the ordinary course of business,
less estimated costs of completion and the
estimated costs necessary to make the sale.
o) Business Combination amongst entities
under common control transactions
Transactions arising from transfers of
assets / liabilities, interest in entities or
businesses between entities that are under
the common control, are accounted at their
carrying amounts. The difference between
any consideration paid / received and the
aggregate carrying amounts of assets /
liabilities and interests in entities acquired /
disposed (other than impairment, if any), is
recorded in capital reserve / retained earnings
/ common control reserve, as applicable.
p) Dividend payments
Final dividend is recognised when it is
approved by the shareholders and the
distribution is no longer at the discretion
of the Company. However, Interim
dividends are recorded as a liability on
the date of declaration by the Company's
Board of Directors.
q) Retirement and other employee benefits
Short term employee benefits are recognised
in the period during which the services
have been rendered. All employee benefits
expected to be settled wholly within
twelve months of rendering the service are
classified as short-term employee benefits.
When an employee has rendered service to
the Company during an accounting period,
the Company recognises the undiscounted
amount of short-term employee benefits
expected to be paid in exchange for that
service as an expense unless another Ind
AS requires or permits the inclusion of the
benefits in the cost of an asset. Benefits such as
salaries, wages and short-term compensated
absences and bonus etc. are recognised in
statement of profit and loss in the period
in which the employee renders the related
service. A liability is recognised for the
amount expected to be paid after deducting
any amount already paid under short-term
cash bonus or profit-sharing plans if the
Company has a present legal or constructive
obligation to pay this amount as a result of
past service provided by the employee, and
the obligation can be estimated reliably.
The Company post-employment benefits
include defined benefit plan and defined
contribution plans. The Company also
provides other benefits in the form of deferred
compensation and compensated absences.
A defined contribution plan is a
post-employment benefit plan under which
an entity pays fixed contributions to a
statutory authority and will have no legal
or constructive obligation to pay further
amounts. The Company contributions to
defined contribution plans are recognized
in the statement of profit and loss when
the related services have been rendered.
The Company has no further obligations under
these plans beyond its periodic contributions.
A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. Under the defined benefit retirement
plan, the Company provides retirement
obligation in the form of Gratuity. Under the
plan, a lump sum payment is made to eligible
employees (including contractual employees
as per their terms of contract) at retirement
or termination of employment based on
respective employee salary and years of
experience with the Company.
The cost of providing benefits under this
plan is determined on the basis of actuarial
valuation carried out half yearly by an
independent qualified actuary using the
projected unit credit method. Actuarial gains
and losses are recognised in full in the period
in which they occur in other comprehensive
income forming part of the statement of
profit and loss.
The obligation towards the said benefit is
recognised in the balance sheet on the basis
of the present value of the defined benefit
obligation as the Company does not have
any plan asset.
All expenses excluding remeasurements
of the net defined benefit liability (asset),
in respect of defined benefit plans are
recognized in the profit or loss as incurred.
Remeasurements, comprising actuarial gains
and losses and the return on the plan assets
(excluding amounts included in net interest
on the net defined benefit liability (asset)),
are recognized immediately in the Balance
Sheet with a corresponding debit or credit
through other comprehensive income in the
period in which they occur. Remeasurements
are not reclassified to profit or loss in
subsequent periods.
The Company provides other benefits in the
form of compensated absences and long
term service awards. The employees of
the Company are entitled to compensated
absences based on the unavailed leave
balance. The Company records liability
based on actuarial valuation computed
under projected unit credit method.
Actuarial gains / losses are immediately
taken to the Statement of Profit and Loss
and are not deferred. The Company presents
the entire leave encashment liability as a
current liability in the balance sheet, since
the Company does not have an unconditional
right to defer its settlement for more than 12
months after the reporting date.
Under the long term service award plan, a
lump sum payment is made to an employee
on completion of specified years of service.
The Company records the liability based on
actuarial valuation computed under projected
unit credit method. Actuarial gains / losses
are immediately taken to the Statement
of Profit and Loss and are not deferred.
The amount charged to the statement of
profit and loss in respect of these plans is
included within employee benefit expenses.
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