NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2016
NOTE NO. 1
Significant Accounting Policies
a) Corporate Information
MVL Ltd. (hereinafter referred to as the “Company”) is a Company domiciled in India and incorporated under the provisions of the Companies Act 1956 read with companies Act 2013 (The Act). The Company is engaged in the business of Real estate builders & developers.
b) Basis of Accounting
The financial statements of the company are prepared and presented under the historical cost convention and comply in all material respects with applicable accounting standards as specified under section 133 of the companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, All incomes & expenditure are accounted for on accrual method of accounting unless otherwise stated hereafter. Accounting policies not specifically referred to are consistent with Generally Accepted Accounting Principles
c) Use of Estimates
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Actual results could differ from those estimates and any revision is recognized in the current and future years.
d) Revenue Recognition Real Estate Projects
i. Revenue from Real Estate Projects is recognized in accordance with the provisions of Accounting Standard (AS) 9 on Revenue Recognition, read with Guidance Note on “Recognition of Revenue by Real Estate Developers”
Revenue is recognized based on “Percentage of Completion” method and on the percentage of actual project costs incurred thereon to total estimated project cost, subject to such actual cost incurred being at least 25 per cent or more of the total estimated project cost
ii. The estimates of the projected revenues, saleable area and projected costs are reviewed periodically by the management and any effect of changes in estimates is recognized in the period, such changes are determined.
iii. Where aggregate of the payments received provide insufficient evidence of Buyers commitment to make the complete payment, revenue is recognized only to the extent of realization.
iv. While all incomes and expenses are accounted for on accrual basis, Interest on delayed payments by customers against dues is taken on realization, owing to uncertainties involved.
v. With effect from April 1, 2012 in accordance with the Revised Guidance Note issued by Institute of Chartered Accountants of India (“ICAI”) on “Accounting for Real Estate Transactions (Revised 2012)”, the Company has revised its Accounting Policy of revenue recognition for all projects commencing on or after April 1, 2012 or project where the revenue is recognized for the first time on or after the said date. As per this Guidance Note, the revenue is recognized on percentage of completion method provided all of the following conditions are met at the reporting date.
- at least 25% of estimated construction and development costs (excluding land cost) has been incurred;
- at least 25% of the saleable project area is secured by the Agreements to sell/application forms (containing salient terms of the agreement to sell); and
- at least 10% of the total revenue as per agreement to sell are realized in respect of these agreements.
e) Cost of construction / Development
Accumulated project cost i.e. cost of construction / development comprises of: -
i) Expenses directly related to the project.
ii) Finance Cost including interest and charges incurred up to the completion of the project are considered as attributable cost to the project and included under accumulated Project cost.
iii) Project costs in relation to a project, ordinarily comprise of :-
- Cost of land and cost of development rights: All costs related to the acquisition of land, development rights, rehabilitation costs, registration charges, stamp duty, brokerage costs, statutory dues paid to sanctioning authorities and other incidental expenses.
- Construction and development costs: These would include costs that relate directly to the specific project and costs that may be attributable to project activity in general and can be allocated to the project.
- Borrowing Costs: (In accordance with Accounting Standard (AS 16))
i) Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets for the year up to the completion/installation or construction of such asset respectively are capitalized as part of the cost of such asset.
ii) Borrowing costs directly attributable to projects under taken by the company are charged to each such project on year to year basis and is treated as cost of the project.
iii) All other borrowing costs are charged to revenue in the year in which they are incurred.
f) Inventory
Inventory comprises of lands, projects completed or under construction, building material in hand and rights in identified lands including: -
i) Work-in-progress comprising of land, materials, services and other overheads related to project under construction, valued at cost.
ii) Stock of building material, valued at cost.
iii) Completed units remaining unsold, valued at lower of cost or market value.
g) Trade Receivables represents
- Receivables due as per Builder Buyer Agreements net of amounts received.
- Unbilled receivables against revenue recognized on “percentage of completion method”
h) Fixed Assets
Fixed Assets are stated at cost, net of accumulated depreciation. Cost includes original cost of acquisition, including incidental expenses related to such acquisition and installation.
i) Depreciation
i) Depreciation on tangible and intangible assets is provided on the Useful life method as specified under Companies Act 2013. Depreciation on additions/ deletions to/from fixed assets is provided on pro-rata basis from the date the asset is put to use /discarded.
j) Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Profit and Loss Account. If at the Balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. k) Investments
Investments are all long term, which are stated at cost. Provision for diminution in value thereof, other than temporary in nature, is accounted for. l) Taxation
i) Current Tax
Provision for Income Tax is based on assessable profits of the company as computed in accordance with the relevant provision of the Income Tax Act, 1961 for the year ending 31st March 2016.
ii) Deferred Tax
Deferred Tax is recognized on timing differences; being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets on unabsorbed tax losses and tax depreciation are recognized only when there is a virtual certainty of their realization and on other items when there is reasonable certainty of realization. The tax effect is calculated on the accumulated timing differences at the yearend based on the tax rates and laws enacted or substantially enacted on the balance sheet date. m) Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized only when there is a present obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Contingent Liability is disclosed for (1) Possible obligations which will be confirmed only by future events not wholly within the control of the company or (2) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made. Contingent assets are not recognized in the financial statements since this may result in recognition of income that may not be realized in the near future.
(a) There is no variation or change in the issued, subscribed and fully paid-up capital structure during the year. Therefore, no separate disclosure of reconciliation of the number of equity share outstanding as at the beginning and at the end of the year is required.
(b) Shareholders Holding more then 5% shares based on legal ownership in the subscribed share capital of the company is set out below:
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