(B) SIGNIFICANT ACCOUNTING POLICIES
a) Property Plant and Equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of plant
and equipment is recognized as an asset if, and only if, it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be measured reliably.
Cost includes its purchase price (after deducting trade discounts and rebates), import duties & non¬
refundable purchase taxes, any costs directly attributable to bringing the asset to the location &
condition necessary for it to be capable of operating in the manner intended by management,
borrowing costs on qualifying assets and asset retirement costs. When parts of an item of property,
plant and equipment have different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
The activities necessary to prepare an asset for its intended use or sale extend to more than just
physical construction of the asset. It may also include technical (DPR, environmental, planning, Land
acquisition and geological study) and administrative work such as obtaining approvals before the
commencement of physical construction.
The cost of replacing a part of an item of property, plant and equipment is capitalized if it is probable
that the future economic benefits of the part will flow to the Company and that its cost can be
measured reliably. The carrying amount of the replaced part is derecognized.
Costs of day-to-day repairs and maintenance costs are recognized into the statement of profit and loss
account as incurred.
Subsequent recognition, property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses.
The carrying values of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable.
The residual values estimated useful lives and depreciation method are reviewed at each financial
year-end, and adjusted prospectively, if appropriate.
An item of plant and equipment is derecognized upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising on de recognition of the asset is
recognised in the profit or loss in the year the asset is derecognized.
Assets under installation or under construction as at the Balance Sheet date are shown as Capital Work
in Progress.
Depreciation, Estimated useful life and Estimated residual value
Depreciation is calculated using the Straight-Line Method, pro rata to the period of use, taking into
account useful lives and residual value of the assets. Depreciation is computed with reference to cost.
Depreciation on additions during the year is provided on pro rata basis with reference to month of
addition/installation. Depreciation on assets disposed/discarded is charged up to the date of sale
excluding the month in which such assets is sold. The assets residual value and useful life are reviewed
and adjusted, if appropriate, at the end of each reporting year. Gains and losses on disposal are
determined by comparing proceeds with carrying amounts. These are included in the statement of
Profit and Loss.
b) Intangible Assets
Intangible assets are recognised when it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably.
The company amortizes computer software using the straight-line method over the period of 5 years.
c) Impairment of Assets
An asset is considered as impaired when at the date of Balance Sheet, there are indications of
impairment and the carrying amount of the asset, or where applicable, the cash generating unit to
which the asset belongs, exceeds its recoverable amount (i.e. the higher of the net asset selling price
and value in use).The carrying amount is reduced to the recoverable amount and the reduction is
recognized as an impairment loss in the statement of profit and loss. The impairment loss recognized
in the prior accounting period is reversed if there has been a change in the estimate of recoverable
amount. Post impairment, depreciation is provided on the revised carrying value of the impaired asset
over its remaining useful life.
d) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial
liability or equity instrument of another Company. Financial instruments also include derivative
contracts such as foreign currency foreign exchange forward contracts, interest rate swaps and
currency options.
(i) Financial assets
Initial Recognition and measurement
All financial assets are initially recognized at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets, which are not at fair value
through profit and loss, are adjusted to the fair value on initial recognition.
Subsequent Measurement
Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised Cost if it is held within a business model whose
objective is to hold the asset in order to collect contractual cash flows and the contractual
terms of the Financial Asset give rise on specified dates to cash flows that represent solely
payments of principal and interest on the principal amount outstanding.
Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose
objective is achieved by both collecting contractual cash flows and selling Financial Assets
and the contractual terms of the Financial Asset give rise on specified dates to cash flows
that represents solely payments of principal and interest on the principal amount
outstanding.
Financial Assets measured at Fair Value Through Profit and Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at
FVTPL. Financial assets are reclassified subsequent to their recognition, if the Company
changes its business model for managing those financial assets. Changes in business
model are made and applied prospectively from the reclassification date which is the first
day of immediately next reporting period following the changes in business model in
accordance with principles laid down under Ind AS 109 - Financial Instruments.
In case of Investments
Investments are classified into current and Long-term investments. Investments that are
readily realizable and intended to be held for not more than a year from the date of
acquisition is classified as Current Investments. All Other investments are classified as
long-term investments.
Long Term Investments are stated at cost and provision for diminution is made if the
decline in value is other than temporary in nature. Current Investments are stated at
lower of cost and fair value determined based on each category of investments.
(ii) Financial Liabilities
Classification
The Company classifies its financial liabilities in the following measurement categories:
- those to be measured subsequently at fair value through profit and loss-[FVTPL]; and
- those measured at amortised cost. [AC]
The classification depends on the Company's business model for managing the financial
assets and the contractual terms of the cash flows.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit and loss or at amortised cost. 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 trade and other
payables, loans and borrowings including bank overdrafts, financial guarantee contracts
and derivative financial instruments.
Subsequent measurement
Financial liabilities are subsequently carried at amortized cost using the effective interest
method. For trade and other payables maturing within one year from the balance sheet
date, the carrying amounts are approximate at their fair value due to the short maturity
of these instruments.
Financial liabilities at fair value through profit and loss [FVTPL]
Financial liabilities at fair value through profit and loss [FVTPL] include financial liabilities
designated upon initial recognition as at fair value through profit and loss. Financial
liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative financial instruments
entered into by the Company that are not designated as hedging instruments in hedge
relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified
as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and
loss.
Financial liabilities designated upon initial recognition at fair value through profit and loss
are designated at the initial date of recognition, only if the criteria in Ind-AS 109 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 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.
Loans and borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Any
difference between the proceeds (net of transaction costs) and the redemption amount
is recognised in statement of profit and loss over the period of borrowings using the
effective interest method. Processing/Upfront fee are treated as prepaid asset netted of
from borrowings. The same is amortised over the period of the facility to which it relates.
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost. Gains and losses are recognised in 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. This category generally
applies to interest-bearing loans and borrowings.
Borrowings are derecognised from the balance sheet when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount
of the financial liability that has been extinguished or transferred to another party and the
consideration paid including any non-cash assets transferred or liability assumed, is
recognised in Statement of profit and loss as other gains or (losses).
Borrowings are classified as current liabilities unless the Company has an unconditional
right to defer the settlement of liabilities for at least twelve months after the reporting
year.
Where there is a breach of a material provision of a long term loan arrangement on or
before the end of the reporting period with the effect that the liability becomes payable
on demand on the reporting date, the same is classified as current unless the lender
agreed, after the reporting year and before the approval of financial statements for issue,
not to demand payment as a consequence of the breach.
Trade and other payable
These amounts represent liabilities for goods and services provided to the Company prior
to the end of financial year which are unpaid at the year end. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months after the
reporting year. They are recognised initially at their fair value and subsequently measured
at amortised cost using the effective interest method.
Derecognition
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 recognised in the statement of profit and loss.
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. The legally enforceable right must not be contingent on
future events and must be enforceable in the normal course of business and in the event
of default, insolvency or bankruptcy of the Company or the counterparty.
e) Inventories
Inventories are measured at the lower of cost and net realisable value after providing for
obsolescence, if any, except for Stock-in-Trade [which are measured at Fair value] and Realisable by¬
products [which are measured at net realisable value]. The cost of inventories is determined using the
weighted average method and includes expenditure incurred in acquiring inventories, production or
conversion and other costs incurred in bringing them to their respective present location and
condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity. The comparison of cost and Net
Realisable value is made on an item-by-item basis. Net realisable value is estimated selling price in the
ordinary course of business, less estimated cost of completion and the estimated costs necessary to
make the sale. The net realisable value of work in progress is determined with reference to selling
prices of finished products.
f) Cash and Cash Equivalents
For the purpose of presentation in the statement of the cash flows, cash and cash equivalent includes
the cash on hand, deposits held at call with financial institutions other short term, highly liquid
investments with original maturity of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. Cash flows are
reported using the indirect method, whereby profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and financing activities of the Company are
segregated based on the available information.
g) Contributed Equity
Equity shares are classified as equity. Incidental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
h) Dividend
Dividends are recognized in profit or loss only when the right to receive payment is established.
i) Earnings Per Share
(i) Basic earnings per share
Basic earnings per shares is calculated by dividing Profit/(Loss) attributable to equity
holders (adjusted for amounts directly charged to
Reserves) before/after Exceptional Items (net of tax) by Weighted average number of
Equity shares, (excluding treasury shares).
(ii) Diluted Earnings per share
Diluted earnings per shares is calculated by dividing Profit/(Loss) attributable to equity
holders (adjusted for amounts directly charged to Reserves) before/after Exceptional
Items (net of tax) by Weighted average number of Equity shares (excluding treasury
shares) considered for basic earning per shares including dilutive potential Equity shares.
j) Foreign Currency
Transactions in foreign currencies are translated into the functional currencies of the Company at the
exchange rate prevailing at the date of the transactions. Monetary assets (other then investments in
companies registered outside India) and liabilities denominated in foreign currencies are translated
into the functional currency at the exchange rate at the reporting date.
Investments in companies registered outside India are converted at rate prevailing at the date of
acquisition. Non-monetary assets and liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange rate when the fair value was determined.
Non-monetary items that are measured based on historical cost in a foreign currency are not
translated.
k) Revenue Recognition
Revenue is recognized and measured at the fair value of the consideration received or receivable, to
the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured. The Company derives revenues primarily from sale of manufactured goods
i.e Bio diesel and provision of Internet Services as Internet Service Providers.
The company collects GST on behalf of the government and, therefore, these are not economic
benefits flowing to the company. Hence, they are excluded from revenue.
a) Sale of Goods
Revenue from the sale of goods are recognized when there is persuasive evidence, usually in the form
of an executed sales agreement at the time of delivery of the goods to customer, indicating that there
has been a transfer of risks and rewards to the customer, no further work or processing is required
the quantity and quality of goods has been determined, the price is considered fixed and generally
title has passed.
b) Other Income
Other income is comprised primarily of interest income and rental income. Interest income is
recognized using the effective interest method.
l) Employee Benefits
(i) During Employment Benefits
(a) Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid 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.
(ii) Post-Employment benefits
(a) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which a Company pays
fixed contribution into a separate entity and will have no legal or constructive obligation to
pay further amounts. The Company makes specified monthly contributions towards
government administered Provident Fund scheme.
Obligations for contributions to defined contribution plans are expensed as the related
service is provided. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in future payments is available.
(b) Defined benefit plans
The Company pays gratuity to the employees who have has completed five years of service
with the company at the time when employee leaves the Company.
The gratuity liability amount is contributed to the approved gratuity fund formed exclusively
for gratuity payment to the employees.
The liability in respect of gratuity and other post-employment benefits is calculated using the
Projected Unit Credit Method and spread over the periods during which the benefit is
expected to be derived from employees' services.
Re-measurement of defined benefit plans in respect of post employment are charged to
Other Comprehensive Income.
(c) Termination Benefits
Termination benefits are payable when employment is terminated by the Company before
the normal retirement date or when an employee accepts voluntary redundancy in exchange
for these benefits. In case of an offer made to encourage voluntary redundancy, the
termination benefits are measured based on the number of employees expected to accept
the offer. Benefits falling due more than twelve months after the end of reporting year are
discounted to the present value.
m) Income Taxes
Income tax expense comprises current and deferred tax. Tax is recognised in statement of profit and
loss, except to the extent that it relates to items recognised in the other comprehensive income or in
equity. In which case, the tax is also recognised in the other comprehensive income or in equity.
(i) Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities, based on tax rates and laws that are enacted or
subsequently enacted at the Balance sheet date. Current tax assets and liabilities are
offset only if, the Company:
a) has a legally enforceable right to set off the recognised amounts; and
b) intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current tax provision is computed for income calculated after considering allowances and
exemptions under the provisions of the applicable Income Tax Laws. Current tax assets
and current tax liabilities are off set and presented as net.
(ii) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply
in the year in which the liability is settled or the asset realised, based on tax rates (and tax
laws) that have enacted or substantively enacted by the end of the reporting year. The
carrying amount of Deferred tax liabilities and assets are reviewed at the end of each
reporting year. Deferred tax is recognised to the extent that it is probable that future
taxable profit will be available against which they can be used.
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 liabilities are offset only if:
a) the Company has a legally enforceable right to set off current tax assets against current
tax liabilities; and
b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by
the same taxation authority on the same
taxable Company.
n) Borrowing Costs
General and specific Borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily takes a substantial period of time to get ready for its
intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use
or sale. Other borrowing costs are recognised as an expense in the year in which they are incurred.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalisation. All
other borrowing costs are charged to the statement of profit and loss for the year for which they are
incurred.
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