1.3 Material accounting policy information
(i) Property, Plant and Equipment & Depreciation
Transition to Ind AS
The Company has elected to use a previous Generally
Accepted Accounting Principles (GAAP) cost {Cost (-)
accumulated depreciation and impairment losses, if
any,} of an item of property, plant and equipment at or
before the date of transition to Ind AS as deemed cost
at the date of transition in accordance with the option
provided under Ind AS-101.
Property, plant and equipment (PPE) are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. The initial cost of PPE is the
cost of acquisition or construction, inclusive of freight,
erection & commissioning charges and any directly
attributable costs of bringing an asset to working
condition and location for its intended use, including
borrowing costs relating to the qualified asset over the
period up to the date the asset is ready to commence
commercial production. The carrying amount of a PPE
is de-recognized when no future economic benefits are
expected from its use or on disposal.
The Property, plant and equipment are subsequently
measured at cost net of accumulated depreciation and
accumulated impairment losses, if any. Depreciation
on property, plant and equipment is provided on a
straight-line basis over the estimated useful lives of
the assets, as prescribed in Part C of Schedule II of the
Companies Act, 2013.
The PPE acquired under finance leases, if any, is
depreciated over the asset's useful life or over the
shorter of the asset's useful life and the lease term, if
there is no reasonable certainty that the Company will
obtain ownership at the end of the lease term. Freehold
land is not depreciated. Borrowing costs relating to
acquisition of PPE which takes substantial period of
time to get ready for its intended use are also included
to the extent they relate to the period till such assets are
ready to be put to use. Depreciation on PPE is provided
based on useful lives of the assets assigned to each
asset in accordance with Schedule II to the Companies
Act, 2013 on straight-line method. Fixtures and lease
hold improvements installed in leased buildings are
amortized over the initial period of lease.
(ii) Intangible assets under development
'Intangible assets under development' represents
expenditure incurred in respect of intangible
assets under development and are carried at
cost less accumulated impairment loss, if any.
Cost includes land, related acquisition expenses,
development/ construction costs, borrowing
costs and other direct expenditure.
(iii) Intangibles and amortization
Intangible assets are recognized when it
is probable that future economic benefits
attributable to asset will flow to the Company and
the cost of the asset can be measured reliably.
Intangible assets (acquired or developed in¬
house) are measured on initial recognition at
cost. The cost of an intangible asset includes
purchase cost (net of rebates and discounts),
including any import duties and non-refundable
taxes, and any directly attributable costs on
making the asset ready for its intended use.
Following initial recognition, intangible assets are
carried at cost less accumulated amortization and
accumulated impairment losses, if any. Internally
generated intangible assets, excluding capitalized
development costs, which meet capitalization
criteria, are not capitalized and expenditure is
reflected in the statement of profit and loss in
the year in which the expenditure is incurred.
Cost of software is amortized over a period of 05
years, being the estimated useful life as per the
Management's estimates.
(iv) Impairment of assets
The amortization period and method are reviewed
at least at each financial year end. If the expected
useful life of the asset is significantly different
from previous estimates, the amortization period
is changed accordingly.
Management at each Balance Sheet date
assesses using external and/ or internal sources
whether there is an indication that an asset or
group of assets or a cash generating unit, as the
case may be, may become impaired. Impairment
exists where the carrying amount exceeds the
fair market value of the asset, represented by
the present value of future cash flows expected
to arise from the continuing use of the asset and
its realizable value. The impairment loss, if any, is
charged off to statement of profit and loss.
An intangible asset is derecognized on disposal,
or when no future economic benefits are
expected from use. Gains and losses arising
from de-recognition of an intangible asset are
measured as the difference between the net
disposal proceeds and the carrying amount of
the asset, and are recognized in the statement of
profit and loss when the asset is de-recognized or
on disposal.
(v) Lease accounting
At the inception of a contract, the Company
assesses whether a contract is or it contains a
lease agreement or a contract is or it contains a
lease if the contract conveys the right to control
the use of an identified asset for a period of time
in exchange of consideration. To assess whether
a contract conveys the right to control the use of
an asset the Company assesses whether:
(a) The contract involves the use of an identified asset
- this may be specified explicitly or implicitly,
and should be physically distinct or represent
substantially all of the capability of a physical
distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
(b) The Company has the right to substantially obtain
all of the economic benefits from use of the asset
throughout the period of use; and
(c) The Company has the right to direct the use of
the asset. The Company has this right when it has
the decision-making rights that are most relevant
to changes how and for what purpose the asset is
used.
Company as a lessee
(i) Right-of-use asset
The Company recognizes a right-of-use asset and
a lease liability at the lease commencement date. At
the commencement date, a lessee shall measure
the right-of-use asset at cost which comprises initial
measurement of the lease liability, any lease payments
made at or before the commencement date, less
any lease incentives received, any initial direct costs
incurred by the lessee, and an estimate of costs to be
incurred by the lessee in dismantling and removing
the underlying asset, restoring the site on which it
is located or restoring the underlying asset to the
condition required by the terms and conditions of the
lease.
(ii) Lease liability
At the commencement date, a lessee shall measure the
lease liability at the present value of the lease payments
that are not paid at that date. The lease payments shall
be discounted using the interest rate implicit in the
lease, if that rate can be readily determined. If that rate
cannot be readily determined, the lessee shall use the
lessee's incremental borrowing rate.
(iii) Short-term lease and leases of low-value assets
The Company has elected not to recognize right-of-use
assets and lease liabilities for short-term leases that
have a lease term of less than 12 months or less and
leases of low-value assets, including IT Equipment. The
Company recognizes the lease payments associated
with these leases as an expense on a straight-line basis
over the lease term.
The election for short-term leases shall be made by
class of underlying asset to which the right of use
relates. A class of underlying asset is a grouping
of underlying assets of a similar nature and use in
Company's operations. The election for leases, for
which the underlying asset is of low value, can be
made on a lease-by-lease basis.
Company as a lessor
Leases in which the Company does not substantially
transfer all the risks and rewards of ownership of an
asset are classified as operating leases. Rental income
from operating leases is recognized on a straight¬
line basis over the term of the relevant lease. Initial
direct costs incurred by lessors in negotiating and
arranging an operating lease shall be added to the
carrying amount of the leased asset and recognized
as an expense over the lease term on the same basis
as the lease income. Leases are classified as finance
leases when substantially all of the risks and rewards
of ownership transfer from the Company to the lessee.
(vi) Investment property
(i) Recognition and initial measurement
Investment properties are properties held to earn
rentals or for capital appreciation, or both. Investment
properties are measured initially at their cost of
acquisition, including transaction costs. On transition
to IND AS, the Company had elected to measure all
of its investment properties at the previous GAAP
carrying value (deemed cost). The cost comprises
purchase price, borrowing cost, if capitalization criteria
are met and directly attributable cost of bringing the
asset to its working condition for the intended use. Any
trade discount and rebates are deducted in arriving
at the purchase price. When significant parts of the
investment property are required to be replaced at
intervals, the Company depreciates them separately
based on their specific useful lives. 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 Company. All
other repair and maintenance costs are recognized in
the statement of profit or loss as incurred.
(ii) Subsequent measurement (depreciation and
useful fives)
Investment properties are subsequently measured at
cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation on investment
properties is provided on the straight-line method over
the useful lives of the assets as follows:
The Company, based on technical assessment made
by technical expert and/ or management estimates,
depreciates certain items of building, plant and
equipment over estimated useful lives which are
different from the useful life prescribed in Schedule II
to the Companies Act, 2013. The Management believes
that these estimated useful lives are realistic and reflect
fair approximation of the period over which the assets
are likely to be used. The residual values, useful lives
and method of depreciation are reviewed at the end
of each financial year and adjusted prospectively.
Though the Company measures investment property
using cost-based measurement, the fair value of
investment property is disclosed in the notes. Fair
values are determined based on evaluation performed
by an accredited external independent valuer applying
valuation model acceptable internationally.
(iii) De-recognition
Investment properties are de-recognized either
when they have been disposed of or when they
are permanently withdrawn from use and no future
economic benefits are expected from their disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognized
in the statement of profit or loss in the period of de¬
recognition.
(vii) Inventories
(i) The cost of inventories comprises the cost of
purchase, cost of conversion and other costs
incurred in bringing the inventories to their
present location and condition. Inventories are
valued at cost or net realizable value, whichever
is lower on the basis of first-in-first-out method,
average cost method or specific identification, as
the case may be.
(ii) Finished stock of completed Real Estate Projects,
land and land development rights are valued at
lower of the cost or net realizable value on the
basis of actual identified units.
(viii) Projects in progress
Projects in progress disclosed as at reporting date
in respect of Real Estate development and related
activities includes aggregate amount of project costs
incurred and recognized profit (less recognized losses)
including unbilled revenue and project costs that relate
to future activity on the contract where it is probable
that these costs will be recovered in future upto the
reporting date less amount received from customers,
for all projects.
Project costs include cost of land, land development
rights, construction costs, job work, allocated
borrowing costs and other incidental costs including
the cost of any delayed penalty, already committed
to the customers that are attributable to project and
such other costs as are specifically chargeable to the
customer being costs incurred upto the reporting date.
Unbilled revenue represents revenue recognized on
percentage of completion method to the extent not
billed to customers as per contractual payment plan/
milestones. The application of IND AS 115 has impact
on Projects in Progress and must be read along with
'Significant accounting policy no. XII below.
(ix) Borrowing costs
Borrowing cost relating to acquisition/ construction
development of qualifying assets of the Company are
not capitalized until the time all substantial activities
necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is the
one that necessarily takes substantial period of time to
get ready for its intended use/ sale. Borrowing costs
that are attributable to the project in progress and
qualifying land advances as well as any capital work
in progress are charged to respective qualifying asset.
Borrowing costs incurred/ proportioned on projects,
otherwise qualified for capitalization, where ultimate
expected profitability is expected to be negative, is
not capitalized, and is charged to statement of profit
and loss. All other borrowing costs, not eligible for
capitalization, are charged to the statement of profit
and loss.
(x) Revenue recognition
The Company derives revenues primarily from the
business of Real Estate development and related
activities including construction, consultancy and
rentals etc. Further, most of the business conducted is
within the geographical boundaries of India.
Revenue is recognized in accordance with the principles
laid down under IND AS-115.
(a) Real Estate Projects
The Company recognizes revenue using
Percentage of Completion Method (POCM),
where performance obligation is satisfied over a
period of time.
Performance obligations are satisfied over time
when the Company transfers control of goods
over time and, therefore, satisfies a performance
obligation and recognizes revenue over time,
if (i) the Company's performance creates or
enhances the asset, viz. projects in progress, that
the customer controls as the asset is created or
enhanced, or (ii) the Company's performance
does not create an asset with an alternative use to
the entity and the entity has an enforceable right
to payment for performance completed to date.
Revenues in excess of invoicing are classified
as contract assets (also referred to as unbilled
revenue) while invoicing in excess of revenues
are classified as contract liabilities (also referred
to as unearned revenues).
The amount of contract revenue may increase or
decrease from one period to the next on account
of:
(i) Variations or claims contractually agreed
that increase or decrease contract revenue
in a period subsequent to that in which
the contract with customers was initially
agreed; and
(ii) Penalties arising from delays caused by the
Company in the completion of the contract
where such penalties are certain. These
penalties do not include those which have
not yet been committed to the customers
where the possession of the unit has not
been handed over.
Further, the Company recognizes revenue on
Percentage of Completion Method (POCM) on
completion of the following events:
(i) All critical approvals necessary for
commencement of the project have been
obtained including, wherever applicable -
environmental & other clearances, approval
of plans, designs etc., title to land or other
rights of development/ construction &
change in land use;
(ii) The expenditure incurred on construction
& development is not less than 25% of the
construction and development costs;
(iii) At least 25% of the saleable project area is
secured by contracts or agreements with
buyers;
(iv) The Company starts giving possession
in that project and has qualified for the
criterion as stated in IND AS 115; and
(v) At least 10% of the total revenue as per
the agreements of sale or any other legally
enforceable document are realized at the
reporting date in respect of each of the
contracts & it is reasonable to expect that
the parties to such contracts will comply
with the payment terms as defined in the
contracts.
When it is probable that total costs will exceed
total project revenue, the expected loss is
recognized as an expense immediately.
An entity shall account for a contract with a
customer that is within the scope of this Standard
only when all of the following criteria are met:
(i) The parties to the contract have approved
the contract (in writing, orally or in
accordance with other customary business
practices) and are committed to perform
their respective obligations;
(ii) The entity can identify each party's rights
regarding the goods or services to be
transferred;
(iii) The entity can identify the payment terms
for the goods or services to be transferred;
(iv) The contract has commercial substance (i.e.
the risk, timing or amount of the entity's
future cash flows is expected to change as a
result of the contract); and
(v) It is probable that the entity will conduct
the consideration to which it will be entitled
in exchange for the goods or services
that will be transferred to the customer.
In evaluating whether collectability of an
amount of consideration is probable, an
entity shall consider only the customer's
ability and intention to pay that amount of
consideration when it is due. The amount
of consideration to which the entity will be
entitled may be less than the price stated in
the contract if the consideration is variable
because the entity may offer the customer a
price concession.
(b) Construction Contracts
The Company recognizes revenue from
construction contracts using Percentage of
Completion Method (POCM), where performance
obligation is satisfied over a period of time.
Performance obligations are satisfied over time
when the Company transfers control of goods
over time and, therefore, satisfies a performance
obligation and recognizes revenue over time,
if (a) the Company's performance creates or
enhances an asset, viz. projects in progress, that
the customer controls as the asset is created or
enhanced, or (b) the Company's performance
does not create an asset with an alternative use to
the entity and the entity has an enforceable right
to payment for performance completed to date.
(i) The stage of completion under the POC
method is measured on the basis of
percentage that actual costs incurred on
construction contracts to the total estimated
cost of the contract.
(ii) Revenue on account of contract variations,
claims and incentives are recognized/
adjusted upon settlement or when it
becomes reasonably certain that such
variations, claims and incentives are both
measurable and recoverable/ adjustable.
Contract revenue is measured at fair value of
the consideration received or receivable. The
measurement of contract revenue is affected
by a variety of uncertainties that depend on
the outcome of future events. The estimates
often need to be revised as events occur and
uncertainties are resolved. Therefore, the amount
of contract revenue may increase or decrease
from one period to the next.
(c) Accounting of projects with co-developers (JVs)
All the development expenses and sale proceeds
booked during the year are transferred to the
co-developer at the year-end as per the mutual
agreement with each such co-developer.
(d) Sale of land and land development rights
Revenue from sale of land and development rights
is recognized upon transfer of all significant risks
and rewards of ownership of such real estate/
property, as per the terms of the contracts entered
into with buyers, which generally coincides with
the firming of the sales contracts/ agreements.
(e) Sale of construction material
Revenue from sale of construction material is
recognized when transfer of significant risk and
rewards of such material takes place. Such sale is
recognized net of taxes.
(f) Sale of investment
Net sale proceeds of the investments including
the investment in subsidiaries, joint ventures
and associates developing real estate projects,
are recognized on completion of sale of such
investment.
(g) Consultancy income
Consultancy income is recognized on accrual
basis based on contractual terms on the
performance of such services. Revenue is
recognized proportionately by reference to the
performance of acts defined contractually. The
revenue is recognized when it is reasonably sure
that the Company has completed its performance
obligation and the revenue shall ultimately be
realized. The revenue recognized is determined
on the basis of contract value, associated costs,
number of acts or other suitable basis.
(h) Interest income
Interest income is recognized only when no
significant uncertainty as to measurability or
collectability exists. Income is recognized on
a time proportion basis taking into account the
amount outstanding and the rate applicable.
Interest income from financial Assets is
recognized using E.I.R. method.
(i) Dividend income
Dividend income is recognized when the right to
receive the same is established.
(j) Income from interest on delayed payment by
customers
The revenue on account of interest on delayed
payment by customers is accounted for at the
time of acceptance/ settlement with customers
due to uncertainties with regard to determination
of amount receivable until then.
(xi) Foreign currency transactions
These Financial Statements are presented in Indian
Rupees (INR), which is the Company's functional
currency. A foreign currency transaction is recorded,
on initial recognition in the reporting currency, by
applying to the foreign currency amount the exchange
rate between the reporting currency and the foreign
currency on the date of the transaction. Monetary
items denominated in a foreign currency are reported
using the closing rate or at the amount which is likely
to be realized from, or required to disburse such items
at the balance sheet date as the situation demands.
Non-monetary items carried in term of historical cost
denominated in foreign currency, are reported using
exchange rate at the date of transaction. Exchange
differences arising on the settlement of monetary
items or on reporting an enterprise's monetary items
at rates different from those at which they were initially
recorded during the period, or reported in previous
financial statements, are recognized as income or as
expenses in the period in which they arise. Exchange
differences arising on reporting of long term monetary
assets at rates different from those at which they were
initially reported during the period or previous periods
in so far they relate to the acquisition of depreciable
capital asset is added to or deducted from the cost of
assets.
The Financial Statement of an integral operation is
translated using the above principle and procedures.
In translating the Financial Statement of a non-integral
foreign operation for incorporation in its Financial
Statement, the following principles and procedures are
followed:
(i) Assets and liabilities, both monetary and non¬
monetary, of the non-integral foreign operation
are translated at the closing rate.
(ii) Income and expense items of the non-integral
foreign operation are translated at exchange
rates at the date of the transactions.
(iii) All resulting exchange differences are
accumulated in a foreign currency translation
reserve until the disposal of the net investment.
(xii) Taxes on income
Tax Expenses have been computed as per the
provisions contained in IND AS 12. The tax expense
for the period comprises the sum of current tax and
deferred income tax. Tax is recognized in the statement
of Profit & Loss, except to the extent that it relates to
items recognized in the other comprehensive income
or in equity, in which case, the tax is also recognized in
Other Comprehensive income.
(i) Current tax
Current tax assets & liabilities are measured at the
amount expected to be recovered from or paid to
the income tax authorities, based on tax rates and
laws that are enacted at balance sheet date.
(ii) Deferred Tax
Deferred tax is recognized on temporary
differences between the carrying amounts of
assets & liabilities in the Financial Statements and
the corresponding tax bases used in computation
of taxable profit.
Deferred tax assets & liabilities are measured
at the tax rates that are expected to apply in
the period in which the liability is settled or the
asset realized, based on tax rates (and tax laws)
that have been enacted or substantively enacted
by the end of the reporting period. The carrying
amount of deferred tax liabilities and assets are
reviewed at the end of each reporting period.
(xiii) Employee benefits
Employee benefits have been computed as per the
provisions contained in IND AS 19
(i) Short-term employee benefits
The Company recognizes the undiscounted
amount of short-term employee benefits expected
to be paid in exchange for services rendered by
employees as -
(a) a liability (accrued expense) after deducting
any amount already paid. Excess of amounts
paid over liability incurred is treated as
prepaid expenses; or
(b) an expense unless it is eligible to be charged
to project in progress or capital work in
progress or fixed asset as the case may be.
(ii) Post-employment benefits
(a) Defined contribution plans
The Company, as per details hereunder,
operates defined contribution plans
pertaining to Employees State Insurance
scheme, Government administered
Pension Fund scheme, Provident Fund plan
and Superannuation scheme for eligible
employees.
The above defined contribution plans are
post-employment benefit plans under which
the Company pays fixed contributions into
separate entities (funds) or to financial
institutions or state managed benefit
schemes. The Company's contribution to
defined contribution plans are recognized
in the statement of profit and loss in the
financial year to which they relate.
? Employees State Insurance/ Pension Fund
scheme: The Company makes specified
monthly contribution towards Employees
State Insurance scheme and government
administrated pension fund scheme.
? Provident Fund Plan: The Company
is obliged to make specified monthly
contributions towards Employee Provident
Fund registered with the Regional Provident
Fund Commissioner.
(b) Defined benefit obligations
The cost of providing benefits i.e. gratuity
and leave encashment is determined using
the projected unit credit method, with
actuarial valuations carried out annually as
at the balance sheet date. Actuarial gains
and losses are recognized immediately in
the statement of profit and loss. The fair
value of the plan assets is reduced from the
gross obligation under the defined benefit
plan, to recognize the obligation on net
basis. Past service cost is recognized as
expense on a straight-line basis over the
average period until the benefits become
vested.
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