Note 2.b MATERIAL ACCOUNTING POLICIES
i Property, Plant and Equipment and intangible assets
Property, plant, and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Freehold
land is carried at cost. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of
bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase
price. Borrowing costs directly attributable to acquisition or construction of qualifying PPE is capitalised.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when 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. The
carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance
are charged to profit or loss during the reporting period in which they are incurred.
Borrowing costs directly attributable to acquisition of property, plant and equipment which take 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. Advances paid towards the
acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non¬
current assets.
An item of property, plant and equipment and any significant part initially recognized is de-recognized 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 (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the
Property, plant and equipment is de-recognized.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital
advances under other non-current assets and the cost of assets not ready to use before such date are disclosed under ‘Capital work-in-
progress'.Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic
benefits associated with these will flow to the Company and the cost of the item can be measured reliably.The cost and related
accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset. Capital work-in-progress,
representing expenditure incurred in respect of assets under development and not ready for their intended use, are carried at cost.
Depreciation methods, estimated useful lives and residual value
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation
on Property,Plant & Equipment of the company has been provided as per the Written Down value method as per the useful lives of the
respective Property,Plant & Equipment in the manner as prescribed by Schedule II of the Act.
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial yearend.The useful lives are
based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in
technology.
Intangible Assets
Intangible assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible asset is carried at
its cost less any accumulated amortization and accumulated impairment loss.
Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates. An
intangible asset is derecognized on disposal or when no future economic benefits are expected from its use and disposal.
Losses arising from retirement and gains or losses arising from disposal 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.
Amortisation methods and periods
The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern, if any. Computer Software is amortized over the useful life prescribed under
Schedule II to the Companies Act, 2013.
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 assets' 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 groups 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.
Impairment losses are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no
longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the
amount was previously charged to the Statement of Profit and Loss.
ii Foreign currency translation
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are recognised in statement of profit or loss. Non-monetary items
denominated in a foreign currency are measured at historical cost and translated at exchange rate prevalent at the date of transaction.
iii Financial Instruments
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the 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.
Initial Recognition
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss and
ancillary costs related to borrowings) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in Statement of Profit and Loss.
a) Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income
(“FVOCI”) or fair value through profit or loss (“FVTPL”) based on following:
- the entity's business model for managing the financial assets and
- the contractual cash flow characteristics of the financial asset.
Financial Assets at Amortised Cost
A financial asset shall be classified and measured at amortised cost if both of the following conditions are met:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR)
method.
Financial Assets Measured at Fair Value through other comprehensive income
A financial asset shall be classified and measured at fair value through OCI if both of the following conditions are met:
• the financial asset 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 are solely payments of principal and interest on
the principal amount outstanding.
Financial instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value
movements are recognised in the other comprehensive income (OCI).
Financial Assets Measured at Fair Value through Profit or Loss
Fair Value through Profit or Loss is a residual category for financial assets. A financial asset shall be classified and measured at fair value
through profit or loss unless it is measured at amortised cost or at fair value through OCI. Financial assets included within the Fair Value
through Profit or Loss category are measured at fair value with all changes recognised in the statement of profit and loss.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies the expected credit loss ("ECL") model for measurement and recognition of
impairment loss on financial assets and credit risk exposures.
The Company follows ‘simplified approach' for recognition of impairment loss allowance on trade receivables. Simplified approach does not
require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECL at each
reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a
significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide
for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a 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 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the group 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. Lifetime ECL are the expected credit losses
resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL
which results from default events that are possible within 12 months after the reporting date.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/ expense in the Statement of Profit and
Loss.
De-recognition of Financial Assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the
financial asset and substantially all risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred
asset, the Company recognizes its retained interest in the assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to
recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
b Classification and Subsequent Measurement: Equity Instruments and Financial Liabilities
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Equity instruments which are issued for cash are recorded at the proceeds received, net of direct issue costs. Equity instruments which are
issued for consideration other than cash are recorded at fair value of the equity instrument.
Finnacial Liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. All financial liabilities are recognised
initially at fair value and, in the case of loans, borrowings, and payables, net of directly attributable transaction costs.
(i) Financial Liabilities at Fair Value through Profit or Loss
Financial liabilities are classified as at Fair Value through Profit or Loss when the financial liability is held for trading or are designated upon
initial recognition as Fair Value through Profit or Loss. Gains or Losses on liabilities held for trading are recognised in the Statement of
Profit and Loss.
(ii) Other Financial Liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the
effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial
recognition.
Financial liabilities at FVPL
Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on
liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Any
difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of
the borrowings in the Statement of Profit and Loss.
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 of Financial Liabilities
Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired. 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 de-recognition of the original liability and recognition of a new
liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Equity investment in subsidiaries
Investment in subsidiaries is carried at cost. Impairment recognized, if any, is reduced from the carrying value.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the balance sheet if there is a currently enforceable
legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities
simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of
business.
iv Derivatives that are not designated as hedges
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the
hedge accounting criteria, they are classified as ‘held for trading' for accounting purposes and are accounted for at FVPL. They are
presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Financial assets and liabilities are offset, and the net amount is reported in the balance sheet where there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their
fair value at the end of each reporting period. The accounting for subsequent changes in fair value is recognised in profit or loss.
v Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all liabilities. Equity
instruments issued by a Company are recognised at the proceeds received.
vi Inventories
Inventories are valued as follows:
a Inventories are stated at lower of cost and net realizable value.
b The cost of raw materials, stores and spare parts and construction materials includes cost of purchases and other cost incurred in bringing
the inventories to the present location and condition. Cost is determined using the weighted average method.
c Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
estimated costs necessary to complete the contract.
vii Employee Benefits
a Defined Contribution Plan
Contributions to defined contribution schemes such as provident fund, employees' state insurance, labour welfare are charged as an
expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above
benefits are classified as Defined Contribution Schemes as the Company has no further obligations beyond the monthly contributions.
b Defined Benefit Plan
The Company also provides for gratuity which is a defined benefit plan, the liabilities of which is determined based on valuations, as at the
balance sheet date, made by an independent actuary using the projected unit credit method. Re-measurement, comprising of actuarial
gains and losses, in respect of gratuity are recognised in the OCI, in the period in which they occur. Re-measurement recognised in OCI
are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognised in the Statement of Profit and
Loss in the year of plan amendment or curtailment. The classification of the Company's obligation into current and non-current is as per the
actuarial valuation report.
c Leave entitlement and compensated absences
Accumulated leave which is expected to be utilised within next twelve months, is treated as short-term employee benefit. Leave entitlement,
other than short term compensated absences, are provided based on a actuarial valuation, similar to that of gratuity benefit. Re¬
measurement, comprising of actuarial gains and losses, in respect of leave entitlement are recognised in the Statement of Profit and Loss
in the period in which they occur.
d Short-term Benefits
Short-term employee benefits such as salaries, wages, performance incentives etc. are recognised as expenses at the undiscounted
amounts in the Statement of Profit and Loss of the period in which the related service is rendered. Expenses on non-accumulating
compensated absences is recognised in the period in which the absences occur.
d Termination benefits
Termination benefits are recognised as an expense as and when incurred.
viii Share - Based Compensation
The company recognizes compensation expense relating to employees stock option plan in statement of profit and loss account in
accordance with IND AS 102, Share - Based Payment. Accordingly,compensation expense as determined on the date of the grant is
amortised over the vesting period.The Company follows fair value method to calculate the value of the stock options.
ix Cash and Cash Equivalents
Cash and cash equivalents in the Balance Sheet comprises of cash at banks and on hand, which are subject to an insignificant risk of
changes in value.
x Borrowing Costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Also, the EIR
amortisation is included in finance costs.
Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial period of time to get ready
for its intended use are added to the cost of such asset to the extent they relate to the period till such assets are ready to be put to use. All
other borrowing costs are expensed in the Statement of Profit and Loss in the period in which they occur.
xi Foreign Exchange T ranslation and Accounting of Foreign Exchange T ransaction
a Initial Recognition
Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign currency amount the exchange rate
between the reporting currency and the foreign currency at the date of the transaction. However, for practical reasons, the Company uses a
monthly average rate if the average rate approximate the actual rate at the date of the transactions.
b Conversion
Monetary assets and liabilities denominated in foreign currencies are reported using the closing rate at the reporting date. Non-monetary
items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the
transaction.
c Treatment of Exchange Difference
Exchange differences arising on settlement/ restatement of short-term foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss except those arising from investment in Non Integral operations.
xii Revenue Recognition
The Company derives revenue principally from the following streams:
> Construction contracts.
> Sale of services (Work contract services).
> Other income.
1. Construction contracts.
The Company recognises revenue from construction contracts over the period of time, as performance obligations are satisfied over time
due to continuous transfer of control to the customer. Construction contracts are generally accounted for as a single performance
obligation, as it involves a complex integration of goods and services.
The performance obligations are satisfied over time as the work progresses. The Company recognises revenue using the input method (i.e
percentage-ofcompletion method), based primarily on contract costs incurred to date compared to total estimated contract costs. Changes
to total estimated contract costs, if any, are recognised in the period in which they are determined as assessed at the contract level. If the
consideration in the contract includes a price variation clause or there are amendments in contracts, the Company estimates the amount of
consideration to which it will be entitled in exchange for work performed.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision
become known by management.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings.
Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities
(which we refer to as"unearned revenues").
2. Sale of services (Work contract services).
Revenue from providing work contract services is recognised in the accounting period in which the services are rendered. Invoices are
issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
3 Interest income:
Interest income from financial assets at fair value through profit or loss is disclosed as interest income within other income. Interest income
on financial assets at amortised cost using the effective interest method is recognised in the statement of profit and loss as part of other
income.
4. Other Income
a. All other income is accounted for on an accrual basis when no significant uncertainty exists regarding the amount that will be received.
b. Dividend income is recognized when the company's right to receive dividend is established.
c. . 'Claims for insurance are accounted on receipts/ on acceptance of claim by insurer.
Xiii Income Tax
Income tax comprises of current and deferred income tax. Income tax is recognised as an expense or income in the Statement of Profit and
Loss, except to the extent it relates to items directly recognised in equity or in OCI.
a Current Income Tax
Current income tax is recognised based on the estimated tax liability computed after taking credit for allowances and exemptions in
accordance with the Income Tax Act, 1961. Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date.
b Deferred Income Tax
Deferred tax is determined by applying the Balance Sheet approach. Deferred tax assets and liabilities are recognised for all deductible
temporary differences between the financial statements' carrying amount of existing assets and liabilities and their respective tax base.
Deferred tax assets and liabilities are measured using the enacted tax rates or tax rates that are substantively enacted at the Balance
Sheet date. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the period that includes the enactment
date. Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised. Such assets are reviewed at each Balance Sheet date to reassess realisation.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
xvi Impairment of Non-Financial Assets
As at each Balance Sheet date, the Company assesses whether there is an indication that a non-financial asset may be impaired and also
whether there is an indication of reversal of impairment loss recognised in the previous periods. If any indication exists, or when annual
impairment testing for an asset is required, the Company determines the recoverable amount and impairment loss is recognised when the
carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
- In case of an individual asset, at the higher of the assets' fair value less cost to sell and value in use; and
- In case of cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of cash generating
unit's fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects
current market assessments of the time value of money and risk specified to the asset. In determining fair value less cost to sell, recent
market transaction are taken into account. If no such transaction can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Profit and Loss, except
for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the
amount of any previous revaluation.
When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the
amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, then the previously recognised impairment loss is reversed through the Statement of Profit and Loss.
xv Trade receivables
A receivable is classified as a ‘trade receivable' if it is in respect of the amount due on account of goods sold or services rendered in the
normal course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
EIR method, less provision for impairment.
<vi Trade payables
A payable is classified as a ‘trade payable' if it is in respect of the amount due on account of goods purchased or services received in the
normal course of business. These amounts represent liabilities for goods and services provided to the Company prior to the end of the
financial year which are unpaid. These amounts are unsecured and are usually settled as per the payment terms stated in the contract.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They
are recognised initially at their fair value and subsequently measured at amortised cost using the EIR method.
cvii Earnings Per Share
Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders of the Company
by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares
outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of
potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources.
Diluted earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders of the
Company and weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted
average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential
equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market
value of the outstanding equity shares).
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