Accounting Policies of JSW Energy Ltd. Company
Mar 31, 2023
1 General information
JSW Energy Limited ("the Company") is a public company incorporated on 10th March,1994 under the Companies Act, 1956 and has its primary listings on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is located at JSW Centre, Bandra Kurla Complex, Bandra (East), Mumbai, Maharashtra. The Company is primarily engaged in the business of generation of power with principal places located at Vijayanagar (Karnataka), Ratnagiri (Maharashtra), Nandyal (Andhra Pradesh) and Salboni (West Bengal).
2.1 Recent accounting pronouncements
The Ministry of Corporate Affairs ("MCA") notifies new standards or amendments under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31st March, 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from 1st April, 2023, as below:
(a) Ind AS 1 - Presentation of Financial
Statements - The amendments require companies to disclose their material
accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can
reasonably be expected to influence
decisions of primary users of general purpose financial statements
(b) Ind AS 12 - Income Taxes - The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the initial recognition exemption of Ind AS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. Accordingly, companies will need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on transactions such
as initial recognition of a lease and a decommissioning provision.
(c) Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - The definition of a "change in accounting estimates" has been replaced with a definition of "accounting estimates". Accounting estimates are defined as "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty.
The Company is in the process of evaluating the impact of these amendments.
The Standalone Financial Statements of the Company which comprise the Balance Sheet as at 31st March, 2023, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended 31st March, 2023, and a summary of the significant accounting policies and other explanatory information (together hereinafter referred to as "Standalone Financial Statements") have been prepared in accordance with Indian Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, the provisions of the Companies Act, 2013 ("the Act") to the extent notified, guidelines issued by the Securities and Exchange Board of India (SEBI) and other accounting principles generally accepted in India. The Standalone Financial Statements have been approved by the Board of Directors in its meeting held on 23rd May, 2023.
2.3 Basis of preparation and presentation
The Standalone Financial Statements are prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies given
below which are consistently followed except where a new accounting standard or amendment to the existing accounting standards requires a change in the policy hitherto applied. Presentation requirements of Division II of Schedule III to the Companies Act, 2013, "as amended," as applicable to the Standalone Financial Statements have been followed. The Standalone Financial Statements are presented in Indian Rupees ("INR") in crore rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013.
Current and non-current classification:
The Company presents assets and liabilities in the balance sheet based on current / noncurrent classification.
An asset is classified as current when it satisfies any of the following criteria:
⢠it is expected to be realised in, or is intended for sale or consumption in the normal operating cycle;
⢠it is held primarily for the purpose of being traded;
⢠it is expected to be realised within 12 months after the reporting date; or
⢠it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the following criteria:
⢠it is expected to be settled in the Companyâs normal operating cycle;
⢠it is held primarily for the purpose of being traded;
⢠it is due to be settled within 12 months after the reporting date; or the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
All other liabilities are classified as non-current.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
Deferred tax assets and liabilities are classified as non-current only.
2.4 Significant accounting policies
I. Revenue recognition:
Revenue towards satisfaction of performance obligation from contracts with customers is recognised when control of the goods including power generated or services is transferred to the customer, at transaction price (net of variable consideration) i.e. at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring promised goods or services having regard to the terms of the contract including Power Purchase Agreements, relevant tariff regulations and the tariff orders by the regulator, as applicable.
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for satisfaction of performance obligation. The variable consideration is estimated having regard to various relevant factors including historical trend and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Compensation towards shortfall in offtake are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
II. Leases:
(a) The Company as lessee:
The Company assesses whether a contract is or contains a lease, at inception of the
contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of
the underlying asset. The depreciation starts at the commencement date of the lease.
For a contract that contain a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative standalone price of the lease component and the aggregate standalone price of the non-lease components.
(b) The Company as lessor:
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs 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 Companyâs net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Company regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of Ind AS 109, recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest
income is calculated with reference to their amortised cost (i.e. after a deduction of the loss allowance).
When a contract includes both lease and nonlease components, the Company applies Ind AS 115 to allocate the consideration under the contract to each component.
III. Foreign currencies:
The Company''s Standalone Financial Statements are presented in Indian Rupee. The transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in statement of profit and loss in the period in which they arise except for:
I exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting in 2.4 (XVI) (G); and
II exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
IV. Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. If any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditure on that asset.
Borrowing Cost includes exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the finance cost.
V. Employee benefits:
a) Short term employee benefits:
A liability is recognised for benefits accruing to employees in respect of wages and salaries in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
b) Long term employee benefits:
Liabilities recognised in respect of longterm employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. The liability for contingency leave is not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
c) Retirement benefit costs and termination benefits:
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
Defined contribution plans:
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Payments made to state-managed retirement benefit plans are accounted for as payments to defined contribution plans where the Companyâs obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
Defined benefit plans:
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at the end of each annual reporting period. Remeasurements comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognised immediately in the balance sheet with a charge or credit to other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income are not reclassified. Actuarial valuations are being carried out at the end of each annual reporting period for defined benefit plans.
The retirement benefit obligation recognised in the balance sheet represents the deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation / superannuation. The gratuity is paid @ 15 days salary for each completed year of service as per the Payment of Gratuity Act, 1972.
d) Share-based payment arrangements:
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straightline basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of
the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
The Company has created an Employee Welfare Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market or directly from the Parent Company, for giving shares to employees. The Company treats Trust as its extension and shares held by the Trust are treated as treasury shares. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other equity.
VI. Taxation:
I ncome tax expense represents the sum of the tax currently payable and deferred tax.
Current tax:
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Companyâs liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of
assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
A deferred tax asset arising from unused tax losses or tax credits (credit on account of Minimum Alternative Tax) is recognised only to the extent that the Company has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Company.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
For operations carried out under tax holiday period (80IA benefits of Income Tax Act, 1961), deferred tax assets or liabilities, if any, have been established for the tax consequences of those
temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Current tax and deferred tax for the year:
Current and deferred tax are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
VII. Property, plant and equipment:
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning.
Cost of major inspection / overhauling is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection/overhauling (as distinct from physical parts) is de-recognised.
Properties in the course of construction are carried at cost, less any recognised impairment loss, as capital work in progress. Upon completion, such properties are transferred to the appropriate categories of property, plant and equipment and the depreciation commences.
Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling,
removing or restoring the site is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognised.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
VIII. Other intangible assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no further economic benefits are expected from use or disposal. Gain / loss on de-recognition are recognised in statement of profit and loss.
IX. Depreciation and amortisation:
Depreciation commences when the assets are ready for their intended use. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using straight-line method as per the useful lives and residual value prescribed in Schedule II to the Act except in case of the following class of assets wherein useful lives are determined based on technical assessment made by a technical expert engaged by the management taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets, anticipated technological changes, in order to reflect the actual usage.
|
Estimated useful lives of the assets are as follows: |
|
|
Class of Property, plant and equipment |
Useful life in Years |
|
Buildings |
12-35 |
|
Plant and equipment |
12-35 |
|
Furniture and fixtures |
5-10 |
|
Vehicles |
10 |
|
Office equipment |
5 |
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Freehold land is not depreciated. Leasehold land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the overhaul. The carrying amount of the remaining previous overhaul cost is charged to the Statement of Profit and Loss if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.
Computer software is amortised over an estimated useful life of 3 years.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
X. Impairment of tangible and intangible assets:
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
I f the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in statement of profit and loss.
Any reversal of the previously recognised impairment loss is limited to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
XI. Inventories:
Inventories are stated at the lower of cost or net realisable value. Costs of inventories are determined on weighted average basis.
Cost of inventories includes cost of purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value.
XII. Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).
Diluted earnings per share is computed by dividing the profit / (loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date.
XIII. Provisions, contingencies and commitments:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable incremental costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
A disclosure for contingent liabilities is made where there is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognized because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
(a) estimated amount of contracts remaining to be executed on capital account and not provided for;
(b) uncalled liability on shares and other investments partly paid;
(c) funding related commitment to associate and joint venture companies; and
(d) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Commitments include the amount of purchase orders (net of advances) issued to parties for completion of assets.
XIV. Non-current assets held for sale:
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Also, such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification.
Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less cost to sell, except for financial assets which are measured as per Ind AS 109 ""Financial Instruments"". Non-current assets are not depreciated or amortised.
XV. Financial guarantee contracts:
The Company provides certain guarantees in respect of the indebtedness of other undertakings, claims under the contract or other arrangements in the ordinary course of business. The Company evaluates each guarantee arrangement and elects to account it as an insurance contract or a financial guarantee contract.
Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of the amount of the obligation under the contract and the amount initially recognised less cumulative amortisation over the period of guarantee.
For the guarantee arrangements designated as insurance contracts, at the end of each reporting period, the Company performs a liability adequacy test, (i.e. it assesses the likelihood of a payout based on current undiscounted estimates of future cash flows) and any deficiency is recognized in Statement of Profit and Loss.
XVI. Financial instruments:
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
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 Statement of Profit and Loss (FVTPL)) 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 and loss are recognised immediately in Statement of Profit and Loss.
A. Investment in subsidiaries, associate and joint venture:
The Company has accounted for its investments in subsidiaries, associate and joint venture at cost.
B. Financial assets:
(a) Recognition and initial measurement:
All financial assets are recognized initially at fair value. In case of financial assets not recorded at fair value through profit or loss (FVTPL), financial assets are recognized at transaction costs that are attributable to the acquisition of financial assets. However, trade receivables that do not contain
a significant financing component are measured at transaction price. Purchases and sales of financial assets are recognised on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
(b) Classification of financial assets:
Financial assets are classified, at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive income (OCI) and fair value through profit and loss. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
⢠The asset is held within a business model whose objective is to hold assets 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.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at FVTPL;
⢠The 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.
Debt 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). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss 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 Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the effective interest rate (EIR) method.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting year, with any gains and losses arising on remeasurement recognised in statement of profit and loss. The net gain or loss recognised in standalone statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the other income line item. Dividend on financial assets at FVTPL is recognised when:
⢠The Companyâs right to receive the dividends is established;
⢠It is probable that the economic benefits associated with the dividends will flow to the entity;
⢠The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Perpetual debt instruments / loans, which provide itâs holder with the contractual right to receive payments on account of interest at fixed dates extending into the indefinite future, either with no right to receive a return of principal or a right to a return of principal under terms that make it very unlikely or very far in the future, are considered as investment in equity instrument of the holder. The Company has elected to measure investment in equity instruments of itâs subsidiaries at cost.
(c) Derecognition of financial assets:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
(d) Impairment:
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights.
Credit loss 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 Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument through the expected life of that financial instrument.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
(e) Income from financial assets:
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset to that assetâs net carrying amount on initial recognition.
Delayed payment charges are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
(f) Effective interest method:
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (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 debt instrument, or, where appropriate, a shorter year, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
C. Financial liabilities and equity instruments:
(a) 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.
(b) Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
(c) Financial liabilities:
Financial liabilities are classified as either financial liabilities ''at FVTPLâ or ''other financial liabilitiesâ.
Financial liabilities at FVTPL:
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if:
⢠I t has been incurred principally for the purpose of repurchasing it in the near term; or
⢠On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profittaking; or
⢠It is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
⢠such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
⢠the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
⢠i t forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
(d) Derecognition of financial liabilities:
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange between a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit or Loss.
D. Derivative financial instruments:
The Company uses derivative financial instruments, such as forward foreign exchange contracts, to hedge its foreign currency risks. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
The contracts to buy or sell a non-financial item that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the entityâs expected purchase, sale or usage requirements are not considered as derivative instruments.
E. 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.
F. Fair Value measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i) I n the principal market for the asset or liability, or
ii) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a nonfinancial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
G. Hedge accounting:
The Company designates certain hedging instruments, which include derivatives in respect of foreign currency, as either cash flow hedge or fair value hedge. Hedges of foreign currency risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values
or cash flows of the hedged item attributable
to hedged risk.
(i) Fair value hedges:
Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognized in statement of profit and loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the designated portion of hedging instrument and the change in the hedged item attributable to hedged risk are recognized in statement of profit and loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit and loss from that date.
(ii) Cash flow hedges:
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in statement of profit and loss.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to statement of profit and loss in the periods when the hedged item affects profit and loss, in the same line as the recognised
hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains or losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement
Mar 31, 2022
1 General information:
JSW Energy Limited ("the Company") is a public company incorporated on 10th March,1994 under the Companies Act, 1956 and has its primary listings on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is located at JSW Centre, Bandra Kurla Complex, Bandra (East), Mumbai, Maharashtra. The Company is primarily engaged in the business of generation of power with principal places located at Vijayanagar (Karnataka), Ratnagiri (Maharashtra), Nandyal (Andhra Pradesh) and Salboni (West Bengal).
2 .1 Recent accounting pronouncements:
The Ministry of Corporate Affairs ("MCA") notifies new standards / amendments under Companies (Indian Accounting Standards) Rules as issued from time to time. On 23rd March, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, as below:
(a) I nd AS 16 | Property, plant and equipment -The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from directly attributable costs considered as part of cost of an item of property, plant and equipment. The effective date for adoption of this amendment is annual periods beginning on or after 1st April, 2022.
(b) I nd AS 37 | Provisions, contingent liabilities and contingent assets - The amendment specifies that the ''cost of fulfillingâ a contract comprises the ''costs that relate directly to the contractâ. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The effective date for adoption of this amendment is annual
periods beginning on or after 1st April, 2022, although early adoption is permitted.
(c) I nd AS 103 | Business combinations - The amendment adds a new exception in Ind AS 103 for liabilities and contingent liabilities.
(d) Ind AS 109 | Financial instruments - The amendment clarifies which fees an entity includes when it applies the ''10%â test in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the otherâs behalf.
The Company is in the process of evaluating the impact of these amendments.
The Standalone Financial Statements of the Company which comprise the Balance Sheet as at 31st March, 2022, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended 31st March, 2022, and a summary of the significant accounting policies and other explanatory information (together hereinafter referred to as "Standalone Financial Statements") have been prepared in accordance with Indian Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, the provisions of the Companies Act, 2013 ("the Act") to the extent notified, guidelines issued by the Securities and Exchange Board of India (SEBI) and other accounting principles generally accepted in India. The Standalone Financial Statements have been approved by the Board of Directors in its meeting held on 3rd May, 2022.
2.3 Basis of preparation and presentation
The Standalone Financial Statements are prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies given below which are consistently followed except where a new accounting standard or amendment to the existing accounting standards requires a change in the policy hitherto applied. Presentation requirements of Division II of Schedule III to the Companies Act, 2013, "as amended", as applicable to the Standalone Financial Statements have been followed. The Standalone Financial Statements are presented in Indian Rupees (âINRâ) in crore rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013.
Current and non-current classification:
The Company presents assets and liabilities in the balance sheet based on current / noncurrent classification.
An asset is classified as current when it satisfies any of the following criteria:
⢠it is expected to be realised in, or is intended for sale or consumption in the normal operating cycle;
⢠it is held primarily for the purpose of being traded;
⢠it is expected to be realised within 12 months after the reporting date; or
⢠it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the following criteria:
⢠it is expected to be settled in the Companyâs normal operating cycle;
⢠it is held primarily for the purpose of being traded;
⢠it is due to be settled within 12 months after the reporting date; or the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
All other liabilities are classified as non-current.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
Deferred tax assets and liabilities are classified as non-current only.
2 .4 Significant accounting policies:
I. Revenue recognition:
Revenue from contracts with customers is recognised when control of the goods including power generated or services is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring promised goods or services having regard to the terms of the contract including Power Purchase Agreements, relevant tariff regulations and the tariff orders by the regulator, as applicable. If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated having regard to various relevant factors including historical trend and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Compensation towards shortfall in offtake are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
II. Leases:
(a) The Company as lessee:
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a right-of-use asset and a corresponding lease liability
with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
For a contract that contain a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative standalone price of the lease component and the aggregate standalone price of the non-lease components.
(b) The Company as lessor:
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs 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 Companyâs net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Company regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of Ind AS 109, recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest income is calculated with reference to their amortised cost (i.e. after a deduction of the loss allowance).
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. If any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditure on that asset.
Borrowing Cost includes exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the finance cost.
V. Employee benefits:
a) Short term employee benefits:
A liability is recognised for benefits accruing to employees in respect of wages and salaries in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
When a contract includes both lease and nonlease components, the Company applies Ind AS 115 to allocate the consideration under the contract to each component.
III. Foreign currencies:
The Companyâs Standalone Financial Statements are presented in Indian Rupee. The transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in statement of profit and loss in the period in which they arise except for:
I exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting in 2.4 (XVI) (G); and
II exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
IV. Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
b) Long term employee benefits:
Liabilities recognised in respect of longterm employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
c) Retirement benefit costs and termination benefits:
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
Defined contribution plans:
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Payments made to state-managed retirement benefit plans are accounted for as payments to defined contribution plans where the Companyâs obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
Defined benefit plans:
For defined benefit retirement plans, the cost of providing benefits is determined
using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurements comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognised immediately in the balance sheet with a charge or credit to other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income are not reclassified. Actuarial valuations are being carried out at the end of each annual reporting period for defined benefit plans.
The retirement benefit obligation recognised in the balance sheet represents the deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/ superannuation. The gratuity is paid @ 15 days salary for each completed year of service as per the Payment of Gratuity Act, 1972.
d) Share-based payment arrangements:
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straightline basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company
revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
The Company has created an Employee Welfare Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market or directly from the Parent Company, for giving shares to employees. The Company treats Trust as its extension and shares held by the Trust are treated as treasury shares. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other equity.
VI. Taxation:
I ncome tax expense represents the sum of the tax currently payable and deferred tax.
Current tax:
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Companyâs liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
A deferred tax asset arising from unused tax losses or tax credits (credit on account of Minimum Alternative Tax) is recognised only to the extent that the Company has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Company. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For operations carried out under tax holiday
period (80IA benefits of Income Tax Act, 1961), deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Current tax and deferred tax for the year:
Current and deferred tax are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
VII. Property, plant and equipment:
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning.
Cost of major inspection/overhauling is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection/overhauling (as distinct from physical parts) is de-recognised.
Properties in the course of construction are carried at cost, less any recognised impairment loss, as capital work in progress. Upon completion, such properties are transferred to the appropriate categories of property, plant and equipment and the depreciation commences.
Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling, removing or restoring the site is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognised.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
VIII. Other intangible assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no further economic benefits are expected from use or disposal. Gain/loss on de-recognition are recognised in statement of profit and loss.
IX. Depreciation and amortisation:
Depreciation commences when the assets are ready for their intended use. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using straight-line method as per the useful lives and residual value prescribed in Schedule II to the Act except in case of the following class of assets wherein useful lives are determined based on technical assessment made by a technical expert engaged by the management taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets,
anticipated technological changes, in order to reflect the actual usage.
Estimated useful lives of the assets are as follows:
|
Class of Property, |
Useful life |
|
plant and equipment |
in Years |
|
Buildings |
12-35 |
|
Plant and equipment |
12-35 |
|
Furniture and fixtures |
5-10 |
|
Vehicles |
10 |
|
Office equipment |
5 |
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Freehold land is not depreciated. Leasehold land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the overhaul. The carrying amount of the remaining previous overhaul cost is charged to the Statement of Profit and Loss if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.
Computer software is amortised over an estimated useful life of 3 years.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
X. Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
I f the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in statement of profit and loss.
Any reversal of the previously recognised impairment loss is limited to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
XI. Inventories:
Inventories are stated at the lower of cost or net realisable value. Costs of inventories are determined on weighted average basis.
Cost of inventories includes cost of purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value.
XII. Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit / (loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the
beginning of the period, unless they have been issued at a later date.
XIII. Provisions, contingencies and commitments:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable incremental costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
A disclosure for contingent liabilities is made where there is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future
events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognized because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
(a) estimated amount of contracts remaining to be executed on capital account and not provided for;
(b) uncalled liability on shares and other investments partly paid;
(c) funding related commitment to associate and joint venture companies; and
(d) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Commitments include the amount of purchase orders (net of advances) issued to parties for completion of assets.
XIV. Non-current assets held for sale:
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Also, such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less cost to sell, except for financial assets which are measured as per Ind AS 109 "Financial Instruments". Non-current assets are not depreciated or amortised.
XV. Financial guarantee contracts:
The Company provides certain guarantees in respect of the indebtedness of other undertakings, claims under the contract or other arrangements in the ordinary course of business. The Company evaluates each guarantee arrangement and elects to account it as an insurance contract or a financial guarantee contract. Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of the amount of the obligation under the contract and the amount initially recognised less cumulative amortisation over the period of guarantee. For the guarantee arrangements designated as insurance contracts, at the end of each reporting period, the Company performs a liability adequacy test, (i.e. it assesses the likelihood of a payout based on current undiscounted estimates of future cash flows), and any deficiency is recognized in Statement of Profit and Loss.
XVI. Financial instruments:
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
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 Statement of Profit and Loss (FVTPL)) 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 and loss are recognised immediately in Statement of Profit and Loss.
(A) Investment in subsidiaries, associate and joint venture:
The Company has accounted for its investments in subsidiaries, associate and joint venture at cost.
(B) Financial assets:
(a) Recognition and initial measurement:
A financial asset is initially recognised at fair value and, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. Purchases and sales of financial assets are recognised on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
(b) Classification of financial assets:
Financial assets are classified, at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit and loss. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
⢠The asset is held within a business model whose objective is to hold assets 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.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at FVTPL:
⢠The 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.
Debt 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). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss 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 Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the effective interest rate (EIR) method.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting year, with any gains and losses arising on remeasurement recognised in statement of profit and loss. The net gain or loss recognised in standalone statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the other income line item. Dividend on financial assets at FVTPL is recognised when:
⢠The Companyâs right to receive the dividends is established;
⢠It is probable that the economic benefits associated with the dividends will flow to the entity;
⢠The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Perpetual debt instruments / loans, which provide itâs holder with the contractual right to receive payments on account of interest at fixed dates extending into the indefinite future, either with no right to receive a return of principal or a right to a return of principal under terms that make it very unlikely or very far in the future, are considered as investment in equity instrument of the holder. The Company has elected to measure investment in equity instruments of itâs subsidiaries at cost.
(c) Derecognition of financial assets:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
(d) Impairment:
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss 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 Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument through the expected life of that financial instrument.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always
measures the loss allowance at an amount equal to lifetime expected credit losses.
(e) Income from financial assets:
Dividend income from investments is recognised when the shareholder''s right to receive payment has been established.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Delayed payment charges are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
(f) Effective interest method:
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (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 debt instrument, or, where appropriate, a shorter year, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
C. Financial liabilities and equity instruments:
(a) 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.
(b) Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
(c) Financial liabilities:
Financial liabilities are classified as either financial liabilities ''at FVTPL'' or ''other financial liabilities''
Financial liabilities at FVTPL:
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if:
⢠It has been incurred principally for the purpose of repurchasing it in the near term; or
⢠On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profittaking; or
⢠It is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
⢠such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
⢠the financial liability forms part of a group of financial assets or financial
liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
⢠it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
(d) Derecognition of financial liabilities:
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange between a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit or Loss.
D. Derivative financial instruments:
The Company uses derivative financial instruments, such as forward foreign exchange contracts, to hedge its foreign currency risks.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately unless the derivative is designated and effective
as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
The contracts to buy or sell a non-financial item that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the entityâs expected purchase, sale or usage requirements are not considered as derivative instruments.
E. 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.
F. Fair Value measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i) I n the principal market for the asset or liability; or
ii) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that
market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a nonfinancial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
G. Hedge accounting:
The Company designates certain hedging instruments, which include derivatives in
respect of foreign currency, as either cash flow hedge or fair value hedge. Hedges of foreign currency risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to hedged risk.
(i) Fair value hedges:
Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognized in statement of profit and loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the designated portion of hedging instrument and the change in the hedged item attributable to hedged risk are recognized in statement of profit and loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit and loss from that date.
(ii) Cash flow hedges:
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in statement of profit and loss.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to statement of profit and loss in the periods when the hedged item affects profit and loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains or losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in statem
Mar 31, 2021
Note No. 1 General information:
JSW Energy Limited ("the Company") is a public company incorporated on 10th March,1994 under the Companies Act, 1956 and has its primary listings on BSE Limited and National Stock Exchange of India Limited.. The registered office of the Company is located at JSW Centre, Bandra Kurla Complex, Bandra (East), Mumbai, Maharashtra. The Company is primarily engaged in the business of generation of power with principal places located at Vijayanagar (Karnataka), Ratnagiri (Maharashtra), Nandyal (Andhra Pradesh) and Salboni (West Bengal).
Note No. 2.1 Applicability of new Indian Accounting Standards (''Ind AS''), amendments and interpretations:
The Ministry of Corporate Affairs ("MCA") through Companies (Indian Accounting Standards) Amendment Rules, 2020 has notified the following major amendments which became applicable with effect from April 1, 2020.
Amendments to Ind AS 103- Business combinations
The Company has adopted the amendments to Ind AS 103 for the first time in the current year. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after 1st April, 2020.
The adoption of these amendments has not had any impact on the disclosures or reported amounts in these financial statements.
Amendments to Ind AS 116 - Leases
The Company has adopted the amendments to Ind AS 116 for the first time in the current year. The amendments provide practical relief, subject to certain conditions, to
lessees in accounting for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to Ind AS 116. The practical expedient permits a lessee to elect not to assess whether a COVID-19-related rent concession is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19-related rent concession the same way it would account for the change applying Ind AS 116 if the change were not a lease modification.
The adoption of this amendment has not had any impact on the disclosures or reported amounts in these financial statements.
Amendment to Ind AS 109 and Ind AS 107 - Interest Rate Benchmark Reform
These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on-going interest rate benchmark reforms. The adoption of this amendment has not had material impact on the disclosures or reported amounts in these financial statements.
Amendment to Ind AS 1 and Ind AS 8 - Definition of "Material"
The Company has adopted the amendments to Ind AS 1 and Ind AS 8 for the first time in the current year. The amendments make the definition of material in Ind AS 1 easier to understand and are not intended to alter the underlying concept of materiality in Ind ASs. The concept of ''obscuring'' material information with immaterial information has been included as part of the new definition."
The threshold for materiality influencing users has been changed from ''could influence'' to ''could reasonably be expected to influence''. The definition of material in Ind AS 8 has been replaced by a reference to the definition of material in Ind AS 1. In addition, the MCA amended other Standards that contain the definition of ''material'' or refer to the term ''material'' to ensure consistency.
The adoption of these amendments did not have any material impact on its evaluation of materiality in relation to the financial statements.
New and revised Ind ASs, amendments and intrepretations in issue but not yet effective:
At the date of approval of these financial statements, the Company has not applied the following amendments that have been issued but are not yet effective.
I. Amendment to Ind AS:
The Ministry of Corporate Affairs (MCA) vide Notification dated 18th June, 2021 has issued new Companies
(Indian Accounting Standard) Amendment Rules, 2021.
These rules are applicable with immediate effect from
the date of the said notification. Major amendments
notified in the notification are provided below:"
(a) Ind AS 116 | Leases - The amendment extends the benefits of the COVID 19 related rent concession that were introduced in the previous year (which allowed lessees to recognize COVID 19 related rent concessions as income rather than as lease modification) from 30th June, 2021 to 30th June, 2022.
(b) Ind AS 109 | Financial Instruments - The amendment provides a practical expedient for assessment of contractual cash flow test, which is one of the criteria for being eligible to measure a financial asset at amortized cost, for the changes in the financial assets that may arise as a result of Interest Rate Benchmark Reform. An additional temporary exception from applying hedge accounting is also added for Interest Rate Benchmark Reform.
(c) Ind AS 101 | Presentation of Financial Statements - The amendment substitutes the item (d) mentioned in paragraph B1 as ''Classification and measurement of financial instruments''. The term ''financial asset'' has been replaced with ''financial instruments''.
(d) Ind AS 102 | Share-Based Payment - The amendments to this standard are made in reference to the Conceptual Framework of Financial Reporting under Ind AS in terms of defining the term ''Equity Instrument'' which shall be applicable for the annual reporting periods beginning on or after 1st April, 2021.
(e) Ind AS 103 | Business Combinations - The amendment substitutes the definition of ''assets'' and ''liabilities'' in accordance with the definition given in the framework for the Preparation and Presentation of Financial Statements in accordance with Ind AS for qualifying the recognition criteria as per acquisition method.
(f) Ind AS 104 | Insurance Contracts - The amendment covers the insertion of certain paragraphs in the standard in order to maintain consistency with IFRS 4 and also incorporates the guidance on accounting treatment for amendments due to Interest Rate Benchmark Reform.
(g) Ind AS 105 | Non-current assets held for sale and discontinued operations - The amendment substitutes the definition of - "fair value less costs to sell" with "fair value less costs of disposal".
(h) Ind AS 106 | Exploration for and evaluation of mineral resources - The amendment has been made in reference to the Conceptual Framework for Financial Reporting under Indian Accounting Standards in respect of expenditures that shall not be recognized as exploration and evaluation assets.
(i) Ind AS 107 | Financial Instruments: Recognition, Presentation and Disclosure - The amendment clarifies the certain additional disclosures to be made on account of Interest Rate Benchmark Reform like the nature and extent of risks to which the entity is exposed arising from financial instruments subject to interest rate benchmark reform; the entity''s progress in completing the transition to alternative benchmark rates, and how the entity is managing the transition.
(j) Ind AS 111 | Joint Arrangements - In order to maintain consistency with the amendments made in Ind AS 103, respective changes have been made in Ind AS 111.
(k) Ind AS 114 | Regulatory Deferral Accounts - The amendment clarifies that an entity may only change its accounting policies for the recognition, measurement, and impairment S derecognition of regulatory deferral account balances if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable.
(l) Ind AS 115 | Revenue from Contracts with Customers - Certain amendments have been made in order to maintain consistency with number of paragraphs of IFRS 15.
(m) Ind AS 8 | Accounting Policies, Changes in Accounting Estimates and Errors - In order to maintain consistency with the amendments made in Ind AS 114 and to substitute the word ''Framework'' with the ''Conceptual Framework of Financial Reporting in Ind AS'', respective changes have been made in the standard.
(n) Ind AS 16 | Property, Plant and Equipment -The amendment has been made by substituting the words "Recoverable amount is the higher of an asset''s fair value less costs to sell and its value in use" with "Recoverable amount is the higher of an asset''s fair value less costs of disposal and its value in use".
(o) Ind AS 34 | Interim Financial Reporting -The amendments to this standard are made in reference to the conceptual framework of Financial Reporting in Ind AS.
(p) Ind AS 37 | Provisions, Contingent Liabilities and Contingent Assets - The amendment substitutes the definition of the term ''Liability'' as provided in the Conceptual Framework for Financial Reporting under Indian Accounting Standards.
(q) Ind AS 38 | Intangible Assets - The amendment substitutes the definition of the term ''Asset'' as provided in the Conceptual Framework for Financial Reporting under Indian Accounting Standards.
The Company is evaluating the impact of these amendments.
II. Amendment to Schedule III of the Companies Act, 2013:
On 24th March, 2021, MCA through a notification, amended Schedule III of the Companies Act, 2013, with effect from 1st April, 2021. Key amendments relevant for the Company are:"
(a) Lease liabilities should be separately disclosed under the head ''financial liabilities'', duly distinguished as current or non-current.
(b) Current maturities of long-term borrowings should be disclosed separately within borrowings instead of earlier disclosure requirement under Other Financial Liabilities.
(c) Certain additional disclosures in the statement of changes in equity due to prior period errors and restated balances at the beginning of the current reporting period.
(d) Specified format for disclosure of shareholding of promoters.
(e) Specified format for ageing schedule of trade receivables, trade payables, capital work-in progress and intangible asset under development.
(f) Additional disclosures relating to Corporate Social Responsibility, undisclosed income and crypto or virtual currency.
(g) Disclosure of specified ratios along with explanation for items included in numerator and denominator and explanation for change in any ratio in excess of 25% compared to preceding year.
(h) If a company has not used funds for the specific purpose for which it was borrowed from banks and financial institutions, then disclosure of details of where it has been used.
(i) Specific disclosure under ''additional regulatory requirement'' such as compliance with approved
schemes of arrangements, compliance with number of layers of companies, title deeds of immovable property not held in name of company, loans and advances to promoters, directors, key managerial personnel and related parties and details of benami property held.
The Company is evaluating the impact of these amendments.
The Standalone Financial Statements of the Company which comprise the Balance Sheet as at 31st March, 2021, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended 31st March, 2021, and a summary of the significant accounting policies and other explanatory information (together hereinafter referred to as "Standalone Financial Statements") have been prepared in accordance with Indian Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, the provisions of the Companies Act, 2013 ("the Act") to the extent notified, guidelines issued by the Securities and Exchange Board of India (SEBI) and other accounting principles generally accepted in India. The Standalone Financial Statements have been approved by the Board of Directors in its meeting held on 25th June, 2021.
2.3 Basis of preparation and presentation
The Standalone Financial Statements are prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies given below which are consistently followed except where a new accounting standard or amendment to the existing accounting standards requires a change in the policy hitherto applied. Presentation requirements of Division II of Schedule III to the Companies Act, 2013, as applicable to the Standalone Financial Statements have been followed. The Standalone Financial Statements are presented in Indian Rupees (''INR'') in crore rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013.
Current and non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
An asset is classified as current when it satisfies any of the following criteria:
- it is expected to be realised in, or is intended for sale or consumption in, the Company''s normal operating cycle.
- it is held primarily for the purpose of being traded;
- it is expected to be realised within 12 months after the reporting date; or
- it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the following criteria:
- it is expected to be settled in the Company''s normal operating cycle;
- it is held primarily for the purpose of being traded;
- it is due to be settled within 12 months after the reporting date; or the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
All other liabilities are classified as non-current.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
Deferred tax assets and liabilities are classified as noncurrent only.
2.4 Significant accounting policies:
I. Revenue recognition:
Revenue from contracts with customers is recognised when control of the goods (power) or services is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring promised goods or services having regard to the terms of the Power Purchase Agreements, relevant tariff regulations and the tariff orders by the regulator, as applicable, and contracts for services.
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated having regard to various relevant factors including historical trend and constrained until it is highly probable
that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Compensation towards shortfall in offtake are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
II. Leases :
(a) The Company as lessee:
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
For a contract that contain a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
(b) The Company as lessor:
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of 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 Company''s net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Company regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of Ind AS 109, recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest income is calculated with reference to their amortised cost (i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Company applies Ind AS 115 to allocate the consideration under the contract to each component.
III. Foreign currencies
The Company''s Standalone Financial Statements are presented in Indian Rupee. The transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in statement of profit and loss in the period in which they arise except for:
I exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting in 2.4 (XVI) (G); and
II exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
IV. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. If any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditure on that asset.
Borrowing Cost includes exchange differences arising
from foreign currency borrowings to the extent they
are regarded as an adjustment to the finance cost.
V. Employee benefits:
a) Short term employee benefits:
A liability is recognised for benefits accruing to employees in respect of wages and salaries in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
b) Long term employee benefits:
Liabilities recognised in respect of long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
c) Retirement benefit costs and termination benefits:
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
Defined contribution plans:
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Payments made to state-managed retirement benefit plans are accounted for as payments to defined contribution plans
where the Company''s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
Defined benefit plans:
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurements comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognised immediately in the balance sheet with a charge or credit to other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income are not reclassified. Actuarial valuations are being carried out at the end of each annual reporting period for defined benefit plans.
The retirement benefit obligation recognised in the balance sheet represents the deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/ superannuation. The gratuity is paid @ 15 days salary for each completed year of service as per the Payment of Gratuity Act, 1972.
d) Share-based payment arrangements:
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
The Company has created an Employee Welfare Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market or directly from the Parent Company, for giving shares to employees. The Company treats Trust as its extension and shares held by the Trust are treated as treasury shares. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other equity.
VI. Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax:
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company''s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
A deferred tax asset arising from unused tax losses or tax credits (credit on account of Minimum Alternative Tax) is recognised only to the extent that the Company has sufficient taxable temporary differences or there is
convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Company.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For operations carried out under tax holiday period (80IA benefits of Income Tax Act, 1961), deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Current tax and deferred tax for the year:
Current and deferred tax are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
VII. Property, plant and equipment:
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning.
Cost of major inspection/overhauling is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection/overhauling (as distinct from physical parts) is de-recognised.
Properties in the course of construction are carried at cost, less any recognised impairment loss, as capital work in progress. Upon completion, such properties are transferred to the appropriate categories of property, plant and equipment and the depreciation commences.
Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling, removing or restoring the site is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognised.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
VIII. Other intangible assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no further economic benefits are expected from use or disposal. Gain/loss on de-recognition are recognised in statement of profit and loss.
IX. Depreciation and amortisation:
Depreciation commences when the assets are ready for their intended use. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using straight-line method as per the useful lives and residual value prescribed in Schedule II to the Act except in case of the following class of assets wherein useful lives are determined based on technical assessment made by a technical expert engaged by the management taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets, anticipated technological changes, in order to reflect the actual usage.
|
Estimated useful lives of the assets are as follows: |
|
|
Class of Property, plant and equipment |
Useful life in Years |
|
Buildings |
12-35 |
|
Plant and equipment |
12-35 |
|
Furniture and fixtures |
5-10 |
|
Vehicles |
10 |
|
Office equipment |
5 |
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Freehold land is not depreciated. Leasehold land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the overhaul. The carrying amount of the remaining previous overhaul cost is charged to the Statement of Profit and Loss if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.
Computer software is amortised over an estimated useful life of 3 years.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
X. Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in statement of profit and loss.
Any reversal of the previously recognised impairment loss is limited to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
XI. Inventories:
Inventories are stated at the lower of cost or net realisable value. Costs of inventories are determined on weighted average basis.
Cost of inventories includes cost of purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value.
XII. Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit / (loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date.
XIII. Provisions , contingencies and commitments:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable incremental costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. The unavoidable costs
under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
A disclosure for contingent liabilities is made where there is :
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognized because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
(a) estimated amount of contracts remaining to be executed on capital account and not provided for;
(b) uncalled liability on shares and other investments partly paid;
(c) funding related commitment to associate and joint venture companies; and
(d) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Commitments include the amount of purchase orders (net of advances) issued to parties for completion of assets.
XIV. Non-current assets held for sale:
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Also, such assets are classified as held
for sale only if the management expects to complete the sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less cost to sell, except for financial assets which are measured as per Ind AS 109 "Financial Instruments". Non-current assets are not depreciated or amortised.
XV. Financial guarantee contracts:
The Company provides certain guarantees in respect of the indebtedness of other undertakings, claims under the contract or other arrangements in the ordinary course of business. The Company evaluates each guarantee arrangement and elects to account it as an insurance contract or a financial guarantee contract.
Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of the amount of the obligation under the contract and the amount initially recognised less cumulative amortisation over the period of guarantee.
For the guarantee arrangements designated as insurance contracts, at the end of each reporting period, the Company performs a liability adequacy test, (i.e. it assesses the likelihood of a pay-out based on current undiscounted estimates of future cash flows), and any deficiency is recognized in Statement of Profit and Loss.
XVI. Financial instruments:
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.
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 Statement of Profit and Loss (FVTPL)) 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 and loss are recognised immediately in Statement of Profit and Loss.
(A) Investment in subsidiaries, associate and joint venture:
The Company has accounted for its investments in subsidiaries, associate and joint venture at cost.
(B) Financial assets:
(a) Recognition and initial measurement:
A financial asset is initially recognised at fair value and, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. Purchases and sales of financial assets are recognised on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
(b) Classification of financial assets:
Financial assets are classified, at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit and loss. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
- The asset is held within a business model whose objective is to hold assets 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.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at FVTPL;
- The 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.
Debt 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). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss 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 Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the effective interest rate (EI R) method.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
I f the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
All other financial assets are classified as measured at FVTPL.
I n addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting year, with any gains and losses arising on remeasurement recognised in statement of profit and loss. The net gain or loss recognised in consolidated statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the other income'' line item. Dividend on financial assets at FVTPL is recognised when:
- The Company''s right to receive the dividends is established;
- It is probable that the economic benefits associated with the dividends will flow to the entity;
- The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Perpetual debt instruments/loans, which provide it''s holder with the contractual right to receive payments on account of interest at fixed dates extending into the indefinite future, either with no right to receive a return of principal or a right to a return of principal under terms that make it very unlikely or very far in the future, are considered as investment in equity instrument of the holder. The Company has elected to measure investment in equity instruments of it''s subsidiaries at cost.
(c) Derecognition of financial assets:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
(d) Impairment:
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss 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 Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument through the expected life of that financial instrument.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
(e) Income from financial assets:
Dividend income from investments is recognised when the shareholder''s right to receive payment has been established.
I nterest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Delayed payment charges are recognised on collection or earlier when there is reasonable certainty to expect ultimate collection.
(f) Effective interest method:
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (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 debt instrument, or, where appropriate, a shorter year, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
C. Financial liabilities and equity instruments:
(a) 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.
(b)
Mar 31, 2019
1 .1 Significant accounting policies:
I. Revenue recognition:
Revenue from contracts with customers is recognised when control of the goods (power) or services is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring promised goods or services having regard to the terms of the Power Purchase Agreements, relevant tariff regulations and the tariff orders by the regulator, as applicable, and contracts for services.
I f the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated having regard to various relevant factors including historical trend and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Delayed payment charges and compensation towards shortfall in offtake are recognised when there is reasonable certainty to expect ultimate collection.
II. Leases :
Arrangements in the nature of lease:
An arrangement comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments is evaluated at its inception to assess whether fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether it also conveys the right to use such asset or assets. In case of the arrangement which is identified to be in the nature of lease, the payments and other consideration under the arrangement are separated at the inception of the arrangement into those for lease and those for other elements. Contingent rentals are recognised as expenses or income in the periods in which they are incurred or earned.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as lessor:
Amount due from the lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Lease receipts are apportioned between finance income and reduction of the revenue so as to achieve a constant rate of interest on the remaining balance of the finance lease receivable. Finance lease income is allocated to the accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases.
The Company as lessee:
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments (discounted at the interest rate implicit in the lease or at the entityâs incremental borrowing rate). The corresponding liability to the lessor is included in the standalone balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
III. Foreign currencies
The Companyâs Standalone Financial Statements are presented in Indian Rupee.
The transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in statement of profit and loss in the period in which they arise except for:
- exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting in 2.4 (XV) (f); and
- exchange difference arising on settlement / restatement of long-term foreign currency monetary items recognized in the Standalone Financial Statements for the year ended 31st March, 2016 prepared under previous GAAP, are capitalized as a part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary item, whichever is earlier and charged to the statement of profit and loss . The un-amortised exchange difference is carried under other equity as âForeign Currency Monetary Item Translation Difference Accountâ net of tax effect thereon, where applicable.
IV. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditure on that asset.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
V. Employee benefits:
a) Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
b) Long term employee benefits:
Compensated absences which are not expected to be availed or encashed within twelve months after the end of the period in which the employee renders the related service are recognised as a liability as at the Balance Sheet date on the basis of actuarial valuation using projected unit credit method.
c) Retirement benefit costs and termination benefits:
Defined contribution plans:
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans:
For defined benefit retirement benefits plans, the cost of providing benefits is determined using the projected unit credit method, and spread over the period during which the benefit is expected to be derived from employeesâ services. Remeasurement of defined benefit plans in respect of post-employment and other long term benefits are charged to the Other Comprehensive Income. Actuarial valuations being carried out at the end of each annual reporting period for defined benefit plans.
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/ superannuation. The gratuity is paid @ 15 days salary for the every completed year of service as per the Payment of Gratuity Act, 1972.
The Company makes monthly contributions to provident fund managed by trust for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. and the Company is obliged to meet interest shortfall, if any.
d) Share-based payment arrangements:
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
The Company has created an Employee Welfare Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market, for giving shares to employees. The Company treats Trust as its extension and shares held by the Trust are treated as treasury shares.
VI. Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax:
Current tax is the amount of tax payable based on the taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961. 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 substantively enacted at the Balance Sheet date.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
A deferred tax asset arising from unused tax losses or tax credits is recognised only to the extent that the Company has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Company.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
For operations carried out under tax holiday period (80IA benefits of Income Tax Act, 1961), deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Current and deferred tax are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
VII. Property, plant and equipment:
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning.
Cost of major inspection/overhauling is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection/overhauling (as distinct from physical parts) is de-recognised.
Properties in the course of construction are carried at cost, less any recognised impairment loss, as capital work-in-progress. Upon completion, such properties are transferred to the appropriate categories of property, plant and equipment and the depreciation commences.
Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling, removing or restoring the site is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognized.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
VIII. Other intangible assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no further economic benefits are expected from use or disposal. Gain/loss on de-recognition are recognised in statement of profit and loss.
IX. Depreciation and amortisation:
Depreciation commences when the assets are ready for their intended use. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using straight-line method as per the useful lives and residual value prescribed in Schedule II to the Act except in case of the following class of assets wherein useful lives are determined based on technical assessment made by a technical expert engaged by the management taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets, anticipated technological changes, in order to reflect the actual usage.
Estimated useful lives of the assets are as follows:
During the year ended 31st March, 2018, the Company has reassessed the balance useful lives, residual values and the manner in which the economic benefit is being derived from property, plant and equipment. Refer Note 24.
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Freehold land is not depreciated. Leasehold land is amortized over the period of the lease, except where Leasehold land is acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the overhaul. The carrying amount of the remaining previous overhaul cost is charged to the statement of profit and loss if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.
Computer software is amortised over an estimated useful life of 3 years.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
X. Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in statement of profit and loss.
Any reversal of the previously recognised impairment loss is limited to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
XI. Inventories:
Inventories are stated at the lower of weighted average cost or net realisable value. Costs of inventories are determined on weighted average basis.
Cost of inventories includes cost of purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated cost of completion and costs necessary to make the sale.
XII. Earnings per share:
Basic earnings pershare is computed bydividing the profit / (loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit / (loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date.
XIII. Provisions , contingencies and commitments:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
A disclosure for contingent liabilities is made where there is :
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognized because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting period.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
XIV. Financial guarantee contracts:
The Company on a case to case basis elects to account for financial guarantee contracts as a financial instrument or as an insurance contract, as specified in Ind AS 109 on Financial Instruments and Ind AS 104 on Insurance Contracts. At the end of each reporting period the Company performs a liability adequacy test, (i.e. it assesses the likelihood of a pay-out based on current undiscounted estimates of future cash flows), and any deficiency is recognized in statement of profit and loss.
XV. Financial instruments:
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.
(a) Investment in subsidiaries, associate and joint venture:
The Company has accounted for its investments in subsidiaries, associate and joint venture at cost.
(b) Financial assets:
(i) Initial recognition and measurement:
All financial assets are initially recognised at fair value.Transaction costs that are directly attributable to the acquisition of financial assets, which are not at fair value through profit and loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognised using trade date accounting.
(i)) Subsequent measurement:
Financial assets carried at amortised cost - A financial asset is subsequently 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 are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income (FVTOCI) - A financial asset is measured at fair value through other comprehensive income 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 are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit and loss (FVTPL) - A financial asset which is not classified in any of the above categories are fair valued through profit and loss.
Financial assets, other than equity instruments, are subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit and loss on the basis of both:
(a) the entityâs business model for managing the financial assets and
(b) the contractual cash flow characteristics of the financial asset.
Equity Investments:
All equity investments are measured at fair value, with value changes recognised in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Incomeâ.
(iii) Impairment:
The Company recognises a loss allowance for Expected Credit Losses (ECL) on financial assets that are measured at amortised cost and at FVTOCI. The credit loss is difference between all contractual cash flows that are due to an entity 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 effective interest rate. This is assessed on an individual or collective basis after considering all reasonable and supportable information including that which is forward-looking.
The Companyâs trade receivables or contract revenue receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall, being simplified approach for recognition of impairment loss allowance.
Under simplified approach, the Company does not track changes in credit risk. Rather it recognizes impairment loss allowance based on the lifetime ECL at each reporting date right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables.
The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
For financial assets other than trade receivables, the Company recognises 12-month expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. If, in a subsequent period, credit quality of the instrument improves such that there is no longer significant increase in credit risks since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12 months ECL.
The impairment losses and reversals are recognised in statement of profit and loss. For equity instruments and financial assets measured at FVTPL, there is no requirement for impairment testing.
(iv) Derecognition:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset 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.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
Dividend and interest income:
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
(c) Financial liabilities and equity instruments:
(i) Classification as debt or equity:
Debt and equity instruments issued by a 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.
(ii) Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Parent Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit and loss on the purchase, sale, issue or cancellation of the Parent Companyâs own equity instruments.
(iii) Initial recognition and measurement:
All financial liabilities are recognized initially at fair value and in case of loans net of directly attributable cost. Fees of recurring nature are directly recognised in statement of profit and loss as finance cost.
(iv) Subsequent measurement:
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(v) Derecognition:
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in statement of profit and loss.
Derivative financial instruments:
The Company uses derivative financial instruments, such as forward foreign exchange contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value, with changes in fair value recognised in statement of profit and loss.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
(d) 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.
(e) Fair value measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i) In the principal market for the asset or liability, or
ii) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(f) Hedge accounting:
The Company designates certain hedging instruments, which include derivatives in respect of foreign currency, as either cash flow hedge or fair value hedge. Hedges of foreign currency risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to hedged risk.
(i) Fair value hedges:
Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognized in statement of profit and loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the designated portion of hedging instrument and the change in the hedged item attributable to hedged risk are recognized in statement of profit and loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit and loss from that date.
(ii) Cash flow hedges:
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in statement of profit and loss.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to statement of profit and loss in the periods when the hedged item affects profit and loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains or losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in statement of profit and loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in statement of profit and loss.
2. Key sources of estimation uncertainty and critical accounting judgements
The preparation of Standalone Financial Statements in conformity with Ind AS requires management to make judgments, estimates and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of these Standalone Financial Statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected.
A) Key sources of estimation uncertainty
i) Useful lives of property, plant and equipment
Management reviews the useful lives of property, plant and equipment at least once a year. Such lives are dependent upon an assessment of both the technical lives of the assets and also their likely economic lives based on various internal and external factors including relative efficiency, the estimated usage of the asset, the operating condition of the asset, anticipated technological changes, historical trend of plant load factor, historical planned and scheduled maintenance etc. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial periods and could cause a material adjustment to the carrying amount of property, plant and equipment.
ii) Provisions and contingent liabilities
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management decides whether the matters needs to be classified as ''remote,â ''possibleâ or ''probableâ based on expert advice, past judgements, terms of the contract, regulatory provisions etc.
iii) Fair value measurements
When the fair values of financial assets or financial liabilities recorded or disclosed in the Standalone Financial Statements cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility.
iv) Income Taxes:
Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. In assessing the realizability of deferred tax assets arising from unused tax credits, the management considers convincing evidence about availability of sufficient taxable income against which such unused tax credits can be utilized. The amount of the deferred income tax assets considered realizable, however, could be reduced if estimates of future taxable income during the carry forward period are reduced.
v) Contingent consideration:
Contingent consideration is recognised based on the Managementâs best estimates about fructification of certain future events (e.g. approval of plant project cost by the regulator and timing thereof, recoverability of dues from government authorities/customers, etc.) pertaining to past acquisition of Hydro Power business. The amount of contingent consideration may vary in future depending on outcome of uncertain events and timing thereof.
vi) Defined benefit plans:
The present value of defined benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations and mortality rates etc. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
vii) Impairment of investment:
Determining whether impairment in the value of investment in JSW Hydro Energy Limited (formerly known as Himachal Baspa Power Company Limited) requires an estimation of the value in use of itâs underlying business. In considering the value in use, the Management has made assumption relating to plant availability, plant load factor, useful life of the assets, additional capacity and capital cost approval from the regulators, input cost escalations, operational margins etc. for arriving at the future cash flows expected to arise from the cash-generating units, and discount rates in order to calculate the present value of such cash flows. Any subsequent changes to the cash flows due to changes in the above mentioned factors could impact the carrying value of the investment.
viii) Loss allowance assessment for a loan/guarantee given to subsidiary and a related party:
a) Assessment for loss allowance for a loan given to subsidiary involves assumptions relating to the valuation of itâs underlying business. In considering the value in use, the Management has made assumption relating to timing of resumption of commercial operations of mining operations, mineable reserves / resources, annual production, yield, future prices of coal, renewal of mining licenses, operational margins, and discount rate. Any subsequent changes in the assumptions could materially impact the carrying value of the assets.
b) Recoverability of loans given to and non-devolvement of financial guarantee given on behalf of, a related party serving as a mine development operator for lignite mine of a joint venture entity is assessed on the basis of its net worth as on 31st March, 2019 and projected cash flows considering it will continue as the operator having regard to the process for selection of mine development operator being carried out through fresh competitive bidding based on the regulatorâs direction and the right to nominate such mine development operator is being contested by a subsidiary.
ix) Expected credit loss:
The policy for expected credit loss allowances for bad and doubtful debts of the Company is based on the evaluation of collectability and the managementâs judgement. A considerable amount of judgement is required in assessing the ultimate realization of the loans, the past collection history of each party and ongoing dealings with these parties.
x) Onerous contract:
While ascertaining the unavoidable costs of meeting the obligations under a power purchase contract, the Company has exercised itâs significant judgement in terms of anticipating the future coal prices, plant load factor, component of unavoidable cost and itâs escalations to conclude that economic benefits expected to receive under the said contract exceeds the unavoidable cost of fulfilling such contract.
B) Critical accounting judgements in applying accouting policy
i) Evaluation of âLease arrangementsâ to determine whether it contains lease arrangements:
In respect of Companyâs power plant unit at Ratnagiri, Maharashtra, while assessing the applicability of the principles relating to arrangements in the nature of lease prescribed under Appendix C to Ind AS 17, the management has exercised judgements in evaluating the customerâs right to use the underlying asset, pricing terms of the arrangement to reach a conclusion that the arrangement for supply of power through aforesaid power plant unit is in the nature of lease.
ii) Revenue recognition:
Significant judgements are involved in determination of tariff entitlement as per relevant contractual terms/governing tariff regulations due to ongoing disputes with customers. The final outcome of such disputes may have impact on the revenue recognised by the Company.
Mar 31, 2018
I. Revenue recognition
Revenue is recognised when it is earned and no significant uncertainty exists as to its realisation or collection. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances.
Revenue from power supply
Revenue from Power Supply is recognised in accordance with the tariff provided in respective Power Purchase Agreements (PPAs) or on the basis of the contracted rates, for sales under merchant trading, as the case may be.
Operator fee
Operator fee is accounted on an accrual basis as and when the right to receive arises.
Delayed payment charges and compensation towards shortfall in offtake
Delayed payment charges and compensation towards shortfall in offtake are recognised, on grounds of prudence when recovered.
Dividend and interest income
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
II. Leasing
Arrangements in the nature of lease
An arrangement comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments is evaluated at its inception to assess whether fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether it also conveys the right to use such asset or assets. In case of the arrangement which is identified to be in the nature of lease, the payments and other consideration under the arrangement are separated at the inception of the arrangement into those for lease and those for other elements.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as a lessor
Amount due from the lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Lease receipts are apportioned between finance income and reduction of the revenue so as to achieve a constant rate of interest on the remaining balance of the finance lease receivable. Finance lease income is allocated to the accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases.
The Company as a lessee
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments under an operating lease shall be recognised as an expense on a straight-line basis over the term of the relevant lease. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
III. Foreign currencies
The functional currency of the Company is determined on the basis of the primary economic environment in which it operates. The functional currency of the Company is Indian National Rupee (INR).
The transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in Statement of Profit and Loss in the period in which they arise except for:
- exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the policy on hedge accounting in 2.4 (XV) (b) (f); and
- exchange difference arising on settlement/ restatement of long-term foreign currency monetary items recognised in the standalone financial statements for the year ended 31st March, 2016 prepared under previous GAAP, are capitalised as a part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary item, whichever is earlier and charged to the Statement of Profit and Loss. The un-amortised exchange difference is carried under other equity as âForeign currency monetary item translation difference accountâ net of tax effect thereon, where applicable.
IV. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditures on that asset.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
V. Employee benefits
a) Short-term employee benefits:
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
b) Long-term employee benefits:
Compensated absences which are not expected to be availed or encashed within twelve months after the end of the period in which the employee renders the related service are recognised as a liability as at the Balance Sheet date on the basis of actuarial valuation using projected unit credit method.
c) Retirement benefit costs and termination benefits:
Defined contribution plans:
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans:
For defined benefit retirement benefits plans, the cost of providing benefits is determined using the projected unit credit method, and spread over the period during which the benefit is expected to be derived from employeesâ services. Re-measurement of defined benefit plans in respect of post-employment and other long-term benefits are charged to the Other Comprehensive Income. Actuarial valuations being carried out at the end of each annual reporting period for defined benefit plans.
. The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/ superannuation. The gratuity is paid @ 15 days salary for the every completed year of service as per the Payment of Gratuity Act, 1972.
The Company makes monthly contributions to provident fund managed by trust for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits.
Share-based payment arrangements:
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
The Company has created an Employee Benefit Trust for providing share-based payment to its employees. The Trust is used as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market, for giving shares to employees. The Company treats the Trust as its extension and shares held by the Trust are treated as treasury shares.
VI. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent it relates to items directly recognised in equity or in other comprehensive income.
Current tax
Current tax is the amount of tax payable based on the taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961. 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 substantively enacted at the Balance Sheet date.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
VII. Property, plant and equipment
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, import duties and other taxes (other than those subsequently recoverable from the tax authorities), directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning.
Cost of major inspection/overhauling is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection/overhauling (as distinct from physical parts) is de-recognised.
Properties in the course of construction are carried at cost, less any recognised impairment loss, as capital work-in-progress. Upon completion, such properties are transferred to the appropriate categories of property, plant and equipment and the depreciation commences.
Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling, removing or restoring the site is capitalised along with the cost of acquisition or construction upon completion and a corresponding liability is recognised.
Property, plant and equipment except freehold land held for use in the production, supply or administrative purposes, are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold or Leasehold land is stated at historical cost, and not depreciated. Leasehold Land with an option in the lease deed to purchase on outright basis after a certain period at no additional cost, is not amortised. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in Statement of Profit and Loss.
VIII. Other Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no further economic benefits are expected from use or disposal. Gain / (loss) on de-recognition are recognised in profit or loss.
IX. Depreciation and amortisation
Depreciation commences when the assets are ready for their intended use. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using straight-line method as per the useful lives and residual value prescribed in Schedule II to the Act except in case of the following class of assets wherein useful lives are determined based on technical assessment made by a technical expert engaged by the management taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets, anticipated technological changes, in order to reflect the actual usage:
During the year ended 31st March, 2018, the Company has reassessed the balance useful lives, residual values and the manner in which the economic benefit is being derived from property, plant and equipment. (Refer Note 24).
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Freehold land is not depreciated. Leasehold land is amortised over the period of the lease, except where Leasehold land is acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortised.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the overhaul. The carrying amount of the remaining previous overhaul cost is charged to the Statement of Profit and Loss if the next overhaul is undertaken earlier than the previously estimated life of the economic benefit.
Computer software is amortised over an estimated useful life of 3 years.
The estimated useful lives, residual value and depreciation/amortisation method are reviewed annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
X. Impairment of Property, plant and equipment
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss.
Anyreversal of the previously recognised impairment loss is limited to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
XI. Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on weighted average basis.
Cost of raw materials include cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
XII. Earnings per share
Basic earnings per share is computed by dividing the profit/(loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).
Diluted earnings per share is computed by dividing the profit/(loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date.
XIII. Provisions, contingencies and commitments
Provisions are recognised when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources, that can be reliably estimated, will be required to settle such an obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
A disclosure for contingent liabilities is made where there is
a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
b) a present obligation that arises from past events but is not recognised because:
i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting period.
Provisions for onerous contracts are recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
XIV. Financial guarantee contracts:
The Company on a case to case basis elects to account for financial guarantee contracts as a financial instrument or as an insurance contract, as specified in Ind AS 109 on Financial Instruments and Ind AS 104 on Insurance Contracts. At the end of each reporting period the Company performs a liability adequacy test, (i.e. it assesses the likelihood of a pay-out based on current undiscounted estimates of future cash flows), and any deficiency is recognised in profit or loss.
XV. Financial Instruments
Financial assets and financial liabilities are recognised when Company becomes a party to the contractual provisions of the instruments.
(a) Investment in subsidiaries, associate and joint venture:
The Company has accounted for its investments in subsidiaries, associate and joint venture at cost.
(b) Financial assets:
(i) Initial recognition and measurement:
All financial assets are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition of financial assets, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognised using trade date accounting.
(ii) Subsequent measurement:
Financial assets carried at amortised cost - A financial asset is subsequently 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 are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income (FVTOCI) - A financial asset is measured at fair value through other comprehensive income 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 are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss (FVTPL) - A financial asset which is not classified in any of the above categories are fair valued through profit or loss.
Financial assets, other than equity instruments, are subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both:
(a) the entityâs business model for managing the financial assets and
(b) the contractual cash flow characteristics of the financial asset.
Equity Investments:
All equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in âOther Comprehensive Incomeâ.
(iii) Impairment:
The Company recognises a loss allowance for Expected Credit Losses (ECL) on financial assets that are measured at amortised cost and at FVTOCI. The credit loss is difference between all contractual cash flows that are due to an entity 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 effective interest rate. This is assessed on an individual or collective basis after considering all reasonable and supportable including that which is forward-looking.
The Companyâs trade receivables or contract revenue receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall, being simplified approach for recognition of impairment loss allowance.
Under simplified approach, the Company does not track changes in credit risk. Rather it recognises impairment loss allowance based on the lifetime ECL at each reporting date right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables.
The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
For financial assets other than trade receivables, the Company recognises 12-months expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. If, in a subsequent period, credit quality of the instrument improves such that there is no longer significant increase in credit risks since initial recognition, then the Company reverts to recognising impairment loss allowance based on 12 months ECL. The impairment losses and reversals are recognised in Statement of Profit and Loss. For equity instruments and financial assets measured at FVTPL, there is no requirement for impairment testing.
(iv) Derecognition:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset 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.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
(c) Financial liabilities and equity instruments:
(i) Classification as debt or equity:
Debt and equity instruments issued by a Company entity 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.
(ii) Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
(iii) Initial recognition and measurement:
All financial liabilities are recognised initially at fair value and in case of loans net of directly attributable cost. Fees of recurring nature are directly recognised in profit or loss as finance cost.
(iv) Subsequent measurement:
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(v) Derecognition:
Financial liabilities are derecognised when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in Statement of Profit and Loss.
Derivative financial instruments:
The Company uses derivative financial instruments, such as forward foreign exchange contracts, to hedge its foreign currency risks.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
(d) 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.
(e) Fair value measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i) In the principal market for the asset or liability, or
ii) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(f) Hedge accounting
The Company designates certain hedging instruments, which include derivatives in respect of foreign currency, as either cash flow hedge or fair value hedge. Hedges of foreign currency risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to hedged risk.
(i) Fair value hedges
Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the designated portion of hedging instrument and the change in the hedged item attributable to hedged risk are recognised in the statement of profit and loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.
(ii) Cash flow hedges
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in Statement profit and loss.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains or losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in Statement profit and loss.
Mar 31, 2017
a) Basis of preparation of financial statements
i) In accordance with the notification issued by the Ministry of Corporate Affairs, the Company is required to prepare its Financial Statements as per the Indian Accounting Standards (âInd ASâ) prescribed under Section 133 of the Companies Act, 2013 read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Accounting Standards) Amendment Rules, 2016 with effect from 1st April, 2016. Accordingly, the Company has prepared these Financial Statements which comprise the Balance Sheet as at 31st March, 2017, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended 31st March, 2017, and a summary of the significant accounting policies and other explanatory information (together hereinafter referred to as âFinancial Statementsâ. The figures for the previous year ended 31st March, 2016 and Opening Balance Sheet as on 1st April, 2015 have also been reinstated by the Management as per the requirements of Ind AS.
ii) The financial statements of the Company are prepared in accordance with the Indian Generally Accepted Accounting Principles (GAAP) on the accrual basis of accounting and historical cost convention except for certain material items that have been measured at fair value as required by the relevant Ind AS and explained in the ensuing policies below.
iii) The financial statements are presented in Indian Rupees ( INR ) and all values are rounded to the nearest crore, except otherwise indicated.
b) Use of estimates and judgements
i) The preparation of the financial statements requires that the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates.
ii) The estimates and judgements used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the Company believes to be reasonable under the existing circumstances. Actual results could differ from those estimates.
Any revision to accounting estimates is recognised prospectively in current and future periods. The critical accounting judgements and key estimates followed by the Company for preparation of financial statements is described in note 27.
c) Property, plant and equipment
i) The cost of property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance, are charged to Statement of Profit and Loss in the period in which the costs are incurred.
ii) Major shutdown or overhaul expenditure is capitalised as the activities undertaken improve the economic benefits expected to arise from the asset.
iii) An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in Statement of Profit and Loss.
iv) Assets in the course of construction are capitalised in the assets under capital work in progress account (CWIP). At the point when an asset is operating at managementâs intended use, the cost of construction is transferred to the appropriate category of property, plant and equipment and depreciation commences. Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling, removing or restoring the site is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognized. Revenue generated from production during the trial period is capitalised.
v) Property, plant and equipment except freehold land held for use in the production, supply or administrative purposes, are stated in the consolidated balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold or Leasehold land is stated at historical cost. Leasehold Land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
d) Other Intangible assets
i) Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.
ii) Certain computer software costs are capitalized and recognised as intangible assets based on materiality, accounting prudence and significant benefits expected to flow therefrom for a period longer than one year.
e) Depreciation / Amortisation
i) Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method.
ii) Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
iii) Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.
iv) Depreciation on tangible assets is provided as per the provisions of Part B of Schedule II of the Companies Act, 2013 based on useful life and residual value notified for accounting purposes by Electricity Regulatory Authorities.
v) Lease improvement costs are amortized over the period of the lease. Leasehold land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
vi) Specialised software is amortised over an estimated useful life of 3 years.
vii) Estimated useful life of the assets are as follows:
Useful life is either the period of time which the asset is expected to be used or the number of production or similar units expected to be obtained from the use of asset.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
f) Impairment of tangible and intangible assets other than goodwill
i) At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
ii) Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
iii) Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
iv) If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in Statement of Profit and Loss.
v) When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in Statement of Profit and Loss.
g) Borrowing costs
i) Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
ii) All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.
iii) The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditures on that asset.
The Company suspends capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
h) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and demand deposits with an original maturity of three months or less and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
i) Inventories
Cost of inventories includes cost of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Inventories of stores, spare parts, coal, fuel and loose tools are stated at the lower of weighted average cost and net realizable value. Net realisable value represents the estimated selling price for inventories in the ordinary course of business less all estimated costs of completion and estimated costs necessary to make the sale.
j) Revenue recognition
i) Sale of Power
Revenue is recognised to the extent that it is probable that economic benefit will flow to the Company and that the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances.
Revenue from sale of power / coal / other items is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract.
ii) Operator fee
Operator fees is accounted on accrual basis as and when the right to receive arises.
iii) Revenue from construction contracts
Revenue from construction contracts is recognised by applying percentage of completion method after providing for foreseeable losses, if any. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date to the total estimated cost to complete. Foreseeable losses, if any, on the contracts is recognised as an expense in the period in which it is foreseen, irrespective of the stage of completion of the contract. While determining the amount of foreseeable loss, all elements of cost and related incidental income which is not included in contract revenue is taken into consideration. Contract is reflected at cost that is expected to be recoverable till such time the outcome of the contract cannot be ascertained reliably and at realisable value thereafter. Claims are accounted as income in the year of acceptance by customer.
iv) Dividend and interest income
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
k) Foreign currency transactions and foreign operations
i) The functional currency of the Company and its subsidiaries is determined on the basis of the primary economic environment in which it operates. The functional currency of the Company is Indian National Rupee (INR).
ii) In preparing the financial statements the Company, transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.
iii) At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
iv) Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
v) Exchange differences on monetary items are recognised in Statement of Profit and Loss in the period in which they arise except for:
- exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; and
- exchange differences on transactions entered into in order to hedge certain foreign currency risks
- exchange difference arising on settlement / restatement of longterm foreign currency monetary items recognized in the financial statements for the year ended 31st March 2016 prepared under previous GAAP, are capitalized as a part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary item, whichever is earlier and charged to the Statement of Profit and Loss. The un-amortised exchange difference is carried under other equity as âForeign currency monetary item translation difference accountâ net of tax effect thereon, where applicable. All exchange differences on foreign currency monetary items originating after March, 2016 including those relating to fixed assets are charged off to statement of profit and loss
l) Employee benefits
The Company has following post-employment plans:
a) Defined benefit plans - gratuity
i) The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plan is the present value of defined benefit obligations at the end of the reporting period less fair value of plan assets. The defined benefit obligation is calculated annually by actuaries through actuarial valuation using the projected unit credit method.
ii) The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailment and non-routine settlements
- Net interest expense or income
iii) The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and fair value of plan assets. This cost is included in employee benefit expenses in the statement of the profit & loss.
iv) Re-measurement comprising of actuarial gains and losses arising from
- Re-measurement of Actuarial(gains)/losses
- Return on plan assets, excluding amount recognized in effect of asset ceiling
- Re-measurement arising because of change in effect of asset ceiling are recognised in the period in which they occur directly in other comprehensive income. Remeasurements are not reclassified to Statement of Profit and Loss in subsequent periods.
v) Ind AS 19 requires the exercise of judgment in relation to various assumptions including future pay rises, inflation and discount rates and employee and pensioner demographics. The Company determines the assumptions in conjunction with its actuaries, and believes these assumptions to be in line with best practice, but the application of different assumptions could have a significant effect on the amounts reflected in the income statement, other comprehensive income and balance sheet. There may be also interdependency between some of the assumptions.
b) Defined contribution plans - provident fund
i) Under defined contribution plans, provident fund, the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. Defined Contribution plan comprise of contributions to the employeesâ provident fund set up as trust and certain state plans like Employeesâ State Insurance. The Companyâs payments to the defined contribution plans are recognised as expenses during the period in which the employees perform the services that the payment covers.
ii) A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
c) Short-term and other long-term employee benefits
i) A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
ii) Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
iii) Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
iv) Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the obligation as at the Balance sheet date determined based on an actuarial valuation.
m) Share-based payment arrangements
i) Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
ii) The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
iii) The Company has created an Employee Benefit Trust for providing share-based payment to its employees. The group uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Parent Company from the market, for giving shares to employees. The group treats Trust as its extension and shares held by the Trust are treated as treasury shares.
n) Taxation
i) Income tax comprises current and deferred tax. Income tax expense is recognized in the statement of profit and loss except to the extent it relates to items directly recognized in equity or in other comprehensive income.
a) Current tax
Current tax is the amount of tax payable based on the taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
b) Deferred tax
1) 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 are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
2) Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
3) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
4) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
5) Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets relate to the same taxable entity and same taxation authority.
ii) Minimum Alternate Tax (âMATâ) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income-tax during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the statement of profit and loss. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal income-tax during the specified period.
iii) Current and deferred tax for the year:
Current and deferred tax are recognised in Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
o) Earnings per share
Basic earnings per share is computed by dividing the profit/(loss) for the year by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares, bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).
Diluted earnings per share is computed by dividing the profit/(loss) for the year as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date.
p) Provisions, contingencies and commitments
i) Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
ii) The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
iii) When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
iv) A disclosure for contingent liabilities is made where there is
a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
b) a present obligation that arises from past events but is not recognized because:
i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
ii) the amount of the obligation cannot be measured with sufficient reliability.
v) A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
vi) Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
vii) Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting period.
viii) Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
q) Financial instruments
Financial assets and financial liabilities are recognised when Company becomes a party to the contractual provisions of the instruments.
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) 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.
Financial assets
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial assets other than trade receivables are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the Statement of Profit and Loss.
Subsequent measurement
Financial assets, other than equity instruments, are subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both:
(a) the entityâs business model for managing the financial assets and
(b) the contractual cash flow characteristics of the financial asset.
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for debt instruments that are designated as fair value through profit or loss on initial recognition)
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in Statement of Profit and Loss for FVTOCI debt instruments. For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortised cost. Thus, the exchange differences on the amortised cost are recognised in Satement of Profit and Loss and other changes in the fair value of FVTOCI financial assets are recognised in other comprehensive income and accumulated under the heading of âReserve for debt instruments through other comprehensive incomeâ. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to Statement of Profit and Loss.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees 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 debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in Statement of Profit and Loss and is included in the âOther incomeâ line item.
Investments in equity instruments at FVTOCI
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. This election is not permitted if the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the âReserve for equity instruments through other comprehensive incomeâ. The cumulative gain or loss is not reclassified to Statement of Profit and Loss on disposal of the investments.
A financial asset is held for trading if:
- it has been acquired principally for the purpose of selling it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
Dividends on these investments in equity instruments are recognised in Statement of Profit and Loss when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised in Statement of Profit and Loss are included in the âOther incomeâ line item.
Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognised when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Impairment of financial assets
The Company recognises a loss allowance for Expected Credit Losses (ECL) on financial assets that are measured at amortised cost and at FVOCI. The credit loss is difference between all contractual cash flows that are due to an entity 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 effective interest rate. This is assessed on an individual or collective basis after considering all reasonable and supportable including that which is forward-looking.
The Companyâs trade receivables or contract revenue receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall, being simplified approach for recognition of impairment loss allowance.
Under simplified approach, the Company does not track changes in credit risk. Rather it recognizes impairment loss allowance based on the lifetime ECL at each reporting date right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables.
The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
For financial assets other than trade receivables, the Company recognises 12-months expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. If, in a subsequent period, credit quality of the instrument improves such that there is no longer significant increase in credit risks since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12 months ECL. The impairment losses and reversals are recognised in Statement of Profit and Loss. For equity instruments and financial assets measured at FVTPL, there is no requirement for impairment testing.
Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset 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.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
r) Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by a Company entity 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 of its liabilities. Equity instruments issued by a Company entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
Financial liabilities
All Financial liabilities are measured at amortized cost using effective interest method or fair value through profit and loss. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
- it has been incurred principally for the purpose of repurchasing it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument
A financial liability other than a financial liability held for trading or contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies, may be designated as at FVTPL upon initial recognition if:
- such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
- the financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs documented risk management or investment strategy, and information about the Companying is provided internally on that basis; or
- it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109 Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any interest paid on the financial liability and is included in the âOther incomeâ line item.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liabilityâs credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case these effects of changes in credit risk are recognised in Statement of Profit and Loss. The remaining amount of change in the fair value of liability is always recognised in Statement of Profit and Loss. Changes in fair value attributable to a financial liabilityâs credit risk that are recognised in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to Statement of Profit and Loss.
Gains or losses on financial guarantee contracts and loan commitments issued by the Company that are designated by the Company as at fair value through profit or loss are recognised in Statement of Profit and Loss.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the âFinance costsâ line item.
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 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.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in Statement of Profit and Loss.
s) Derivative financial instruments
The Company uses derivative financial instruments, such as forward foreign exchange contracts, to hedge its foreign currency risks.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value, with changes in fair value recognised in Statement of Profit and Loss.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
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.
Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i) In the principal market for the asset or liability, or
ii) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
t) Reclassification of financial assets and liabilities:
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 Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs 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 the business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
u) Leases
A lease is classified at the inception date as a finance lease or an operating lease. Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
The Company as lessor:
Rental income from operating leases is generally recognised on a straight-line basis over the term of the relevant lease except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
The Company as lessee:
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments (discounted at the interest rate implicit in the lease or at the entityâs incremental borrowing rate). The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Lease payments under an operating lease shall be recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
Accounting for arrangements in the nature of lease:
Under appendix C to Ind AS17, an entity may enter into an arrangement comprising a transaction or a series of related transactions, that do not take the legal form of lease but conveys a right to use an asset in return for a payment or series of payments. Arrangements meeting these criteria should be identified as either operating leases or finance leases.
For determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an assessment of whether:
a) fulfilment of the arrangement is dependent on the use of specific asset or assets; and
b) the arrangement conveys a right to use the asset.
The Company enters into agreements, comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments. In case of such arrangements, the Company applies the requirements of Ind AS 17 - Leases to the lease element of the arrangement. For the purpose of applying the requirements under Ind AS 17
- Leases, payments and other consideration required by the arrangement are separated at the inception of the arrangement into those for lease and those for other elements.
Mar 31, 2015
(a) General
i) The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
ii) Accounting Policies not specifically referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed under section 133 of the Companies Act, 2013 (''the Act'')
read with Rule 7 of the Companies (Accounts) Rules, 2014 the provisions
of the Act (to the extent notified) and guidelines issued by the
Securities and Exchange Board of India (SEBI) to the extent applicable.
iii) All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
iv) The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liabilities on
the date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
v) All assets and liabilities have been classified as current and
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013.
(b) Revenue Recognition:
Revenue is recognised when it is earned and no significant uncertainty
exists as to its realisation or collection.
i) Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract. Power supplied under banking arrangements is accounted as per
terms of agreements. Quantity of power banked is recorded as a loan
transaction valued at cost or net realizable value whichever is lower
and recognised as revenue when the same is returned and sold to an
ultimate customer.
ii) Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contract cost comprises of all costs that relate directly to the
specified contract, incidental costs attributable to the contract
including allocated overheads and warranty costs.
iii) Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets:
i) Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned
during the construction period is deducted from the indirect costs.
ii) Intangible Assets:
An item is recognized as an intangible asset if it meets the definition
of an intangible asset, it is probable that future economic benefits
will flow to the Company and the cost of the assets can be reliably
measured.
(d) Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fixed assets that are
not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other
related expenses incurred for the projects are shown as CWIP for
capitalization.
Expenditure attributable to construction of fixed assets are identified
and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to
construction are apportioned to CWIP on the basis of the closing
balance of specific asset or part of asset being capitalized. The
balance, if any, left after such capitalization is kept as a separate
item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of
contracts are accounted for on acceptance / receipt of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the fixed asset is
charged off to Statement of Profit and Loss in the period in which they
are incurred.
(e) Depreciation / Amortisation:
Depreciation on tangible assets is provided as per the provisions of
Part B of Schedule II of the Companies Act, 2013 based on useful life
and residual value notified for accounting purposes by Central
Electricity Regulatory Authority (CERC) Tariff Regulations.
Leasehold Land acquired by the Company, with an option in the lease
deed, entitling the Company to purchase on outright basis after a
certain period at no additional cost is not amortized.
Specialised Software is depreciated over an estimated useful life of 3
years.
(f) Impairment of assets:
In accordance with Accounting Standard 28 ''Impairment of assets, where
there is an indication of impairment of the Company''s assets related to
cash generating units, the carrying amounts of such assets are reviewed
at each balance sheet date to determine whether there is any
impairment. The recoverable amount of such assets is estimated as the
higher of its net selling price and its value in use. An impairment
loss is recognized in the Statement of Profit and Loss whenever the
carrying amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
(g) Borrowing Costs:
i) Borrowing Costs directly attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets up to the date when the asset is ready for its intended
use. A qualifying asset is one
that necessarily takes substantial period of time to get ready for its
intended use. The borrowing cost eligible for capitalization is netted
off against any income arising on temporary investment of those
borrowings. The capitalization of the borrowing costs ceases when
substantially all activities necessary to prepare the qualifying asset
for its intended use are complete.
ii) Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing.
iii) Other borrowing costs are charged to revenue.
(h) Investments:
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost and
fair value.
(i) Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
of inventories comprise all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on the weighted average
basis for valuation. 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 make the sale.
Obsolete, defective and unserviceable stocks are duly provided for.
(j) Foreign Exchange Transactions:
Foreign Currency transactions are initially recorded at the exchange
rates prevailing on the date of the transaction. Foreign Currency
assets and liabilities (monetary items) are reported at the exchange
rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign
currency monetary items at rates different from those at which they
were initially recorded are recognized in the Statement of Profit and
Loss.
In respect of foreign exchange differences arising on revaluation or
settlement of long term foreign currency monetary items, the Company
has availed the option available in the Companies (Accounting Standard)
(Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is
adjusted in the cost of depreciable asset and the charge of
depreciation is accordingly increased / reduced.
ii. In other cases, foreign exchange differences are accumulated in
"Foreign Currency Monetary Item Translation difference account" and
amortized over the balance period of such long term assets /
liabilities.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Statement of
Profit and Loss.
(k) Employee benefits:
Retirement benefits in the form of Provident Fund and Family Pension
Scheme are defined contribution schemes and the contributions are
charged to the Statement of Profit and Loss of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the
intrinsic value method of the stock options. The compensation expense
is amortised uniformly over the vesting period of the option in
accordance with the Guidance note on Share based payments issued by the
Institute of Chartered Accountants of India.
Employee benefits under defined benefit plans, such as Gratuity and
Compensated absences are provided for on the basis of the actuarial
valuation made at the end of each financial year.
Actuarial gains / losses are immediately taken to Statement of Profit
and Loss and are not deferred.
(l) Taxation:
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (reflecting the tax effects of timing differences
between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain as the
case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of the Income Tax Act, 1961 based on convincing evidence that
the Company will pay normal income tax within the statutory time frame
and the same is reviewed at each balance sheet date.
(m) Provisions and Contingent Liabilities:
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation
and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when 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.
b) a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non- occurrence of
one or more uncertain future events not within the control of the
enterprise.
Mar 31, 2014
A. General
i. The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifi cally referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
extent applicable.
iii. All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
iv. The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liabilities on
the date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
v. All assets and liabilities have been classifi ed as current and
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956.
b. Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract. Power supplied under banking arrangements is accounted as per
terms of agreements. Quantity of power banked is recorded as a loan
transaction valued at cost or net realizable value whichever is lower
and recognised as revenue when the same is returned and sold to an
ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profitability of the contract under the percentage
of completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contract cost comprises of all costs that relate directly to the
Specified contract, incidental costs attributable to the contract
including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
c. Fixed Assets
i. Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
ii. Intangible Assets:
An item is recognized as an intangible asset if it meets the defi
nition of an intangible asset, it is probable that future economic
benefits will fl ow to the Company and the cost of the assets can be
reliably measured.
d. Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fi xed assets that
are not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other
related expenses incurred for the projects are shown as CWIP for
capitalization.
Expenditure attributable to construction of fi xed assets are identifi
ed and allocated on a systematic basis to the cost of the related
asset.
Interest during construction and expenditure (net) allocated to
construction are apportioned to CWIP on the basis of the closing
balance of specifi c asset or part of asset being capitalized. The
balance, if any, left after such capitalization is kept as a separate
item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of
contracts are accounted for on acceptance / receipt of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the fi xed asset
is charged off to profit and loss statement in the period in which
they are incurred.
e. Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in
the manner Specified in Schedule XIV to the
Companies Act, 1956 or as notifi ed by Central Electricity Regulatory
Commission (CERC), whichever is higher.
In the following categories of Assets, the higher depreciation rates
are adopted:
Leasehold Land acquired by the Company, with an option in the lease
deed, entitling the Company to purchase on outright basis after a
certain period at no additional cost is not amortized.
Software is depreciated over an estimated useful life of 3 years.
f. Impairment of assets
In accordance with AS-28 ''Impairment of assets'' prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profit and loss statement whenever the carrying
amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
g. Borrowing Costs
i. Borrowing Costs directly attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets up to the date when the asset is ready for its intended
use. A qualifying asset is one that necessarily takes substantial
period of time to get ready for its intended use. The borrowing cost
eligible for capitalization is netted off against any income arising on
temporary investment of those borrowings. The capitalization of the
borrowing costs shall cease when substantially all activities necessary
to prepare the qualifying asset for its intended use are complete.
ii. Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing.
iii. Other borrowing costs are charged to revenue.
h. Investments
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost and
fair value.
i. Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable
stocks are duly provided for.
j. Foreign Exchange Transactions
Foreign Currency transactions are initially recorded at the exchange
rates prevailing on the date of the transaction. Foreign Currency
assets and liabilities (monetary items) are reported at the exchange
rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign
currency monetary items at rates different from those at which they
were initially recorded are recognized in the Profit and Loss
Statement.
In respect of foreign exchange differences arising on revaluation or
settlement of long term foreign currency monetary items, the Company
has availed the option available in the Companies (Accounting Standard)
(Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is
adjusted in the cost of depreciable asset and the charge of
depreciation is accordingly increased / reduced.
ii. In other cases, foreign exchange differences are accumulated in
"Foreign Currency Monetary Item Translation Difference Account" and
amortized over the balance period of such long term assets /
liabilities.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted fi rm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Profit and Loss
Statement.
k. Employee benefits
Retirement benefits in the form of Provident Fund and Family Pension
Scheme are defi ned contribution schemes
and the contributions are charged to the profit and loss statement of
the year when the contributions to the respective funds are due. There
are no other obligations other than the contribution payable to the
respective trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value method of
the stock options. The compensation expense is amortised uniformly
over the vesting period of the option in accordance with the Guidance
note on Share based payments issued by the Institute of Chartered
Accountant of India.
Employee benefits under defi ned benefit plans, such as Gratuity and
Compensated absences are provided for on the basis of the actuarial
valuation made at the end of each financial year.
Actuarial gains / losses are immediately taken to profit and loss
statement and are not deferred.
l. Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (refl ecting the tax effects of timing
differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to refl ect the amount that is reasonably / virtually certain as the
case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of the Income Tax Act, 1961 based on convincing evidence that
the Company will pay normal income tax within the statutory time frame
and the same is reviewed at each balance sheet date.
m. Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
when,
a) the Company has a present obligation as a result of a past event
b) a probable outfl ow of resources is expected to settle the
obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not
probable that an outfl ow of resources will be required to settle the
obligation or a reliable estimate of the amount of obligation cannot be
made.
b) a possible obligation arising from past events, the existence of
which will be confi rmed only by the occurrence or non-occurrence of
one or more uncertain future events not within the control of the
enterprise.
Mar 31, 2013
A. General
i. The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifically referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
extent applicable.
iii. All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
iv. The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liabilities on
the date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
v. All assets and liabilities have been classified as current and
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956.
b. Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract. Power supplied under banking arrangements is accounted as per
terms of agreements. Quantity of power banked is recorded as a loan
transaction valued at cost or net realizable value whichever is lower
and recognised as revenue when the same is returned and sold to an
ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contract cost comprises of all costs that relate directly to the
specified contract, incidental costs attributable to the contract
including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
c. Fixed Assets
i. Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
ii. Intangible Assets:
An item is recognized as an intangible asset if it meets the definition
of an intangible asset, it is probable that future economic benefits
will flow to the Company and the cost of the assets can be reliably
measured.
d. Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fixed assets that are
not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other
related expenses incurred for the projects are shown as CWIP for
capitalization.
Expenditure attributable to construction of fixed assets are identified
and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to
construction are apportioned to CWIP on the basis of the closing
balance of specific asset or part of asset being capitalized. The
balance, if any, left after such capitalization is kept as a separate
item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of
contracts are accounted for on acceptance/ receipt of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the fixed asset is
charged off to profit and loss statement in the year in which they are
incurred.
e. Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956 or as
notified by Central Electricity Regulatory Commission (CERC), whichever
is higher.
In the following categories of Assets, the higher depreciation rates
are adopted:
Leasehold Land acquired by the Company, with an option in the lease
deed, entitling the Company to purchase on outright basis after a
certain period at no additional cost is not amortized.
Software is depreciated over an estimated useful life of 3 years.
f. Impairment of assets
In accordance with AS-28 ''Impairment of Assets'' prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profit and loss statement whenever the carrying
amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
g. Borrowing Costs
i. Borrowing Costs directly attributable to the acquisition or
construction of qualifying assets, are capitalized as part of the cost
of such assets up to the date when the asset is ready for its intended
use. A qualifying asset is one that necessarily takes substantial
period of time to get ready for its intended use. The borrowing cost
eligible for capitalization is netted off against any income arising on
temporary investment of those borrowings. The capitalization of the
borrowing costs shall cease when substantially all activities necessary
to prepare the qualifying asset for its intended use are complete.
ii. Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing.
iii. Other borrowing costs are charged to revenue.
h. Investments
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost or
fair value.
i. Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable
stocks are duly provided for.
j. Foreign Exchange Transactions
Foreign Currency transactions are initially recorded at the exchange
rates prevailing on the date of the transaction. Foreign Currency
assets and liabilities (monetary items) are reported at the exchange
rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign
currency monetary items at rates different from those at which they
were initially recorded are recognized in the Statement of Profit and
Loss.
In respect of foreign exchange differences arising on revaluation or
settlement of long term foreign currency monetary items, the Company
has availed the option available in the Companies (Accounting Standard)
(Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is
adjusted in the cost of depreciable asset and the charge of
depreciation is accordingly increased/reduced.
ii. In other cases, foreign exchange differences are accumulated in
"Foreign Currency Monetary Item Translation difference account" and
amortized over the balance period of such long term assets /
liabilities.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the profit and loss
statement
k. Employee benefits
Retirement benefits in the form of Provident Fund and Family Pension
Scheme are defined contribution schemes and the contributions are
charged to the profit and loss statement of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value method of
the stock options.
The compensation expense is amortised uniformly over the vesting period
of the option in accordance with the Guidance note on Share based
payments issued by the Institute of Chartered Accountants of India.
Employee benefits under defined benefit plans, such as Gratuity and
Compensated absences are provided for on the basis of the actuarial
valuation made at the end of each financial year.
Actuarial gains/ losses are immediately taken to profit and loss
statement and are not deferred.
l. Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (reflecting the tax effects of timing differences
between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain as the
case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of the Income Tax Act, 1961 based on convincing evidence that
the Company will pay normal income tax within the statutory time frame
and the same is reviewed at each balance sheet date.
m. Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation
and
c) the amount of the obligation can be reliably estimated.
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not
probable that a outflow of resources will be required to settle the
obligation or a reliable estimate of the amount of obligation cannot be
made.
b) a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not within the control of the
enterprise.
Mar 31, 2012
(a) General
(i) The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
(ii) Accounting Policies not specifically referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
extent applicable.
(iii) All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
(iv) The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liabilities on
the date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
(v) All assets and liabilities have been classified as current and
non-current as per the Company's normal operating cycle and other
criteria set out in the revised Schedule VI to the Companies Act, 1956.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract. Power supplied under banking arrangements is accounted as per
terms of agreements. Quantity of power banked is recorded as a loan
transaction valued at cost or net realizable value whichever is lower
and recognised as revenue when the same is returned and sold to an
ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contract cost comprises of all costs that relate directly to the
specified contract, incidental costs attributable to the contract
including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets
(i) Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
(ii) Intangible Assets:
The Company capitalizes software where it is reasonably estimated that
the software has an enduring useful life. Software is depreciated over
an estimated useful life of 3 years.
(d) Capital Work-in-Progress (CWIP):
Capital Work-in-Progress comprises of the cost of assets that are not
yet ready for their intended use at the reporting date. Cost of
material consumed, erection charges thereon along with other related
expenses incurred for the projects are shown as CWIP for
capitalization.
Expenditure attributable to construction of fixed assets are identified
and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to
construction are apportioned to CWIP on the basis of the closing
balance of Specific asset or part of asset being capitalized. The
balance, if any, left after such capitalization is kept as a separate
item under the CWIP Schedule.
Claims for price variation/exchange rate variation in case of contracts
are accounted for on acceptance/receipt of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the Fixed Asset,
is charged off to profit and loss statement in the period in which they
are incurred.
(e) Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956 or as
notified by Central Electricity Regulatory Commission (CERC), whichever
is higher.
In the following categories of Assets, the higher depreciation rates
are adopted:
(f) Impairment of assets
In accordance with AS-28 'Impairment of assets' prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the Company's assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profit and loss statement whenever the carrying
amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
(g) Borrowing Costs
(i) Borrowing Costs (including exchange differences) directly
attributable to the acquisition or construction of qualifying assets,
are capitalized as part of the cost of such assets up to the date when
the asset is ready for its intended use. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. The borrowing cost eligible for capitalization is netted
off against any income arising on temporary investment of those
borrowings. The capitalization of the borrowing costs shall cease when
substantially all activities necessary to prepare the qualifying asset
for its intended use are complete.
(ii) Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing.
(iii) Other borrowing costs are charged to revenue.
(h) Investments
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost or
fair value.
(i) Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and
unserviceable stocks are duly provided for.
(j) Foreign Exchange Transactions
Foreign Currency transactions are recorded at the exchange rates
prevailing on the date of the transaction. Foreign Currency assets and
liabilities (monetary items) are reported at the exchange rate
prevailing on the balance sheet date.
Pursuant to the notification of the Companies (Accounting Standards)
Amendment Rules, 2006 on 31st March, 2009, which amended Accounting
Standard 11 on "The Effects of Changes in Foreign Exchange Rates",
exchange differences relating to long term monetary items are dealt
with in the following manner:
i. Exchange differences relating to long-term monetary
items, arising during the year, in so far as they relate to the
acquisition of a depreciable capital asset are added to / deducted from
the cost of the asset and depreciated over the balance life of the
asset.
ii. In other cases such differences are accumulated in "Foreign
Currency Monetary Item Translation Difference Account" and amortized to
the profit and loss statement over the balance life of the long-term
monetary item, but not beyond 31st March 2020.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the profit & loss
statement.
(k) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension
Scheme are defined contribution schemes and the contributions are
charged to the profit and loss statement of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value method of
the stock options. The compensation expense is amortised uniformly over
the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation and is provided for on the basis of the actuarial
valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation.
Actuarial gains/ losses are immediately taken to profit and loss
statement and are not deferred.
(l) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (reflecting the tax effects of timing differences
between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain as the
case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of the Income Tax Act, 1961 based on convincing evidence that
the Company will pay normal income tax within the statutory time frame
and the same is reviewed at each balance sheet date.
(m) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation
and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Mar 31, 2011
(a) General
i) The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
ii) Accounting Policies not Specifically referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
extent applicable.
iii) All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
iv) The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires the management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent liabilities on the
date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i) Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract.
ii) Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated Profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contracts cost comprise all cost that relate directly to the specifed
contract, incidental cost attributable to the contract including
allocated overheads and warranty cost.
iii) Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
(d) Intangibles
Intangible Assets consisting of Membership fee for Power Trading
Exchanges and Exchange Trading Software is amortised over the estimated
useful life of 3 years.
The Company capitalises software where it is reasonably estimated that
the software has an enduring useful life. Software is depreciated over
an estimated useful life of 3 years.
(e) Capital Work-in-Progress (CWIP)
Cost of material consumed, erection charges thereon along with other
related expenses incurred for the projects are shown as CWIP for
capitalisation.
Expenditure attributable to construction of fixed assets are identifed
and allocated on a systematic basis to the cost of the related assets.
Interest during construction and expenditure (net) allocated to
construction are apportioned to capital work-in-progress (CWIP) on the
basis of the closing balance of Specific asset or part of asset being
capitalised. The balance, if any, left after such capitalisation is
kept as a separate item under the CWIP Schedule.
Claims for price variation/exchange rate variation in case of contracts
are accounted for on acceptance of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the Fixed Asset,
is charged off to Profit and loss account in the period in which they
are incurred.
(f) Depreciation
Depreciation is provided on Straight Line Method at the rates and in
the manner specifed in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
(g) Impairment of assets
In accordance with AS-28 Impairment of assets prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the Companys assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Profit and loss account whenever the carrying amounts
of such assets exceed its recoverable amount.
(h) Borrowing Costs
(i) Borrowing Costs (including exchange differences) directly
attributable to the acquisition or construction of qualifying assets
are capitalized as part of the cost of such assets up to the date when
the asset is ready for its intended use. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. The borrowing cost eligible for capitalisation is being
netted off against any income arising on temporary investment of those
borrowings. The capitalization of the borrowing costs shall cease when
substantially all activities necessary to prepare the qualifying asset
for its intended use are complete.
(ii) Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing
(iii) Other borrowing costs are charged to revenue.
(i) Investments
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost and
fair value.
(j) Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the weighted average basis for valuation. Obsolete,
defective and unserviceable stocks are duly provided for.
(k) Foreign Exchange Transactions
Foreign Currency transactions are recorded at the exchange rates
prevailing on the date of the transaction. Monetary Foreign Currency
assets and liabilities (monetary items) are reported at the exchange
rate prevailing on the balance sheet date. Pursuant to the notifcation
of the Companies (Accounting Standards) Amendment Rules, 2006 on 31st
March, 2009, which amended Accounting Standard 11 on The Effects of
Changes in Foreign Exchange Rates, exchange differences relating to
long term monetary items are dealt with in the following manner:
- Exchange differences relating to long-term monetary items, arising
during the year, in so far as they relate to the acquisition of a
depreciable capital asset are added to / deducted from the cost of the
asset and depreciated over the balance life of the asset.
- In other cases such differences are accumulated in a "Foreign
Currency Monetary Item Translation Difference Account" and amortised to
the Profit and loss account over the balance life of the long-term
monetary item, upto 31st March, 2011.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted frm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognised in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Profit and loss
account.
(l) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension
Scheme are defned contribution schemes and the contributions are
charged to the Profit and loss account of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value of the
stock options. The compensation expense is amortised uniformly over the
vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defned
beneft obligation and is provided for on the basis of the actuarial
valuation made at the end of each financial year.
Short-term compensated absences are provided for based on estimates.
Long-term compensated absences are provided for based on actuarial
valuation.
Actuarial gains/ losses are immediately taken to Profit and loss account
and are not deferred.
(m) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (refecting the tax effects of timing differences
between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to refect the amount that is reasonably / virtually certain as the case
may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of Section 115JAA of the Income Tax Act, 1961 based on
convincing evidence that the Company will pay normal income tax within
the statutory time frame and the same is reviewed at each balance sheet
date.
(n) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
when,
a) the Company has a present obligation as a result of a past event,
b) a probable outflow of resources is expected to settle the obligation
and
c) the amount of the obligation can be reliably estimated.
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not
probable that a outflow of resources will be required to settle the
obligation or a reliable estimate of the amount of obligation cannot be
made.
b) a possible obligation arising from past events, the existence of
which will be confrmed only by the occurrence or non- ocurrence of one
or more uncertain future events not within the control of the
enterprise.
Mar 31, 2010
(a) General
i. The fi nancial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifi cally referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
extent applicable.
iii. All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
iv. The preparation of fi nancial statements in conformity with
generally accepted accounting principles (GAAP) requires the management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liabilities on
the date of fi nancial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profi tability of the contract under the percentage
of completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contracts cost comprise all cost that relate directly to the specifi ed
contract, incidental cost attributable to the contract including
allocated overheads and warranty cost.
iii. Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets
F ixed Assets are stated at cost of acquisition and any cost
attributable for bringing the asset to its working condition for its
intended use.
Expenditure incurred during Construction Period
Expenditure related to and incurred during implementation of capital
projects is included under ÃCapital Work in ProgressÃ. The same is
allocated to the respective fi xed assets on completion of construction
/ erection of the capital project / fi xed assets
(d) Depreciation
Depreciation is provided on Straight Line Method at the rates and in
the manner specifi ed in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
The Company capitalises software where it is reasonably estimated that
the software has an enduring useful life Software is depreciated over
an estimated useful life of 3 years.
(e) Impairment of assets
In accordance with AS-28 ÃImpairment of assetsà prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the CompanyÃs assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profi t and loss account whenever the carrying
amounts of such assets exceed its recoverable amount.
(f) Borrowing Costs
Borrowing costs attributable to the acquisition or construction of
qualifying assets, are capitalized as part of the cost of such assets
up to the date when the asset is ready for its intended use. A
qualifying asset is one that necessarily takes substantial period of
time to get ready for its intended use. The borrowing cost eligible for
capitalization is being netted off against any income arising on
temporary investment of those borrowings. The capitalization of the
borrowing costs shall cease when substantially all activities necessary
to prepare the qualifying asset for its intended use or sale are
complete. Other borrowing costs are expensed as and when they are
incurred.
(g) Investments
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost or
fair value.
(h) Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the basis of weighted average. Obsolete, defective
and unserviceable stocks are duly provided for wherever applicable.
(i) Foreign Exchange Transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
Foreign currency designated assets, liabilities and capital commitments
are stated at the year end rates.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted fi rm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
Ex change difference relating to long term monetary items, so far as
they relate to asset acquisition, are capitalized and added to /
deducted from the cost of the asset. All other exchange differences are
dealt with in the Profi t & Loss account.
(j) Employee benefi ts
Retirement benefi ts in the form of Provident Fund and Family pension
Scheme are defi ned contribution schemes and the contributions are
charged to the profi t and loss account of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
trusts.
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value of the
stock options. The compensation expense is amortised uniformly over the
vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defi
ned benefi t obligation and is provided for on the basis of the
actuarial valuation made at the end of each fi nancial year.
Short-term compensated absences are provided for based on estimates.
Long-term compensated absences are provided for based on actuarial
valuation.
Actuarial gains/losses are immediately taken to profi t and loss
account and are not deferred.
(k) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (refl ecting the tax effects of timing
differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each balance sheet date and written down or written up
to refl ect the amount that is reasonably / virtually certain as the
case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of Section 115JAA of the Income Tax Act, 1961 based on
convincing evidence that the Company will pay normal income tax within
the statutory time frame and the same is reviewed at each balance sheet
date.
(l) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate o f the
expenditure required to settle the present obligation at the balance
sheet date when
a) the Company has a present obligation as a result of a past event.
b) a probable outfl ow of resources is expected to settle the
obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Contingent liability is disclosed in the case of
a) a present obligation arising from a past event, when it is not
probable that a outfl ow of resources will be required to settle the
obligation or a reliable estimate of the amount of obligation cannot be
made.
b) a possible obligation arising from past events , the existence of
which will be confi rmed only by the occurrence or non- occurrence of
one or more uncertain future events not within the control of the
enterprise.
Mar 31, 2009
(a) General
The financial statements are prepared under the historical cost
convention on the accounting principles of a going concern and as per
applicable accounting standards The Company follows mercantile system
of accounting and recognises income and expenditure on accrual basis
except those with significant uncertainties.
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires the management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent liabilities on the
date of financial statements and reported amounts of revenue and
expenses for that year. Actual result could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of
ownership is transferred to the buyer under the terms of the contract.
ii. Revenue from construction / project related activity:
Revenue from construction contract are recognised by reference to the
overall estimated profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contracts cost comprise all cost that relate directly to the specified
contract, incidental cost attributable to the contract including
allocated overheads and warranty cost.
iii. Operator fees and other income is accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets
Fixed assets are recorded at cost which include all direct and indirect
expenses upto the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
(d) Depreciation
Depreciation is provided on Straight Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
The Company capitalises software where it is reasonably estimated that
the software has an enduring useful life. Software is depreciated over
an estimated useful life of 3 years.
(e) Impairment of assets
In accordance with AS-28 on Impairment of assets issued by the
Institute of Chartered Accountants of India, where there is an
indication of impairment of the Company s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profit and loss account whenever the carrying amount
of such assets exceed its recoverable amount.
(f) Borrowing Costs
(i) Borrowing Costs (including exchange difference) directly
attributable to the acquisition and construction of a qualifying asset
are capitalised as part of cost of such asset upto the date when such
asset is ready for its intended use.
(ii) Other borrowing costs are charged to revenje.
(g) Investments
Long term Investments are stated at cost. :;n case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made.
(h) Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the basis of weighted average. Obsolete, defective and
unserviceable stocks are duly provided for wherever applicable.
(i) Foreign Exchange Transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
Foreign currency designated assets, liabilities and capital commitments
are stated at the year end rates.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
The exchange differences are adjusted to carrying cost of the fixed
assets if they relate to such fixed assets and to profit and loss
account in other cases.
(j) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension
Scheme are defined contribution schemes and the contributions are
charged to the profit and -account o the year when the contributions to
the respective funds are due. There are no other obligations other than
the contribution payable to the respective trusts.
Stock Based Compensation - The compensat on cost of stock options
granted to employees is calculated using the intrinsic value of the
stock options. The compensation expense is amortised uniformly over the
vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation and is provided for on the basis of the actuarial
valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based or actuarial
valuation.
Actuarial gains/ losses are immediately taken to profit and loss
account and are not deferred.
(k) Taxation
Tnrome tax expenses comprise current tax and fringe benefit tax (i.e.
amount of tax for K^period determined in accordance with the income tax
law) and deferred tax charges or credt "reflecting the tax effects of
timing differences between accounting income and taxable income of the
year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets Ire recognised usmg ?he tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the a tea realised in future; however where
there is unabsorbed depreciation or
caVy forward loss under taxation laws, deferrec tax assets are
recognised only if there is a virtual certainty of realisation of such
assets. Deferred tax assets are reviewed at each balance sheet date and
written down or written up to reflect the amount that is reasonably /
virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
ir.terms of Section 115JAA of the Income Tax Act, 1961 based on
convincing evidence that the Company will pay normal income tax within
the statutory time frame and the same is reviewed at each balance sheet
date.
(l) Provisions and Contingent Liabilities
Provisions are recognised for liabilities that car be measured only by
using a substantial degree of estimation, if
a) the Company has a present obligation as a result of a past event.
b) a probable outflow of resources is expected to settle the obligation
and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.
Continaent liability is disclosed in the case of
a) a Present obligation arising from a past event, when it is not
probable that a outflow of resources will be required to settle the
obligation.
b) a possible obligation, unless the probability of outflow of
resources is remote.
(a) General
i) The financial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
ii) Accounting Policies not specifically referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed under section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014 the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI) to the extent applicable.
iii) All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
iv) The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
v) All assets and liabilities have been classified as current and non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
(b) Revenue Recognition:
Revenue is recognised when it is earned and no significant uncertainty exists as to its realisation or collection.
i) Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract. Power supplied under banking arrangements is accounted as per terms of agreements. Quantity of power banked is recorded as a loan transaction valued at cost or net realizable value whichever is lower and recognised as revenue when the same is returned and sold to an ultimate customer.
ii) Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contract cost comprises of all costs that relate directly to the specified contract, incidental costs attributable to the contract including allocated overheads and warranty costs.
iii) Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
(c) Fixed Assets:
i) Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect expenses up to the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset, expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
ii) Intangible Assets:
An item is recognized as an intangible asset if it meets the definition of an intangible asset, it is probable that future economic benefits will flow to the Company and the cost of the assets can be reliably measured.
(d) Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP for capitalization.
Expenditure attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to construction are apportioned to CWIP on the basis of the closing balance of specific asset or part of asset being capitalized. The balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of contracts are accounted for on acceptance / receipt of claims.
Any other expenditure which is not directly or indirectly attributable to the construction of the Project / construction of the fixed asset is charged off to Statement of Profit and Loss in the period in which they are incurred.
(e) Depreciation / Amortisation:
Depreciation on tangible assets is provided as per the provisions of Part B of Schedule II of the Companies Act, 2013 based on useful life and residual value notified for accounting purposes by Central Electricity Regulatory Authority (CERC) Tariff Regulations.
Leasehold Land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Specialised Software is depreciated over an estimated useful life of 3 years.
(f) Impairment of assets:
In accordance with Accounting Standard 28 ''Impairment of assets, where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
(g) Borrowing Costs:
i) Borrowing Costs directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one
that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalization is netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.
ii) Expenses incurred in connection with the arrangement of borrowings are written off over the period of the borrowing.
iii) Other borrowing costs are charged to revenue.
(h) Investments:
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost and fair value.
(i) Inventories:
Inventories are valued at lower of cost and net realisable value. Cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable stocks are duly provided for.
(j) Foreign Exchange Transactions:
Foreign Currency transactions are initially recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency assets and liabilities (monetary items) are reported at the exchange rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign currency monetary items at rates different from those at which they were initially recorded are recognized in the Statement of Profit and Loss.
In respect of foreign exchange differences arising on revaluation or settlement of long term foreign currency monetary items, the Company has availed the option available in the Companies (Accounting Standard) (Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is adjusted in the cost of depreciable asset and the charge of depreciation is accordingly increased / reduced.
ii. In other cases, foreign exchange differences are accumulated in "Foreign Currency Monetary Item Translation difference account" and amortized over the balance period of such long term assets / liabilities.
Non-monetary items such as investments are carried at historical cost using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted firm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Statement of Profit and Loss.
(k) Employee benefits:
Retirement benefits in the form of Provident Fund and Family Pension Scheme are defined contribution schemes and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the
intrinsic value method of the stock options. The compensation expense is amortised uniformly over the vesting period of the option in accordance with the Guidance note on Share based payments issued by the Institute of Chartered Accountants of India.
Employee benefits under defined benefit plans, such as Gratuity and Compensated absences are provided for on the basis of the actuarial valuation made at the end of each financial year.
Actuarial gains / losses are immediately taken to Statement of Profit and Loss and are not deferred.
(l) Taxation:
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (reflecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
(m) Provisions and Contingent Liabilities:
Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when 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.
b) a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not within the control of the enterprise.
A. General
i. The financial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifi cally referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 to the extent applicable.
iii. All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
iv. The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
v. All assets and liabilities have been classifi ed as current and non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956.
b. Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract. Power supplied under banking arrangements is accounted as per terms of agreements. Quantity of power banked is recorded as a loan transaction valued at cost or net realizable value whichever is lower and recognised as revenue when the same is returned and sold to an ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contract cost comprises of all costs that relate directly to the Specified contract, incidental costs attributable to the contract including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
c. Fixed Assets
i. Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect expenses up to the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset, indirect expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
ii. Intangible Assets:
An item is recognized as an intangible asset if it meets the defi nition of an intangible asset, it is probable that future economic benefits will fl ow to the Company and the cost of the assets can be reliably measured.
d. Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fi xed assets that are not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP for capitalization.
Expenditure attributable to construction of fi xed assets are identifi ed and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to construction are apportioned to CWIP on the basis of the closing balance of specifi c asset or part of asset being capitalized. The balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of contracts are accounted for on acceptance / receipt of claims.
Any other expenditure which is not directly or indirectly attributable to the construction of the Project / construction of the fi xed asset is charged off to profit and loss statement in the period in which they are incurred.
e. Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in the manner Specified in Schedule XIV to the
Companies Act, 1956 or as notifi ed by Central Electricity Regulatory Commission (CERC), whichever is higher.
In the following categories of Assets, the higher depreciation rates are adopted:
Leasehold Land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Software is depreciated over an estimated useful life of 3 years.
f. Impairment of assets
In accordance with AS-28 ''Impairment of assets'' prescribed by the Companies (Accounting Standards) Rules, 2006, where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the profit and loss statement whenever the carrying amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
g. Borrowing Costs
i. Borrowing Costs directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalization is netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs shall cease when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.
ii. Expenses incurred in connection with the arrangement of borrowings are written off over the period of the borrowing.
iii. Other borrowing costs are charged to revenue.
h. Investments
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost and fair value.
i. Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable stocks are duly provided for.
j. Foreign Exchange Transactions
Foreign Currency transactions are initially recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency assets and liabilities (monetary items) are reported at the exchange rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign currency monetary items at rates different from those at which they were initially recorded are recognized in the Profit and Loss Statement.
In respect of foreign exchange differences arising on revaluation or settlement of long term foreign currency monetary items, the Company has availed the option available in the Companies (Accounting Standard) (Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is adjusted in the cost of depreciable asset and the charge of depreciation is accordingly increased / reduced.
ii. In other cases, foreign exchange differences are accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term assets / liabilities.
Non-monetary items such as investments are carried at historical cost using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted fi rm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Profit and Loss Statement.
k. Employee benefits
Retirement benefits in the form of Provident Fund and Family Pension Scheme are defi ned contribution schemes
and the contributions are charged to the profit and loss statement of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the intrinsic value method of the stock options. The compensation expense is amortised uniformly over the vesting period of the option in accordance with the Guidance note on Share based payments issued by the Institute of Chartered Accountant of India.
Employee benefits under defi ned benefit plans, such as Gratuity and Compensated absences are provided for on the basis of the actuarial valuation made at the end of each financial year.
Actuarial gains / losses are immediately taken to profit and loss statement and are not deferred.
l. Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (refl ecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to refl ect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
m. Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date when,
a) the Company has a present obligation as a result of a past event
b) a probable outfl ow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not probable that an outfl ow of resources will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made.
b) a possible obligation arising from past events, the existence of which will be confi rmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the enterprise.
A. General
i. The financial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifically referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 to the extent applicable.
iii. All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
iv. The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
v. All assets and liabilities have been classified as current and non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956.
b. Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract. Power supplied under banking arrangements is accounted as per terms of agreements. Quantity of power banked is recorded as a loan transaction valued at cost or net realizable value whichever is lower and recognised as revenue when the same is returned and sold to an ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contract cost comprises of all costs that relate directly to the specified contract, incidental costs attributable to the contract including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
c. Fixed Assets
i. Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect expenses up to the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset, indirect expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
ii. Intangible Assets:
An item is recognized as an intangible asset if it meets the definition of an intangible asset, it is probable that future economic benefits will flow to the Company and the cost of the assets can be reliably measured.
d. Capital Work-in-Progress (CWIP):
Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP for capitalization.
Expenditure attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to construction are apportioned to CWIP on the basis of the closing balance of specific asset or part of asset being capitalized. The balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.
Claims for price variation / exchange rate variation in case of contracts are accounted for on acceptance/ receipt of claims.
Any other expenditure which is not directly or indirectly attributable to the construction of the Project / construction of the fixed asset is charged off to profit and loss statement in the year in which they are incurred.
e. Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 or as notified by Central Electricity Regulatory Commission (CERC), whichever is higher.
In the following categories of Assets, the higher depreciation rates are adopted:
Leasehold Land acquired by the Company, with an option in the lease deed, entitling the Company to purchase on outright basis after a certain period at no additional cost is not amortized.
Software is depreciated over an estimated useful life of 3 years.
f. Impairment of assets
In accordance with AS-28 ''Impairment of Assets'' prescribed by the Companies (Accounting Standards) Rules, 2006, where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the profit and loss statement whenever the carrying amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
g. Borrowing Costs
i. Borrowing Costs directly attributable to the acquisition or construction of qualifying assets, are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalization is netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs shall cease when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.
ii. Expenses incurred in connection with the arrangement of borrowings are written off over the period of the borrowing.
iii. Other borrowing costs are charged to revenue.
h. Investments
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost or fair value.
i. Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable stocks are duly provided for.
j. Foreign Exchange Transactions
Foreign Currency transactions are initially recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency assets and liabilities (monetary items) are reported at the exchange rate prevailing on the balance sheet date.
All exchange differences arising on reporting of short term foreign currency monetary items at rates different from those at which they were initially recorded are recognized in the Statement of Profit and Loss.
In respect of foreign exchange differences arising on revaluation or settlement of long term foreign currency monetary items, the Company has availed the option available in the Companies (Accounting Standard) (Second Amendment) Rules 2011, wherein:
i. Foreign exchange differences on account of depreciable asset, is adjusted in the cost of depreciable asset and the charge of depreciation is accordingly increased/reduced.
ii. In other cases, foreign exchange differences are accumulated in "Foreign Currency Monetary Item Translation difference account" and amortized over the balance period of such long term assets / liabilities.
Non-monetary items such as investments are carried at historical cost using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted firm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the profit and loss statement
k. Employee benefits
Retirement benefits in the form of Provident Fund and Family Pension Scheme are defined contribution schemes and the contributions are charged to the profit and loss statement of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the intrinsic value method of the stock options.
The compensation expense is amortised uniformly over the vesting period of the option in accordance with the Guidance note on Share based payments issued by the Institute of Chartered Accountants of India.
Employee benefits under defined benefit plans, such as Gratuity and Compensated absences are provided for on the basis of the actuarial valuation made at the end of each financial year.
Actuarial gains/ losses are immediately taken to profit and loss statement and are not deferred.
l. Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (reflecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
m. Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated.
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not probable that a outflow of resources will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made.
b) a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the enterprise.
(a) General
(i) The financial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
(ii) Accounting Policies not specifically referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 to the extent applicable.
(iii) All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
(iv) The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
(v) All assets and liabilities have been classified as current and non-current as per the Company's normal operating cycle and other criteria set out in the revised Schedule VI to the Companies Act, 1956.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract. Power supplied under banking arrangements is accounted as per terms of agreements. Quantity of power banked is recorded as a loan transaction valued at cost or net realizable value whichever is lower and recognised as revenue when the same is returned and sold to an ultimate customer.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contract cost comprises of all costs that relate directly to the specified contract, incidental costs attributable to the contract including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
(c) Fixed Assets
(i) Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect expenses up to the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset, indirect expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
(ii) Intangible Assets:
The Company capitalizes software where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over an estimated useful life of 3 years.
(d) Capital Work-in-Progress (CWIP):
Capital Work-in-Progress comprises of the cost of assets that are not yet ready for their intended use at the reporting date. Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP for capitalization.
Expenditure attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to construction are apportioned to CWIP on the basis of the closing balance of Specific asset or part of asset being capitalized. The balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.
Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance/receipt of claims.
Any other expenditure which is not directly or indirectly attributable to the construction of the Project / construction of the Fixed Asset, is charged off to profit and loss statement in the period in which they are incurred.
(e) Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 or as notified by Central Electricity Regulatory Commission (CERC), whichever is higher.
In the following categories of Assets, the higher depreciation rates are adopted:
(f) Impairment of assets
In accordance with AS-28 'Impairment of assets' prescribed by the Companies (Accounting Standards) Rules, 2006, where there is an indication of impairment of the Company's assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the profit and loss statement whenever the carrying amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
(g) Borrowing Costs
(i) Borrowing Costs (including exchange differences) directly attributable to the acquisition or construction of qualifying assets, are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalization is netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs shall cease when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.
(ii) Expenses incurred in connection with the arrangement of borrowings are written off over the period of the borrowing.
(iii) Other borrowing costs are charged to revenue.
(h) Investments
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost or fair value.
(i) Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the weighted average basis for valuation. 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 make the sale. Obsolete, defective and unserviceable stocks are duly provided for.
(j) Foreign Exchange Transactions
Foreign Currency transactions are recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency assets and liabilities (monetary items) are reported at the exchange rate prevailing on the balance sheet date.
Pursuant to the notification of the Companies (Accounting Standards) Amendment Rules, 2006 on 31st March, 2009, which amended Accounting Standard 11 on "The Effects of Changes in Foreign Exchange Rates", exchange differences relating to long term monetary items are dealt with in the following manner:
i. Exchange differences relating to long-term monetary
items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and depreciated over the balance life of the asset.
ii. In other cases such differences are accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortized to the profit and loss statement over the balance life of the long-term monetary item, but not beyond 31st March 2020.
Non-monetary items such as investments are carried at historical cost using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted firm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the profit & loss statement.
(k) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension Scheme are defined contribution schemes and the contributions are charged to the profit and loss statement of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the intrinsic value method of the stock options. The compensation expense is amortised uniformly over the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined benefit obligation and is provided for on the basis of the actuarial valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation.
Actuarial gains/ losses are immediately taken to profit and loss statement and are not deferred.
(l) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (reflecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
(m) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date when,
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
(a) General
i) The financial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
ii) Accounting Policies not Specifically referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 to the extent applicable.
iii) All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
iv) The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i) Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract.
ii) Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated Profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contracts cost comprise all cost that relate directly to the specifed contract, incidental cost attributable to the contract including allocated overheads and warranty cost.
iii) Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
(c) Fixed Assets
Fixed assets are stated at cost which includes all direct and indirect expenses up to the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period
Apart from costs related directly to the construction of an asset, indirect expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
(d) Intangibles
Intangible Assets consisting of Membership fee for Power Trading Exchanges and Exchange Trading Software is amortised over the estimated useful life of 3 years.
The Company capitalises software where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over an estimated useful life of 3 years.
(e) Capital Work-in-Progress (CWIP)
Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP for capitalisation.
Expenditure attributable to construction of fixed assets are identifed and allocated on a systematic basis to the cost of the related assets.
Interest during construction and expenditure (net) allocated to construction are apportioned to capital work-in-progress (CWIP) on the basis of the closing balance of Specific asset or part of asset being capitalised. The balance, if any, left after such capitalisation is kept as a separate item under the CWIP Schedule.
Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance of claims.
Any other expenditure which is not directly or indirectly attributable to the construction of the Project / construction of the Fixed Asset, is charged off to Profit and loss account in the period in which they are incurred.
(f) Depreciation
Depreciation is provided on Straight Line Method at the rates and in the manner specifed in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
(g) Impairment of assets
In accordance with AS-28 Impairment of assets prescribed by the Companies (Accounting Standards) Rules, 2006, where there is an indication of impairment of the Companys assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Profit and loss account whenever the carrying amounts of such assets exceed its recoverable amount.
(h) Borrowing Costs
(i) Borrowing Costs (including exchange differences) directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalisation is being netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs shall cease when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.
(ii) Expenses incurred in connection with the arrangement of borrowings are written off over the period of the borrowing
(iii) Other borrowing costs are charged to revenue.
(i) Investments
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost and fair value.
(j) Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the weighted average basis for valuation. Obsolete, defective and unserviceable stocks are duly provided for.
(k) Foreign Exchange Transactions
Foreign Currency transactions are recorded at the exchange rates prevailing on the date of the transaction. Monetary Foreign Currency assets and liabilities (monetary items) are reported at the exchange rate prevailing on the balance sheet date. Pursuant to the notifcation of the Companies (Accounting Standards) Amendment Rules, 2006 on 31st March, 2009, which amended Accounting Standard 11 on The Effects of Changes in Foreign Exchange Rates, exchange differences relating to long term monetary items are dealt with in the following manner:
- Exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and depreciated over the balance life of the asset.
- In other cases such differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortised to the Profit and loss account over the balance life of the long-term monetary item, upto 31st March, 2011.
Non-monetary items such as investments are carried at historical cost using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted frm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognised in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the Profit and loss account.
(l) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension Scheme are defned contribution schemes and the contributions are charged to the Profit and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the intrinsic value of the stock options. The compensation expense is amortised uniformly over the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defned beneft obligation and is provided for on the basis of the actuarial valuation made at the end of each financial year.
Short-term compensated absences are provided for based on estimates. Long-term compensated absences are provided for based on actuarial valuation.
Actuarial gains/ losses are immediately taken to Profit and loss account and are not deferred.
(m) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (refecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to refect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of Section 115JAA of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
(n) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date when,
a) the Company has a present obligation as a result of a past event,
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated.
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Contingent liability is disclosed in the case of:
a) a present obligation arising from a past event, when it is not probable that a outflow of resources will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made.
b) a possible obligation arising from past events, the existence of which will be confrmed only by the occurrence or non- ocurrence of one or more uncertain future events not within the control of the enterprise.
(a) General
i. The fi nancial statements are prepared under the historical cost convention, on the accounting principles of a going concern.
ii. Accounting Policies not specifi cally referred to otherwise are consistent and in consonance with the applicable accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 to the extent applicable.
iii. All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis.
iv. The preparation of fi nancial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of fi nancial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and rewards of ownership is transferred to the buyer under the terms of the contract.
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the overall estimated profi tability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contracts cost comprise all cost that relate directly to the specifi ed contract, incidental cost attributable to the contract including allocated overheads and warranty cost.
iii. Operator fees and other income are accounted on accrual basis as and when the right to receive arises.
(c) Fixed Assets
F ixed Assets are stated at cost of acquisition and any cost attributable for bringing the asset to its working condition for its intended use.
Expenditure incurred during Construction Period
Expenditure related to and incurred during implementation of capital projects is included under ÃCapital Work in ProgressÃ. The same is allocated to the respective fi xed assets on completion of construction / erection of the capital project / fi xed assets
(d) Depreciation
Depreciation is provided on Straight Line Method at the rates and in the manner specifi ed in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
The Company capitalises software where it is reasonably estimated that the software has an enduring useful life Software is depreciated over an estimated useful life of 3 years.
(e) Impairment of assets
In accordance with AS-28 ÃImpairment of assetsà prescribed by the Companies (Accounting Standards) Rules, 2006, where there is an indication of impairment of the CompanyÃs assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the profi t and loss account whenever the carrying amounts of such assets exceed its recoverable amount.
(f) Borrowing Costs
Borrowing costs attributable to the acquisition or construction of qualifying assets, are capitalized as part of the cost of such assets up to the date when the asset is ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. The borrowing cost eligible for capitalization is being netted off against any income arising on temporary investment of those borrowings. The capitalization of the borrowing costs shall cease when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs are expensed as and when they are incurred.
(g) Investments
Long term Investments are stated at cost. In case, there is a decline other than temporary in the value of any Investments, a provision for the same is made. Current Investments are valued at lower of cost or fair value.
(h) Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the basis of weighted average. Obsolete, defective and unserviceable stocks are duly provided for wherever applicable.
(i) Foreign Exchange Transactions
Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction.
Foreign currency designated assets, liabilities and capital commitments are stated at the year end rates.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted fi rm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
Ex change difference relating to long term monetary items, so far as they relate to asset acquisition, are capitalized and added to / deducted from the cost of the asset. All other exchange differences are dealt with in the Profi t & Loss account.
(j) Employee benefi ts
Retirement benefi ts in the form of Provident Fund and Family pension Scheme are defi ned contribution schemes and the contributions are charged to the profi t and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensation cost of stock options granted to employees is calculated using the intrinsic value of the stock options. The compensation expense is amortised uniformly over the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defi ned benefi t obligation and is provided for on the basis of the actuarial valuation made at the end of each fi nancial year.
Short-term compensated absences are provided for based on estimates. Long-term compensated absences are provided for based on actuarial valuation.
Actuarial gains/losses are immediately taken to profi t and loss account and are not deferred.
(k) Taxation
Income tax expenses comprise current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charges or credit (refl ecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to refl ect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid in terms of Section 115JAA of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
(l) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate o f the expenditure required to settle the present obligation at the balance sheet date when
a) the Company has a present obligation as a result of a past event.
b) a probable outfl ow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Contingent liability is disclosed in the case of
a) a present obligation arising from a past event, when it is not probable that a outfl ow of resources will be required to settle the obligation or a reliable estimate of the amount of obligation cannot be made.
b) a possible obligation arising from past events , the existence of which will be confi rmed only by the occurrence or non- occurrence of one or more uncertain future events not within the control of the enterprise.
(a) General
The financial statements are prepared under the historical cost convention on the accounting principles of a going concern and as per applicable accounting standards The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis except those with significant uncertainties.
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and rewards of
ownership is transferred to the buyer under the terms of the contract.
ii. Revenue from construction / project related activity:
Revenue from construction contract are recognised by reference to the overall estimated profitability of the contract under the percentage of completion method. Foreseeable losses in any contract are provided irrespective of the stage of completion of the contract activity. The stage of completion of the contract is determined considering the nature of the contract, technical evaluation of work completed / measurement of physical progress and proportion of the cost incurred to the estimated total cost.
Contracts cost comprise all cost that relate directly to the specified contract, incidental cost attributable to the contract including allocated overheads and warranty cost.
iii. Operator fees and other income is accounted on accrual basis as and when the right to receive arises.
(c) Fixed Assets
Fixed assets are recorded at cost which include all direct and indirect expenses upto the date of acquisition, installation and / or commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset, indirect expenses incurred up to the date of commencement of commercial production which are incidental and related to construction are capitalised as part of construction cost. Income, if any, earned during the construction period is deducted from the indirect costs.
(d) Depreciation
Depreciation is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.
Depreciation on impaired assets related to a cash generating unit is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the asset over its remaining useful life.
The Company capitalises software where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over an estimated useful life of 3 years.
(e) Impairment of assets
In accordance with AS-28 on Impairment of assets issued by the Institute of Chartered Accountants of India, where there is an indication of impairment of the Company s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the profit and loss account whenever the carrying amount of such assets exceed its recoverable amount.
(f) Borrowing Costs
(i) Borrowing Costs (including exchange difference) directly attributable to the acquisition and construction of a qualifying asset are capitalised as part of cost of such asset upto the date when such asset is ready for its intended use.
(ii) Other borrowing costs are charged to revenje.
(g) Investments
Long term Investments are stated at cost. :;n case, there is a decline other than temporary in the value of any Investments, a provision for the same is made.
(h) Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on the basis of weighted average. Obsolete, defective and unserviceable stocks are duly provided for wherever applicable.
(i) Foreign Exchange Transactions
Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction.
Foreign currency designated assets, liabilities and capital commitments are stated at the year end rates.
Forward contracts other than those entered into to hedge foreign currency risk on unexecuted firm commitments or of highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly. Exchange differences arising on such contracts are recognized in the period in which they arise and the premium paid is accounted as expense over the period of the contract.
The exchange differences are adjusted to carrying cost of the fixed assets if they relate to such fixed assets and to profit and loss account in other cases.
(j) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension Scheme are defined contribution schemes and the contributions are charged to the profit and -account o the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.
Stock Based Compensation - The compensat on cost of stock options granted to employees is calculated using the intrinsic value of the stock options. The compensation expense is amortised uniformly over the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined benefit obligation and is provided for on the basis of the actuarial valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based or actuarial valuation.
Actuarial gains/ losses are immediately taken to profit and loss account and are not deferred.
(k) Taxation
Tnrome tax expenses comprise current tax and fringe benefit tax (i.e. amount of tax for K^period determined in accordance with the income tax law) and deferred tax charges or credt "reflecting the tax effects of timing differences between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets Ire recognised usmg ?he tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the a tea realised in future; however where there is unabsorbed depreciation or
caVy forward loss under taxation laws, deferrec tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain as the case may be to be realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid ir.terms of Section 115JAA of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and the same is reviewed at each balance sheet date.
(l) Provisions and Contingent Liabilities
Provisions are recognised for liabilities that car be measured only by using a substantial degree of estimation, if
a) the Company has a present obligation as a result of a past event.
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is expected to be reimbursed by another party, such reimbursement is recognised to the extent of provision or contingent liability as the case may be, only when it is virtually certain that the reimbursement will be received.
Continaent liability is disclosed in the case of
a) a Present obligation arising from a past event, when it is not probable that a outflow of resources will be required to settle the obligation.
b) a possible obligation, unless the probability of outflow of resources is remote.
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