Accounting Policies of KEC International Ltd. Company
Mar 31, 2023
1. GENERAL INFORMATION
KEC International Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India.The registered office of the Company is located at RPG House, 463, Dr. Annie Besant Road, Worli, Mumbai- 400 030.
The Company is primarily engaged in Engineering, Procurement and Construction business (EPC) relating to infrastructure interalia products, projects and systems and related activities for power transmission, distribution, railway, civil, cable and other EPC businesses.
The Companyâs manufacturing footprint extends across three countries in addition to India. The Company has several international branch offices enabling diversified global footprint.
2(a). NEW AND AMENDED STANDARDS ADOPTED BY THE COMPANY
The Ministry of Corporate Affairs had vide notification dated 23 March 2022 notified Companies (Indian
Accounting Standards) Amendment Rules, 2022 which amended certain accounting standards, and are effective 1 April 2022. These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
2(b). NEW AND AMENDED STANDARDS ISSUED BUT NOT EFFECTIVE.
The Ministry of Corporate Affairs has vide notification dated 31 March 2023 notified Companies (Indian
Accounting Standards) Amendment Rules, 2023 (the âRulesâ) which amends certain accounting standards, and are effective 1 April 2023.
The Rules predominantly amend Ind AS 12, Income taxes, and Ind AS 1, Presentation of financial statements. The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications.
These amendments are not expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions.
Specifically, no changes would be necessary as a consequence of amendments made to Ind AS 12 as the groupâs accounting policy already complies with the now mandatory treatment.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Statement of compliance
The financial statements have been prepared in
accordance with the provisions of Companies Act, 2013 and Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
3.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments and plan assets under defined benefit plans, that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2, âInventoriesâ or value in use in Ind AS 36 âImpairment of Assetsâ or net present value of lease payments in Ind AS 116 âLeasesâ, as applicable.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
Above levels of fair values are applied consistently and generally, there are no transfers between the levels of fair value hierarchy unless the circumstances change warranting such transfer.
The principal accounting policies are set out below: Operating Cycle
Assets and liabilities other than those relating to long-term contracts (i.e. supply or construction contracts) are classified as current if it is expected to realize or settle within 12 months after the balance sheet date.
In case of long-term contracts, the time between acquisition of assets for processing and realisation of the entire proceeds under the contracts in cash or cash equivalent exceeds one year. Accordingly, for classification of assets and liabilities related to such contracts as current, duration of each contract is considered as its operating cycle, except for amounts with respect to legal cases or long pending disputes.
3.3 Interests in Jointly Controlled Operations (Refer note 50)
A jointly controlled operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Company undertakes its activities under jointly controlled operations, the Company as a joint operator recognises in relation to its interest in a jointly controlled operation:
1. its assets, including its share of any assets held jointly;
2. its liabilities, including its share of any liabilities incurred jointly;
3. its revenue from the sale of its share of the output arising from the jointly controlled operation; and
4. its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues, and expenses relating to its interest in a jointly controlled operation in accordance with the Ind AS applicable to the assets, liabilities, revenues, and expenses.
When a Company transacts with a jointly controlled operation in which a Company is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the jointly controlled operation, and gains and losses resulting from the transactions are recognised in the Companyâs financial statements only to the extent of other partiesâ interests in the jointly controlled operation.
When a Company transacts with a jointly controlled operation in which a Company is a joint operator (such as a purchase of assets), the Company does not recognise its share of the gains and losses until it resells those assets to a third party.
3.4 Non-current assets held for sale
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction (rather than through continuing use) and a sale is considered highly probable and is expected to qualify for recognition as a completed sale within one year from the date of classification. They are measured at the lower of their carrying amount and fair value less cost to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale and are presented separately from the other assets in the balance sheet. The liabilities related to the assets held for sale are presented separately from other liabilities in the balance sheet.
The Company derives revenue principally from following streams:
⢠Sale of products (towers and cables)
⢠Sale of services
⢠Construction contracts
⢠Other Operating Revenue
Revenue from sale of products is recognised upon satisfaction of performance obligations i.e âover timeâ or âin timeâ based on an assessment of the transfer of control as per the terms of the contract.
In determining the transaction price for sale of product, the Company considers the effects of variable consideration, if any. Invoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
Services rendered include tower testing and designing, operating and maintenance and other services.
Revenue from providing services is recognised in the accounting period in which the services are rendered.
Invoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
The Company recognises revenue from engineering, procurement and construction contracts (âEPCâ) over the period of time, as performance obligations are satisfied over time due to continuous transfer of control to the customer. EPC contracts are generally accounted for as a single performance obligation as it involves complex integration of goods and services.
The revenue is recognised to the extent of transaction price allocated to the performance obligation satisfied. Transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer excluding amounts collected on behalf of a third party.
Costs to obtain a contract which are incurred regardless of whether the contract was obtained are charged-off in profit or loss immediately in the period in which such costs are incurred. Incremental costs of obtaining a contract, if any, and costs incurred to fulfil a contract are amortised over the period of execution of the contract in proportion to the progress measured in terms of a proportion of actual cost incurred to-date, to the total estimated cost attributable to the performance obligation.
The performance obligations are satisfied over time as the work progresses. The Company recognises revenue using input method (i.e percentage-of-completion method), based primarily on contract cost incurred to date compared to total estimated contract costs. Changes to total estimated contract costs, if any, are recognised in the period in which they are determined as assessed at the contract level. If the consideration in the contract includes price variation clause or there are amendments in contracts, the Company estimates the amount of consideration to which it will be entitled in exchange for work performed.
Due to the nature of work required to be performed on many of the performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgement. Variability in the transaction price arises primarily due to liquidated damages, price variation clauses, changes in scope, incentives, discounts, if any. The Company considers its experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration
to which it will be entitled and determining whether the estimated variable consideration should be constrained. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.
Progress billings are generally issued upon completion of certain phases of the work as stipulated in the contract. Billing terms of the over-time contracts vary but are generally based on achieving specified milestones. The difference between the timing of revenue recognised and customer billings result in changes to contract assets and contract liabilities. Contractual retention amounts billed to customers are generally due upon expiration of the contract period.
The contracts generally result in revenue recognised in excess of billings which are presented as contract assets on the statement of financial position. Amounts billed and due from customers are classified as receivables on the statement of financial position. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component since it is usually intended to provide customer with a form of security for Companyâs remaining performance as specified under the contract, which is consistent with the industry practice. Contract liabilities represent amounts billed to customers in excess of revenue recognised till date. A liability is recognised for advance payments and it is not considered as a significant financing component since it is used to meet working capital requirements at the time of project mobilization stage. The same is presented as contract liability in the balance sheet.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known to management.
For construction contracts the control is transferred over time and revenue is recognised based on
the extent of progress towards completion of the performance obligations. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
3.5.4 Other Operating Revenue:
Export benefits under Mercantile Export from India Scheme (MEIS), Service Export from India Scheme (SEIS), Duty Drawback benefits and Remission of Duties and Taxes on Export Products Scheme (RoDTEP) are accounted as revenue on accrual basis as and when export of goods take place, where there is a reasonable assurance that the benefit will be received and the Company will comply with all the attached conditions.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate for and presented within other income. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented within other income.
The Company assesses whether a contract is or contains a lease, at inception of the contract. Leases are recognised as right-of-use assets and a corresponding liability at the date at which the leased asset is available for use by the Company.
Assets and liabilities arising from a lease are initially measured on present value basis. Lease liabilities include the net present value of the following lease payments:
⢠Lease payments less any lease incentives receivable
⢠Variable lease payments that vary to reflect changes in market rental rates, if any
⢠Amounts expected to be payable by the Company under residual value guarantees, if any
⢠Exercise price of the purchase option, if the Company is reasonably certain to exercise that option, and
⢠Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using Companyâs incremental borrowing rate (since the interest rate implicit in the lease cannot be readily determined). Incremental borrowing rate is the rate of interest that the Company would have to pay to borrow over a similar term, and a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on any key variable / condition, are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
As a result of the COVID-19 pandemic, rent concessions have been granted to lessees. Amendment to Ind AS 116 âLeasesâw.r.t âCovid-19-Related Rent Concessionsâ provides lessees with an option to treat qualifying rent concessions in the same way as they would if they were not lease modifications. The Company has applied the practical expedient for all qualifying rent concessions and these concessions have been accounted as variable lease payments in the statement of profit and loss in the period in which they are granted.
Right-of-use assets are measured at cost comprising the following:
⢠The amount of the initial measurement of lease liability
⢠Any lease payments made at or before the commencement date less any lease incentives received
⢠Any initial direct costs and
⢠Restoration costs.
Right-of-use assets are depreciated over the lease term on a straight-line basis.
As a practical expedient, the company has recognised payments associated with short-term leases and leases of low-value assets on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Lease income from operating leases where the Company is lessor is recognised in income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
3.7 Foreign currency transactions
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency). For each branch and jointly controlled operation situated outside India, the Company determines the functional currency and items included in the financial statements of each entity are measured using that functional currency of that respective branch and jointly controlled operation. The functional and presentation currency of the Company is Indian Rupees (INR). The financial statements are presented in Indian rupees (INR).
3.7.1 Accounting for transactions and balances in foreign currencies
Foreign currency transactions are recorded in the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain and losses resulting from the settlement of such transactions and from translation of monetary assets and liabilities denominated in foreign currency at the year end exchange rate are generally recognised in profit or loss.
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 foreign currencies are not retranslated at year end.
In case of consideration paid or received in advance for foreign currency denominated contracts, the related expense or income is recognised using the rate on the date of transaction on initial recognition of a related asset or liability.
Exchange differences on settlement or translation of monetary items are recognised in the Statement of Profit and Loss in the period in which they arise except for:
⢠exchange differences on foreign currency borrowings relating to qualifying 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.
⢠exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 3.21 below for hedging accounting policies);
⢠exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to the consolidated statement of profit and loss on repayment of the monetary items.
3.7.2 Translation of foreign operations whose functional currency is other than presentation currency:
1. Assets and liabilities, both monetary and non- monetary are translated at the rates prevailing at the end of each reporting period and all resulting exchange differences are accumulated in the exchange differences on translation of foreign operations in the statement of changes in equity.
2. I ncome and expense items are translated at the exchange rates at the dates of the transactions and all resulting exchange differences are accumulated in the exchange differences on translation of foreign operations in the statement of changes in equity.
On the disposal of a foreign operation all of the exchange differences accumulated in other comprehensive income relating to that particular foreign operation attributable to the owners of the Company is reclassified in the statement of profit and loss.
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. The Company considers a period of twelve months or more as a substantial period of time.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Finance expenses are recognised immediately in the Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs policy on borrowing costs.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
3.9 Employee benefits
3.9.1 Long Term Employee Benefits:
(a) Defined Contribution Plans:
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund and provident fund are recognised as expense when employees have rendered services entitling them to the contributions. The Company has no further payment obligation once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expenses when they are due.
(b) Defined Benefit Plans:
The Company has established âKEC International Limited Provident Fundâ in respect of employees other than factory workers, to which both the employee and the employer make contribution equal to 12% of the employeeâs basic salary. The Companyâs contribution to the provident fund for all employees are charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall between the return from its investments and the administered interest rate, the same is required to be provided for by the Company.
The defined benefit plan of Company and its jointly controlled operations at India i.e. gratuity plan, provides for lump sum payment to vested employees on retirement / separation of an amount equivalent to 15 days salary for completed years of service and on death while in employment an amount equivalent to 15 days salary for anticipated years of service in terms of Gratuity scheme of the Company or as per payment of the Gratuity Act, whichever is higher. Vesting occurs upon completion of five years of service.
In case of jointly controlled operation at Al-Sharif Group and KEC Ltd Company and Saudi Arabia (Al Sharif JV), the defined benefit plan i.e. End Service Benefit (ESB), provides for lump sum payment to vested employees on resignation/ termination or retirement on an amount equivalent to 15 days salary upto 5 years and one month salary from 6th year onwards for each completed year of service or part thereof on proportionate basis according to the law applicable in Saudi. Vesting occurs upon completion of two years of service.
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.
Defined benefit costs are categorised as follows:
⢠Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
⢠Net interest expense or income; and
⢠Remeasurement
Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss.
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item âEmployee benefits expenseâ.
The retirement benefit obligation recognised in the balance sheet represents the actual 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.
Company has liabilities for earned leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations 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 appropriate 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.
The obligations are presented as current liabilities in the balance sheet as the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
3.9.2 Short-term employee benefit:
Short term employee benefits such as Salaries, wages, short term compensated absences, bonus, ex gratia and performance linked rewards including non-monetary benefits that are expected to be settled wholly within 12 months after the end of period in which the employees rendered the related services are recognised in respect of employee services upto the end of reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefits obligations in the balance sheet.
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.
3.10 Taxation
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
3.10.1 Current tax
The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period in the countries where the Company, its branches and jointly controlled operations operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretations. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
3.10.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities 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.
Deferred tax liabilities are recognised for taxable temporary differences associated with interests in jointly controlled operations except where 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 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.
3.11 Property, plant and equipment
Property, plant and equipment (except freehold land) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to Statement of profit and loss during the reporting period in which they are incurred. Freehold land is not depreciated.
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. 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.
Depreciation commences when the assets are ready for their intended use. Depreciation on Property, Plant and Equipment has been provided on the straight-line method as per the useful life specified in Schedule II to the Companies Act, 2013, except in the case of assets where the useful life was determined based on technical advice. The estimate of the useful life of the assets has been based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. The estimated useful life of these Property, Plant and Equipment is mentioned below:
|
Particulars |
Estimated useful life (in years) |
|
Buildings (including roads and |
3- 60 |
|
temporary structures) |
|
|
Plant and Equipment / Office |
5-25 |
|
Equipment |
|
|
Erection tools |
3-5 |
|
Furniture and Fixtures |
10 |
|
Vehicles |
6-8 |
|
Computers |
3-6 |
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.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when entity has legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and credits only if, it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
3.10.3 Current and deferred tax for the year
Current and deferred tax are recognised in the 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.
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.
Capital work-in-progress comprises of assets in the course of construction for production or/and supply of goods or services or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. 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. Costs associated with the commissioning of an asset are capitalised where the asset is available for use and commissioning has been completed. Capital work-in-progress also includes spares which we are yet to be put to use.
3.12 Intangible assets3.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 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.
3.12.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any on the same basis as intangible assets that are acquired separately.
3.12.3 Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
3.12.4 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in the Statement of Profit and Loss when the asset is derecognised.
3.12.5 Useful lives of intangible assets
Brand in respect of the power transmission business acquired under the High Court approved Composite Scheme of Arrangement in an earlier year is amortised by the Company in terms of the said Scheme over its useful life, which based on an expert opinion is estimated to be of 20 years. Non-compete fees paid on acquisition of Spur Infrastructure Private Limited are amortized on straight line basis over the term of non-compete agreement i.e. 3 years.
Computer Software are amortised on straight line basis over the estimated useful life ranging between 4-6 years.
3.13 Impairment of Non-current assets
At the end of each reporting period, the Company reviews the carrying amounts of its Property, plant and equipment, intangible and other non-current 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. For the purpose of assessing impairment, assets are grouped at the lowest level, for which there are separately identifiable cash inflows, which are largely independent of the cash inflows from other assets or group of assets (cash-generating unit).
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.
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 the Statement of Profit and Loss.
3.14 Investments
Investment in equity shares of subsidiaries are measured at cost. Investments in equity instruments are measured at fair value through other comprehensive income.
The Company classifies its financial assets in the measurement categories as those to be measured subsequently at fair value (through other comprehensive income or through profit and loss) and those measured at amortised cost. The classification depends on the Companyâs business model for managing the financial asset and the contractual terms of the cash flows. (Also refer 3.17)
Investment in preference shares of subsidiaries are classified as equity since the company has the option of early conversion with fixed ratio and also there is no requirement for mandatory dividend payout.
3.14.1 Impairment of investments in subsidiaries
I nvestment in subsidiaries are carried at cost and are tested for Impairment in accordance with Ind AS 36, âImpairment of assetsâ. The carrying amount of investment is tested for impairment as a single asset by comparing itâs recoverable amount with its carrying amount, any impairment loss recognised reduces the carrying amount of investment.
Inventories (Raw material, work-in-progress, finished goods, stores and spares) are stated at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Scrap is valued at net realisable value.
Cost of work-in-progress and finished goods includes material cost, labour cost, and manufacturing overheads absorbed on the basis of normal capacity of production.
3.16 Provisions and contingencies
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event; it is probable that the Company will be required to settle the obligation in respect of which a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the managementâs 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, measured and disclosed as provisions in financial statements. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
Contingent assets: 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. Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.
Financial assets except trade receivable and financial liabilities are initially measured at fair value. Trade receivables are initially measured at transaction 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 (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 or loss are recognised immediately in the Statement of Profit and Loss.
Purchases or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
3.18 Classification and Measurement of Financial Assets3.18.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Income is recognised on an effective interest basis for financial assets other than those financial assets classified as FVTPL or FVOCI. Interest income is recognised in the Statement of Profit and Loss.
3.18.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive
income on initial recognition. Gains or losses arising on remeasurement are recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item.
3.18.3 Dividend income is recognised when the right to receive payment has been established.3.18.4 Impairment of financial assets
The Company recognizes loss allowances on a forward looking basis using the expected credit loss (ECL) model for all the financial assets except for trade receivables. Loss allowance for all financial assets is measured at an amount equal to lifetime ECL. The Company recognises impairment loss on trade receivables using expected credit loss model which involves use of a provision matrix constructed on the basis of historical credit loss experience and adjusted for forward-looking information as permitted under Ind AS 109. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the Statement of Profit and Loss.
3.18.5 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 and does not retain control of the asset. The Company continues to recognise the asset to the extent of Companyâs continuing involvement.
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 the Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
3.19 Classification and Measurement Financial liabilities
and equity instruments
3.19.1 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.
3.19.2 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.
3.19.3. Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method.
3.19.31 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.
3.19.32 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair value and, if not designated as at FVTPL, are subsequently measured at the higher of:
⢠the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109, âFinancial Instrumentsâ; and
⢠t he amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115, âRevenue from contract with customersâ.
The Financial guarantees issued to third parties on behalf of subsidiaries are recorded at fair value. The same is recognised as Other income in the statement of Profit and Loss.
3.19.33 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations
3.21.1 Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the 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 the Statement of Profit and Loss. For cash flow hedging relationships that span multiple reporting periods, the ineffectiveness for the period is calculated as the difference between the cumulative ineffectiveness as at reporting date (based on the âlesser ofâ the cumulative change in the fair value of the hedging instrument and the hedged item), and the cumulative ineffectiveness reported in prior periods.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to the Statement of Profit and 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 and 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 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 the 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 the Statement of Profit and Loss.
Where the hedged item subsequently results in the recognition of a non-financial asset, both the deferred hedging gains and losses and the deferred time value of the option contracts, if any, are included within the initial cost of the asset. The deferred amounts are ultimately recognised in profit or loss as the hedged item affects profit or loss through cost of material consumed.
are discharged, cancelled or have expired. An exchange with a new 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 and Loss.
3.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks, including foreign exchange forward contracts, and commodity contracts - Over the Counter (OTC) derivatives. Derivatives are only used for economic hedging purposes and not as a speculative investments.
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
Mar 31, 2022
1. GENERAL INFORMATION
KEC International Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The registered office of the Company is located at RPG House, 463, Dr. Annie Besant Road, Worli, Mumbai- 400 030.
The Company is primarily engaged in Engineering, Procurement and Construction business (EPC) relating to infrastructure interalia products, projects and systems and related activities for power transmission, distribution, railway, civil, cable and other EPC businesses.
2. NEW AND AMENDED STANDARDS ADOPTED BY THE COMPANY
The Company has applied the following amendments to Ind AS for the first time for their annual reporting period commencing April 01,2021:
⢠Extension of COVID-19 related concessions -amendments to Ind AS 116
⢠Interest rate benchmark reform - amendments to Ind AS 109, Financial Instruments, Ind AS 107, Financial Instruments: Disclosures, Ind AS 104, Insurance Contracts and Ind AS 116, Leases.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods
Amendments applicable from April 01,2022
The Ministry of Corporate Affairs has vide notification dated March 23, 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends certain accounting standards, and are effective April 01, 2022. These amendments are not expected to have a material impact on the company in the current or future reporting periods and on foreseeable future transactions.
Reclassifications consequent to amendments to Schedule III
The Ministry of Corporate Affairs amended the Schedule III to the Companies Act, 2013 on March 24, 2021 to increase the transparency and provide additional disclosures to users of financial statements. These amendments are effective from April 01,2021.
Consequent to above, the company has changed the classification/ presentation of (i) current maturities of longterm borrowings (ii) security deposits
⢠The current maturities of long-term borrowings (including interest accrued) has now been included in the âCurrent borrowingsâ line item. Previously, current maturities of long-term borrowings and interest accrued were included in âother financial liabilitiesâ line item.
⢠security deposits (which meet the definition of a financial asset as per Ind AS 32) have been included in âother financial assetsâ line item. Previously, these deposits were included in âloansâ line item.
The company has reclassified comparative amounts of security deposits amounting to '' 13.24 crore and '' 34.26 crore from non-current and current loans respectively to Other financial assets (non-current and current respectively) to conform with current year presentation as per the requirements of Ind AS 1.
3. SIGNIFICANT ACCOUNTING POLICIES3.1 Statement of compliance
The financial statements comply in all material aspects with Ind AS notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
3.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments and plan assets under defined benefit plans, that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2, âInventoriesâ or value in use in Ind AS 36 âImpairment of Assetsâ or net present value of lease payments in Ind AS 116 âLeasesâ, as applicable.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below: Operating Cycle
Assets and liabilities other than those relating to longterm contracts (i.e. supply or construction contracts) are classified as current if it is expected to realize or settle within 12 months after the balance sheet date.
In case of long-term contracts, the time between acquisition of assets for processing and realisation of the entire proceeds under the contracts in cash or cash equivalent exceeds one year. Accordingly, for classification of assets and liabilities related to such contracts as current, duration of each contract is considered as its operating cycle, except for amounts with respect to legal cases or long pending disputes.
3.3 Interests in jointly controlled operations (Refer Note 50)
A jointly controlled operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Company undertakes its activities under jointly controlled operations, the Company as a joint operator recognises in relation to its interest in a jointly controlled operation:
1. its assets, including its share of any assets held jointly;
2. its liabilities, including its share of any liabilities incurred jointly;
3. i ts revenue from the sale of its share of the output arising from the jointly controlled operation; and
4. its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues, and expenses relating to its interest in a jointly controlled operation in accordance with the Ind AS applicable to the assets, liabilities, revenues, and expenses.
When a Company transacts with a jointly controlled operation in which a Company is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the jointly controlled operation, and gains and losses resulting from the transactions are recognised
in the Companyâs financial statements only to the extent of other partiesâ interests in the jointly controlled operation.
When a Company transacts with a jointly controlled operation in which a Company is a joint operator (such as a purchase of assets), the Company does not recognise its share of the gains and losses until it resells those assets to a third party.
3.4 Non-current assets held for sale
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less cost to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale and are presented separately from the other assets in the balance sheet. The liabilities related to the assets held for sale are presented separately from other liabilities in the balance sheet.
The Company derives revenue principally from following streams:
⢠Sale of products (towers and cables)
⢠Sale of services
⢠Construction contracts
⢠Other Operating Revenue
Revenue from sale of products is recognised upon satisfaction of performance obligations i.e âover timeâ or âin timeâ based on an assessment of the transfer of control as per the terms of the contract.
In determining the transaction price for sale of product, the Company considers the effects of variable consideration, if any. Invoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
Services rendered include tower testing and designing, operating and maintenance and other services.
Revenue from providing services is recognised in the accounting period in which the services are rendered.
I nvoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
The Company recognises revenue from engineering, procurement and construction contracts (âEPCâ) over the period of time, as performance obligations are satisfied over time due to continuous transfer of control to the customer. EPC contracts are generally accounted for as a single performance obligation as it involves complex integration of goods and services.
The performance obligations are satisfied over time as the work progresses. The Company recognises revenue using input method (i.e percentage-of-completion method), based primarily on contract cost incurred to date compared to total estimated contract costs. Changes to total estimated contract costs, if any, are recognised in the period in which they are determined as assessed at the contract level. If the consideration in the contract includes price variation clause or there are amendments in contracts, the Company estimates the amount of consideration to which it will be entitled in exchange for work performed.
Due to the nature of work required to be performed on many of the performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgement. Variability in the transaction price arises primarily due to liquidated damages, price variation clauses, changes in scope, incentives, discounts, if any. The Company considers its experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration to which it will be entitled and determining whether the estimated variable consideration should be constrained. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.
Progress billings are generally issued upon completion of certain phases of the work as stipulated in the contract. Billing terms of the over-time contracts vary but are generally based on achieving specified milestones. The difference between the timing of revenue recognised and customer billings result in changes to contract assets and contract liabilities. Contractual retention amounts billed to customers are generally due upon expiration of the contract period.
The contracts generally result in revenue recognised in excess of billings which are presented as contract assets on the statement of financial position. Amounts billed and due from customers are classified as receivables on the statement of financial position. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component since it is usually intended to provide customer with a form of security for Companyâs remaining performance as specified under the contract, which is consistent with the industry practice. Contract liabilities represent amounts billed to customers in excess of revenue recognised till date. A liability is recognised for advance payments and it is not considered as a significant financing component since it is used to meet working capital requirements at the time of project mobilization stage. The same is presented as contract liability in the balance sheet.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known to management.
For construction contracts the control is transferred over time and revenue is recognised based on the extent of progress towards completion of the performance obligations. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
3.5.4 Other Operating Revenue:
Export benefits under Mercantile Export from India Scheme (MEIS), Service Export from India Scheme (SEIS), Duty Drawback benefits and Remission of Duties and Taxes on Export Products Scheme (RoDTEP) are accounted as revenue on accrual basis as and when export of goods take place, where there is a reasonable assurance that the benefit will be received and the Company will comply with all the attached conditions.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate for and presented within other income. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income
determined. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated at year end.
I n case of consideration paid or received in advance for foreign currency denominated contracts, the related expense or income is recognised using the rate on the date of transaction on initial recognition of a related asset or liability.
Exchange differences on settlement or translation of monetary items are recognised in the Statement of Profit and Loss in the period in which they arise except for:
⢠exchange differences on foreign currency borrowings relating to qualifying 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
⢠exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 3.21 below for hedging accounting policies);
⢠exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to the statement of profit and loss on repayment of the monetary items
3.7.2 Translation of foreign operations whose functional currency is other than presentation currency:
1. Assets and liabilities, both monetary and nonmonetary are translated at the rates prevailing at the end of each reporting period and all resulting exchange differences are accumulated in the exchange differences on translation of foreign operations in the statement of changes in equity.
2. Income and expense items are translated at the exchange rates at the dates of the transactions and all resulting exchange differences are accumulated in the exchange differences on translation of foreign operations in the statement of changes in equity.
On the disposal of a foreign operation all of the exchange differences accumulated in other comprehensive income relating to that particular foreign operation attributable to the owners of the Company is reclassified in the statement of profit and loss.
and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented within other income.
The Company assesses whether a contract is or contains a lease, at inception of the contract. Leases are recognised as right-of-use assets and a corresponding liability at the date at which the leased asset is available for use by the Company.
Assets and liabilities arising from a lease are initially measured on present value basis. Lease liabilities include the net present value of the following lease payments:
⢠Lease payments less any lease incentives receivable
⢠Variable lease payments that vary to reflect changes in market rental rates, if any
⢠Amounts expected to be payable by the Company under residual value guarantees, if any
⢠Exercise price of the purchase option, if the Company is reasonably certain to exercise that option, and
⢠Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using Companyâs incremental borrowing rate (since the interest rate implicit in the lease cannot be readily determined). Incremental borrowing rate is the rate of interest that the Company would have to pay to borrow over a similar term, and a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on any key variable / condition, are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
As a result of the COVID-19 pandemic, rent concessions have been granted to lessees. Amendment to Ind AS 116 âLeasesâw.r.t âCovid-19-Related Rent Concessionsâ provides lessees with an option to treat qualifying rent concessions in the same way as they would if they were not lease modifications. The Company has applied the practical expedient for all qualifying rent concessions and these concessions have been accounted as variable lease
payments in the statement of profit and loss in the period in which they are granted.
Right-of-use assets are measured at cost comprising the following:
⢠The amount of the initial measurement of lease liability
⢠Any lease payments made at or before the commencement date less any lease incentives received
⢠Any initial direct costs and
⢠Restoration costs.
Right-of-use assets are depreciated over the lease term on a straight-line basis.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Lease income from operating leases where the Company is lessor is recognised in income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
3.7 Foreign currency transactions
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency). For each branch and jointly controlled operation situated outside India, the Company determines the functional currency and items included in the financial statements of each entity are measured using that functional currency of that respective branch and jointly controlled operation. The functional and presentation currency of the Company is Indian Rupees (INR). The financial statements are presented in Indian rupees (INR).
3.7.1 Accounting for transactions and balances in foreign currencies
Foreign currency transactions are recorded in the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain and losses resulting from the settlement of such transactions and from translation of monetary assets and liabilities denominated in foreign currency at the year end exchange rate are generally recognised in profit or loss.
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
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. The Company considers a period of twelve months or more as a substantial period of time.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Finance expenses are recognised immediately in the Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs policy on borrowing costs.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
3.9 Employee benefits3.9.1 Long Term Employee Benefits:
(a) Defined Contribution Plans:
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund and provident fund are recognised as expense when employees have rendered services entitling them to the contributions. The Company has no further payment obligation once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expenses when they are due.
(b) Defined Benefit Plans:
The Company has established âKEC International Limited Provident Fundâ in respect of employees other than factory workers, to which both the employee and the employer make contribution equal to 12% of the employeeâs basic salary. The Companyâs contribution to the provident fund for all employees are charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall between the return from its investments and the administered interest rate, the same is required to be provided for by the Company.
The defined benefit plan of Company and its jointly controlled operations at India i.e. gratuity plan, provides for lump sum payment to vested employees on retirement / separation of an amount equivalent to 15 days salary for completed years of service and on death while in employment an amount equivalent to 15 days salary for anticipated years of service in terms of Gratuity scheme of the Company or as per payment of the Gratuity Act, whichever is higher. Vesting occurs upon completion of five years of service.
In case of jointly controlled operation at Al-Sharif Group and KEC Ltd Company and Saudi Arabia (Al Sharif JV), the defined benefit plan i.e. End Service Benefit (ESB), provides for lump sum payment to vested employees on resignation/ termination or retirement on an amount equivalent to 15 days salary upto 5 years and one month salary from 6th year onwards for each completed year of service or part thereof on proportionate basis according to the law applicable in Saudi. Vesting occurs upon completion of two years of service.
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.
Defined benefit costs are categorised as follows:
⢠Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
⢠Net interest expense or income; and
⢠Remeasurement
Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other
comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss.
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item âEmployee benefits expenseâ.
The retirement benefit obligation recognised in the balance sheet represents the actual 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.
(c) Compensated absences:
Company has liabilities for earned leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations 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 appropriate 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.
The obligations are presented as current liabilities in the balance sheet as the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
3.9.2 Short-term employee benefit:
Liabilities for wages & salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of period in which the employees rendered the related services are recognised in respect of employee services upto the end of reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefits obligations in the balance sheet.
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.
Short term employee benefits also cover the Companyâs liability for sick and earned leave.
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period in the countries where the Company, its branches and jointly controlled operations operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretations. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
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.
Deferred tax liabilities are recognised for taxable temporary differences associated with interests in jointly controlled operations except where 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 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.
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.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when entity has legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and credits only if, it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
3.10.3 Current and deferred tax for the year
Current and deferred tax are recognised in the 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.
3.11 Property, plant and equipment
Property, plant and equipment (except freehold land) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to Statement of profit and loss during the reporting period in which they are incurred. Freehold land is not depreciated.
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. 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.
Depreciation commences when the assets are ready for their intended use. Depreciation on Property, Plant and Equipment has been provided on the straight-line method as per the useful life specified in Schedule II to the Companies Act, 2013, except in the case of assets where the useful life was determined based on technical advice. The estimate of the useful life of the assets has been based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. The estimated useful life of these Property, Plant and Equipment is mentioned below:
|
Particulars |
Estimated useful life (in years) |
|
Buildings (including roads and temporary structures) |
3- 60 |
|
Plant and Equipment / Office Equipment |
5-25 |
|
Erection tools |
3-5 |
|
Furniture and Fixtures |
10 |
|
Vehicles |
6-8 |
|
Computers |
3-6 |
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.
Capital work-in-progress
Capital work-in-progress comprises of assets in the course of construction for production or/and supply of goods or services or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. 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. Costs associated with the commissioning of an asset are capitalised where the asset is available for use and commissioning has been completed.
3.12 Intangible assets3.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 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.
3.12.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any on the same basis as intangible assets that are acquired separately.
3.12.3 Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
3.12.4 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in the Statement of Profit and Loss when the asset is derecognised.
3.12.5 Useful lives of intangible assets
Brand in respect of the power transmission business acquired under the High Court approved Composite Scheme of Arrangement in an earlier year is amortised by the Company in terms of the said Scheme over its useful life, which based on an expert opinion is estimated to be of 20 years. Non-compete fees paid on acquisition of Spur Infrastructure Private Limited are amortized on straight line basis over the term of non-compete agreement i.e. 3 years.
Computer Software are amortised on straight line basis over the estimated useful life ranging between 4-6 years.
3.13 Impairment of Non-current assets
At the end of each reporting period, the Company reviews the carrying amounts of its Property, plant and equipment, intangible and other non-current 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. For the purpose of assessing impairment, assets are grouped at the lowest level, for which there are separately identifiable cash inflows, which are largely independent of the cash inflows from other assets or group of assets (cash-generating unit).
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.
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 cashgenerating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit and Loss.
I nvestment in equity shares of subsidiaries are measured at cost. Investments in equity instruments are measured at fair value through other comprehensive income.
The Company classifies its financial assets in the measurement categories as those to be measured subsequently at fair value (through other comprehensive income or through profit and loss) and those measured at amortised cost. The classification depends on the Companyâs business model for managing the financial asset and the contractual terms of the cash flows. (Also refer 3.17)
Investment in preference shares of subsidiaries are classified as equity since the company has the option of early conversion with fixed ratio and also there is no requirement for mandatory dividend payout.
3.14.1 Impairment of investments in subsidiaries
Investment in subsidiaries are carried at cost and are tested for Impairment in accordance with Ind AS 36, âImpairment of assetsâ. The carrying amount of investment is tested for impairment as a single asset by comparing itâs recoverable amount with its carrying amount, any impairment loss recognised reduces the carrying amount of investment.
Inventories (Raw material, work-in-progress, finished goods, stores and spares and erection material) are stated at the lower of cost and net realisable value. Cost of purchased material is determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion
and costs necessary to make the sale. Scrap is valued at net realisable value.
Cost of work-in-progress and finished goods includes material cost, labour cost, and manufacturing overheads absorbed on the basis of normal capacity of production.
3.16 Provisions and contingencies
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event; it is probable that the Company will be required to settle the obligation in respect of which a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the managementâs 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, measured and disclosed as provisions in financial statements. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
Contingent assets: 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. Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
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 Profit or 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 or loss are recognised immediately in the Statement of Profit and Loss.
Purchases or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
3.18 Classification and Measurement of Financial Assets3.18.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Effective interest method
I ncome is recognised on an effective interest basis for financial assets other than those financial assets classified as FVTPL or FVOCI. Interest income is recognised in the Statement of Profit and Loss.
3.18.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. Gains or losses arising on remeasurement are recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item.
3.18.3 Dividend income is recognised when the right to receive payment has been established.
3.18.4 Impairment of financial assets
The Company recognizes loss allowances on a forward looking basis using the expected credit loss (ECL) model for all the financial assets except for trade receivables. Loss allowance for all financial assets is measured at an amount equal to lifetime ECL. The Company recognises impairment loss on trade receivables using expected credit loss model which involves use of a provision matrix constructed on the basis of historical credit loss experience and adjusted for forward-looking information as permitted under Ind AS 109. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the Statement of Profit and Loss.
3.18.5. 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 and does not retain control of the asset. The Company continues to recognise the asset to the extent of Companyâs continuing involvement.
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 the Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
3.19 Classification and Measurement Financial liabilities and equity instruments
3.19.1 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.
3.19.2 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.
Financial liabilities are subsequently measured at amortised cost using the effective interest method.
3.19.3.1 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.
3.19.3.2 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair value and, if not designated as at FVTPL, are subsequently measured at the higher of:
⢠the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109, âFinancial Instrumentsâ; and
⢠the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115, âRevenue from contract with customersâ.
The Financial guarantees issued to third parties on behalf of subsidiaries are recorded at fair value. The same is recognised as Other income in the statement of Profit and Loss.
3.19.3.3 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 new 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 and Loss.
3.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks, including foreign exchange forward contracts, and commodity contracts - Over the Counter (OTC) derivatives. Derivatives are only used for economic hedging purposes and not as a speculative investments.
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 the 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 the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged item.
The Company designates certain hedging instruments, which include derivatives in respect of foreign currency risk and, commodity price risk as cash flow hedges. Hedges of foreign exchange risk and commodity price risk for highly probable forecast transactions are accounted for as cash flow hedges. Hedges of the fair value of recognised assets or liabilities are accounted for as fair value 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 the hedged risk.
3.21.1 Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the 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 the Statement of Profit and Loss. For cash flow hedging relationships that span multiple reporting periods, the ineffectiveness for the period is calculated as the difference between the cumulative ineffectiveness as at reporting date (based on the âlesser ofâ the cumulative change in the fair value of the hedging instrument and the hedged item), and the cumulative ineffectiveness reported in prior periods.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above are reclassified to the Statement of Profit and 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 and 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 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 i
Mar 31, 2019
1. SIGNIFICANT ACCOUNTING POLICIES
1.1 Statement of compliance
The financial statements comply in all material aspects with Ind AS notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the act.
2.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments and employee benefit obligations, that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 17, âLeasesâ and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2, âInventoriesâ or value in use in Ind AS 36 âImpairment of Assetsâ, as applicable.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1 , 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
Operating Cycle
Assets and liabilities other than those relating to long-term contracts (i.e. supply or construction contracts) are classified as current if it is expected to realise or settle within 12 months after the balance sheet date.
In case of long-term contracts, the time between acquisition of assets for processing and realisation of the entire proceeds under the contracts in cash or cash equivalent exceeds one year. Accordingly, for classification of assets and liabilities related to such contracts as current, duration of each contract is considered as its operating cycle.
3.3 Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Company undertakes its activities under joint operations, the Company as a joint operator recognises in relation to its interest in a joint operation:
1. its assets, including its share of any assets held jointly;
2. its liabilities, including its share of any liabilities incurred jointly;
3. its revenue from the sale of its share of the output arising from the joint operation;
4. i ts share of the revenue from the sale of the output by the joint operation; and
5. its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues, and expenses relating to its interest in a joint operation in accordance with the Ind AS applicable to the assets, liabilities, revenues, and expenses.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Companyâs financial statements only to the extent of other partiesâ interests in the joint operation.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a purchase of assets), the Company does not recognise its share of the gains and losses until it resells those assets to a third party.
3.4 Non-current assets held for sale
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less cost to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale and are presented separately from the other assets in the balance sheet. The liabilities related to the assets held for sale are presented separately from other liabilities in the balance sheet.
3.5 Revenue recognition
The Company derives revenue principally from following streams:
- Sale of products (towers and cables)
- Sale of services
- Construction contracts
- Other Operating Revenue
3.5.1 Sale of products:
Revenue from sale of products is recognised upon satisfaction of performance obligations, i.e. at a point of time, which occurs when the control is transferred to the customer.
Customers obtain control as per the incoterms. In determining the transaction price for sale of product, the Company considers the effects of variable consideration, if any. Invoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
3.5.2 Sale of services:
Services rendered include tower testing and designing, operating and maintenance and other services.
Revenue from providing services is recognised in the accounting period in which the services are rendered.
Invoices are issued according to contractual terms and are usually payable as per the credit period agreed with the customer.
3.5.3 Construction contracts:
The Company recognises revenue from Engineering, Procurement and Construction contracts (âEPCâ) over the period of time, as performance obligations are satisfied over time due to continuous transfer of control to the customer. EPC contracts are generally accounted for as a single performance obligation as it involves complex integration of goods and services.
The performance obligations are satisfied over time as the work progresses. The Company recognises revenue using input method (i.e. percentage-of-completion method), based primarily on contract cost incurred to date compared to total estimated contract costs. Changes to total estimated contract costs, if any, are recognised in the period in which they are determined as assessed at the contract level. If the consideration in the contract includes price variation clause or there are amendments in contracts, the Company estimates the amount of consideration to which it will be entitled in exchange for work performed.
Due to the nature of the work required to be performed on many of the performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgement. Variability in the transaction price arises primarily due to liquidated damages, price variation clauses, changes in scope, incentives, discounts, if any. The Company considers its experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration to which it will be entitled and determining whether the estimated variable consideration should be constrained. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.
Progress billings are generally issued upon completion of certain phases of the work as stipulated in the contract. Billing terms of the over-time contracts vary but are generally based on achieving specified milestones. The difference between the timing of revenue recognised and customer billings result in changes to contract assets and contract liabilities. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Contractual retention amounts billed to customers are generally due upon expiration of the contract period.
The contracts generally result in revenue recognised in excess of billings which are presented as contract assets on the statement of financial position. Amounts billed and due from customers are classified as receivables on the statement of financial position. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component since it is usually intended to provide customer with a form of security for Companyâs remaining performance as specified under the contract, which is consistent with the industry practice. Contract liabilities represent amounts billed to customers in excess of revenue recognised till date. A liability is recognised for advance payments and it is not considered as a significant financing component since it is used to meet working capital requirements at the time of project mobilisation stage. The same is presented as contract liability in the statement of financial position.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.
For construction contracts the control is transferred over time and revenue is recognised based on the extent of progress towards completion of the performance obligations. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. The percentage of completion is based primarily on contract cost incurred to date compared to total estimated contract cost for each contract in order to reflect the effective completion of the project. This percentage of completion could be based on technical milestones or as per the contractual terms specified. A construction contract is considered completed when the last technical milestone is achieved, which occurs upon contractual transfer of ownership of the asset.
3.5.4 Other Operating Revenue:
Export benefits under Mercantile Export from India Incentive Scheme (MEIS), Service Export from India Scheme (SEIS) and Duty Drawback benefits are accounted as revenue on accrual basis as and when export of goods take place.
3.6 Leasing
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.
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 rental obligations (net of finance charges) 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. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Rental expense from operating leases is generally 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 accounted in the year in which it is incurred. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
3.7 Foreign currency translation
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Companyâs functional and presentation currency is Indian Rupees (INR) and the financial statements are presented in Indian rupees (INR).
In preparing these financial statements, the Company has applied following policies:
A) Foreign Branches of the Company:-
1. Income and expense items are translated at the exchange rates at the dates of the transactions and all resulting exchange differences are recognised in the Statement of Profit and Loss.
2. Non-monetary assets and liabilities are measured in terms of historical cost in foreign currencies and are not translated at the rates prevailing at the end of each reporting period. Monetary assets and liabilities are translated at the rates prevailing at the end of each reporting period. Exchange differences on translations are recognised in the Statement of Profit and Loss.
B) Joint Operations outside India with functional currency other than presentation currency:
1. Assets and liabilities, both monetary and non-monetary are translated at the rates prevailing at the end of each reporting period.
2. Income and expense items are translated at the exchange rates at the dates of the transactions and all resulting exchange differences are accumulated in the foreign currency translation reserve in the statement of changes in equity.
C) Other foreign currency transactions:
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain and losses resulting from the settlement of such transactions and from translation of monetary assets and liabilities denominated in foreign currency at the year end exchange rate are generally recognised in profit or loss. 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.
In case of consideration paid or received in advance for foreign currency denominated contracts, the related expense or income is recognised using the rate on the date of transaction on initial recognition of a related asset or liability.
Exchange differences on monetary items are recognised in the 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
- exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note
3.21 below for hedging accounting policies); and
Forward Exchange Contracts:
The forward exchange contracts are marked to market and gain/loss on such contracts are recognised in the Statement of Profit and Loss at the end of each reporting period, except for those contracts which are designated as hedge instruments.
The net foreign exchange difference reported in statement of profit and loss has been disclosed in Note 40.
3.8 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.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Finance expenses are recognised immediately in the 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.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
3.9 Employee benefits 3.9.1Long-Term Employee Benefits:
(a) Defined Contribution Plans:
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund and provident fund are recognised as expense when employees have rendered services entitling them to the contributions. The Company has no further payment obligation once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expenses when they are due.
(b) Defined Benefit Plans:
The Company has established âKEC International Limited Provident Fundâ in respect of employees other than factory workers, to which both the employee and the employer make contribution equal to 12% of the employeeâs basic salary. The Companyâs contribution to the provident fund for all employees are charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall between the return from its investments and the administered interest rate, the same is required to be provided for by the Company.
The defined benefit plan i.e. gratuity plan, provides for lump sum payment to vested employees on retirement / termination of an amount equivalent to 15 days salary and on death while in employment or on death of an employee an amount equivalent to one month salary, payable for each completed year of service or part thereof in excess of six months in terms of Gratuity scheme of the Company or as per payment of the Gratuity Act, whichever is higher. Vesting occurs upon completion of five years of service. 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.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss. Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense or income; and
- remeasurement
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual 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.
3.9.2 Short-term employee benefit:
Liabilities for wages and salaries, including non monetary benefits that are expected to be settled wholly with in 12 months after the end of period in which the employees rendered the related services are recognised in respect of employee services upto the end of reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
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.
Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit and loss. The obligations are presented as current liabilities in the balance sheet, if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
3.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.10.1 Current tax
The tax currently payable is based on 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 in the countries where the Company, itâs branches and jointly controlled operations operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretations. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
3.10.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities 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.
Deferred tax liabilities are recognised for taxable temporary differences associated with interests in joint operations 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 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.
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.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when entity has legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and credits only if, it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
3.10.3 Current and deferred tax for the year
Current and deferred tax are recognised in the 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.
3.11 Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Freehold land is not depreciated. Leasehold land is amortised over the remaining period of the lease.
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at April 01, 2016 measured as per previous GAAP and use that carrying value as deemed cost of the property, plant and equipment.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
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. 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.
Assets held under finance leases are depreciated over the assetâs useful life or over the shorter of the assetâs useful life and the lease term if there is no reasonable certainty that the Company will obtained ownership at the end of the lease term.
Depreciation on other items of Property, Plant and Equipment has been provided on the straight-line method as per the useful life as estimated by the Management. The estimate of the useful life of the assets has been based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. The estimated useful life of these Property, Plant and Equipment is mentioned below:
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.
3.12 Intangible assets
3.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 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.
3.12.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any on the same basis as intangible assets that are acquired separately.
3.12.3 Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
3.12.4 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of Profit and Loss when the asset is derecognised.
3.12.5 Useful lives of intangible assets
Brand in respect of the power transmission business acquired under the High Court approved Composite Scheme of Arrangement in an earlier year is amortised by the Company in terms of the said Scheme over its useful life, which based on an expert opinion is estimated to be of 20 years. Brand in respect of the railway signaling business transferred to the Company pursuant to the High Court approved Scheme of Amalgamation is amortised over 10 year being its useful life, as estimated by the management.
Computer Software are amortised on straight-line basis over the estimated useful life ranging between 4-6 years.
3.13 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.
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.
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 the Statement of Profit and Loss.
3.14 Investments
Investment in equity shares of subsidiaries are measured at cost. Investments in equity instruments are measured at fair value through other comprehensive income.
The Company classifies its financial assets in the measurement categories as those to be measured subsequently at fair value (through other comprehensive income or through profit and loss) and those measured at amortised cost. The classification depends on the Companyâs business model for managing the financial asset and the contractual terms of the cash flows. (Also refer 3.17)
3.15 Inventories
Inventories (Raw material, work-in-progress, finished goods, stores and spares and erection material) are stated at the lower of cost and net realisable value. Cost of purchased material is determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Scrap is valued at net realisable value.
Cost of work-in-progress and finished goods includes material cost, labour cost, and manufacturing overheads absorbed on the basis of normal capacity of production.
3.16 Provisions and Contingencies
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event; it is probable that the Company will be required to settle the obligation in respect of which 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 costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
Contingent assets: 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. Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
3.17 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 Profit or 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 or loss are recognised immediately in the Statement of Profit and Loss.
Purchases or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
3.18 Financial Assets
3.18.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Effective interest method
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as FVTPL. Interest income is recognised in the Statement of Profit and Loss.
3.18.2 Financial assets at Fair Value Through Profit or Loss (FVTPL)
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. Gains or losses arising on remeasurement are recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item.
3.18.3 Dividend income is recognised when the right to receive payment has been established.
3.18.4 Impairment of financial assets
The Company recognises loss allowances using the Expected Credit Loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for all financial assets is measured at an amount equal to lifetime ECL. The Company has used practical expedient by computing expected credit loss allowance for trade receivable by taking into consideration historical credit loss experience and adjusted for forward looking information. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
3.18.5. 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 and does not retain control of the asset. The Company continues to recognise the asset to the extent of Companyâs continuing involvement.
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 the Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
3.18.6 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.
For foreign currency denominated financial assets measured at amortised cost, the exchange differences are recognised in the Statement of Profit and Loss except for those which are designated as hedging instruments in a hedging relationship.
3.19 Financial liabilities and equity instruments
3.19.1 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.
3.19.2 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.
3.19.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
3.19.3.1 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.
3.19.3.2 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair value and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109, âFinancial Instrumentsâ; and
- the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18, âRevenueâ.
The Financial guarantees issued to third parties on behalf of subsidiaries are recorded at fair value. The same is added in the cost of investment of a subsidiary and corresponding amount is recognised as Other income in the statement of Profit and Loss.
3.19.3.3 Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are included in the Statement of Profit and Loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.
3.19.3.4 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 new 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 and Loss.
3.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks and commodity price risks, including foreign exchange forward contracts, and commodity contracts - Over The Counter (OTC) derivatives. Derivatives are only used for economic hedging purposes and not as a speculative investments. Further, details of derivative financial instruments are disclosed in Note 45.
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 the 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 the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged item.
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
3.21 Hedge accounting
The Company designates certain hedging instruments, which include derivatives, embedded derivatives in respect of commodity price risk as cash flow hedges. Hedges of commodity price 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 the hedged risk.
Note 46 sets out details of the fair values of the derivative instruments used for hedging purposes.
3.21.1 Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the 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 the 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 the Statement of Profit and 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 and 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 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 the 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 the Statement of Profit and Loss.
Where the hedged item subsequently results in the recognition of a non-financial asset, both the deferred hedging gains and losses and the deferred time value of the option contracts, if any, are included within the initial cost of the asset. The deferred amounts are ultimately recognised in profit or loss as the hedged item affects profit or loss through cost of material consumed.
3.21.2 Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss is recognised in profit or loss.
3.22 Cash and cash equivalents
For the purpose of presentation in statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of 3 months or less that are readily convertible to known amount of cash and which are subject to a insignificant risk of change in value.
3.23 Earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
3.24 Rounding off amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirement of Schedule III, unless otherwise stated.
4. CRITICAL ESTIMATES AND JUDGEMENTS
In the application of the Companyâs accounting policies, which are described in Note 3, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical estimates and judgements, that have the significant effect on the amounts recognised in the financial statements.
4.1 Classification of Joint Arrangement as a Joint Operation
In terms of Ind AS 111, âJoint Arrangementâ, the following joint arrangements have been classified as joint operations as the contractual arrangements between the parties specify that parties have rights to the assets, and obligations for the liabilities, relating to the arrangement:
i) Al- Sharif Group and KEC Ltd. Company, Saudi Arabia* [refer Note 43]
ii) EJP KEC Joint Venture, South Africa
iii) KEC - ASSB JV
iv) KEC - ASIAKOM - UB JV
v) KEC - ASIAKOM JV
vi) KEC - DELCO - VARAHA JV
vii) KEC - VARAHA - KHAZANA JV
viii) KEC - VALECHA - DELCO JV
ix) KEC - SIDHARTH JV
x) KEC - TRIVENI - KPIPL JV
xi) KEC - UNIVERSAL JV
xii) KEC - DELCO - DUSTAN JV
xiii) KEC - ANPR - KPIPL JV
xiv) KEC - PLR - KPIPL JV
xv) KEC - BJCL JV
xvi) KEC-KIEL JV
xvii) KEC - ABEPL JV
xviii) KEC - TNR Infra JV
xix) KEC - SMC JV
xx) KEC - WATERLEAU JV
* KEC International (Company) holds 51.10% share capital of Al Sharif Group and KEC Ltd. Company, Saudi Arabia (âAl Sharif JVâ), having a joint arrangement located in Saudi Arabia, with the JV partner Al Sharif Group (ASG) [also refer Note 43]. Al Sharif JV is a subsidiary of the Company as per the definition of âsubsidiaryâ under the Companies Act, 2013. However, Al Sharif JV is a limited liability company whose legal form confers separation between the parties to the joint arrangement and the Company itself, the internal agreements (contractual arrangements) entered into between the parties to the joint arrangements for execution of projects (turnkey contracts) reverses or modifies the rights and obligations conferred by the legal form and establishes and define their respective rights and obligations on these projects. As per these contractual arrangements, the parties to the joint arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
Accordingly, for financial reporting purposes, Al Sharif JV is classified as jointly controlled operation as per the requirements of Ind AS 111 Joint Arrangements.
4.2 Revenue recognition for construction contracts
Refer Note 3.5.3 and Note 45.
4.3 Useful lives of property, plant and equipment and intangible assets
As described in Notes 3.11 and 3.12 above, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period. There was no change in the useful life of property, plant and equipment and intangible assets as compared to Previous Year.
4.4 Contingencies
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Guarantees are also given in the normal course of business.
There are certain obligations which management has concluded based on all available facts and circumstances are treated as contingent liabilities and disclosed in the Notes but are not provided for in the financial statements. Although there can be no assurance of the final outcome of the legal proceedings in which the Company is involved it is not expected that such contingencies will have a material effect on its financial position or profitability.
4.5 Income taxes
In preparing the financial statements, the Company recognises income taxes in each of the jurisdictions in which it operates. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. The uncertain tax positions are measured at the amount expected to be paid to taxation authorities when the Company determines that the probable outflow of economic resources will occur. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
4.6 Impairment of trade receivables
The impairment provisions for trade receivables are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Companyâs past history, credit risk, existing market conditions as well as forward looking estimates at the end of each reporting period.
4.7 Defined benefit obligations
The present value of defined benefit obligations is determined by discounting the estimated future cash outflows by reference to market yields at the end of reporting period that have terms approximating to the terms of the related obligation.
Mar 31, 2018
1.1 Statement of compliance
The financial statements of the Company have been prepared in accordance with Ind ASs notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016 and the Companies (Indian Accounting Standards) (Amendment) Rules, 2017.
The financial statements comply in all material aspects with Ind AS notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the act.
1.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments and employee benefit obligations, that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
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. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 17, âLeasesâ and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2, âInventoriesâ or value in use in Ind AS 36 âImpairment of Assetsâ, as applicable.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
1.3 Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Company undertakes its activities under joint operations, the Company as a joint operator recognises in relation to its interest in a joint operation:
1. its assets, including its share of any assets held jointly;
2. i ts liabilities, including its share of any liabilities incurred jointly;
3. its revenue from the sale of its share of the output arising from the joint operation;
4. its share of the revenue from the sale of the output by the joint operation; and
5. its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues, and expenses relating to its interest in a joint operation in accordance with the Ind AS applicable to the assets, liabilities, revenues, and expenses.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Companyâs financial statements only to the extent of other partiesâ interests in the joint operation.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a purchase of assets), the Company does not recognise its share of the gains and losses until it resells those assets to a third party.
1.4 Non-current assets held for sale
Non-current assets are classified as held for sale, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
1.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, VAT / GST and amounts collected on behalf of third parties.
The Company recognises revenue when the amount of revenue can be measured reliably, it is probable that the economic benefit will flow to the Company and specific criteriaâs have been met for each of the Companyâs activities as described below:
1.5.1 Sale of goods:
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:
the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.5.2 Rendering of services:
Sale of services is recognised in the accounting period in which the services are rendered.
Revenue from operation and maintenance (O&M) contracts is recognised on pro rata basis for the duration of the O&M contracts.
1.5.3 Construction contracts:
When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
The outcome of a construction contract is considered as estimated reliably when all critical approvals necessary for commencement of the project have been obtained.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable to be recovered. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the balance sheet under trade receivables.
Liquidated damages / penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Company.
1.5.4 Dividend and interest income
Dividend income is recognised when the right to receive payment has been established.
Interest income is recognised using effective interest method.
1.5.5 Export benefits
Export benefits under Mercantile Export from India Incentive Scheme (MEIS) and Duty Drawback benefits are accounted as revenue on accrual basis as and when export of goods take place.
1.6 Leasing
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.
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 rental obligations (net of finance charges) 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. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Rental expense from operating leases is generally 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 accounted in the year in which it is incurred. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.7 Foreign currencies
In preparing these financial statements, the Company has applied following policies:
A) Foreign Branches:
1. Income and expense items are translated at the average exchange rate and all resulting exchange differences are recognised in the Statement of Profit and Loss.
2. Non-monetary assets and liabilities are measured in terms of historical cost in foreign currencies and are not translated at the rates prevailing at the end of each reporting period. Foreign currency denominated monetary assets and liabilities are translated at the rates prevailing at the end of each reporting period. Exchange differences on translations are recognised in the Statement of Profit and Loss.
B) Joint Operations outside India with functional currency other than presentation currency:
1. Assets and liabilities, both monetary and non- monetary are translated at the rates prevailing at the end of each reporting period.
2. Income and expense items are translated at the average exchange rate and all resulting exchange differences are accumulated in the foreign currency translation reserve in the statement of changes in equity.
C) Other foreign currency transactions:
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain and losses resulting from the settlement of such transactions and from translation of monetary assets and liabilities denominated in foreign currency at the year end exchange rate are generally recognised in profit or loss. 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.
Exchange differences on monetary items are recognised in the 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
exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 3.21 below for hedging accounting policies); and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
Forward Exchange Contracts:
The forward exchange contracts are marked to market and gain/loss on such contracts are recognised in the Statement of Profit and Loss at the end of each reporting period, except for those contracts which are designated as hedge instruments.
1.8 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.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Finance expenses are recognised immediately in the 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.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
1.9 Employee benefits
1.9.1 Retirement benefit costs:
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund is recognised as an expense when employees have rendered service entitling them to the contributions.
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. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss. Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
net interest expense or income; and
Remeasurement
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual 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.
1.9.2 Short-term and other long-term employee benefits:
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave, that are expected to be settled wholly within twelve month after the end of the period in which the employee render the related services are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
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.
Liabilities recognised in respect of other long-term employee benefits are measured using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period.
Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit and loss. The obligations are presented as current liabilities in the balance sheet, if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
1.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1.10.1 Current tax
The tax currently payable is based on 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 in the countries where the Company, itâs branches and jointly controlled operations operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretations. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
1.10.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities 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.
Deferred tax liabilities are recognised for taxable temporary differences associated with interests in joint operations 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 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.
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.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when entity has legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Minimum Alternate Tax (MAT) in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as deferred tax asset if there is convincing evidence that the Company will pay normal income tax against which the MAT paid will be adjusted.
1.10.3 Current and deferred tax for the year
Current and deferred tax are recognised in the 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.
1.11 Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold land is not depreciated. Freehold land is not depreciated. Leasehold land is amortised over the remaining period of the lease.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss, if any. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Companyâs accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
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. 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.
Assets held under finance leases are depreciated over the assetâs useful life or over the shorter of the assetâs useful life and the lease term if there is no reasonable certainty that the group will obtained ownership at the end of the lease term.
Depreciation on other items of Property, Plant and Equipment has been provided on the straight-line method as per the useful life as estimated by the Management. The estimate of the useful life of the assets has been based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. The estimated useful life of these Property, Plant and Equipment is mentioned below:
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.
1.12 Intangible assets
1.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 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.
1.12.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any on the same basis as intangible assets that are acquired separately.
1.12.3 Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
Its intention to complete and its ability and intention to use or sell the asset
How the asset will generate future economic benefits
The availability of resources to complete the asset
The ability to measure reliably the expenditure during development
1.12.4 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of Profit and Loss when the asset is derecognised.
1.12.5 Useful lives of intangible assets
Brand in respect of the power transmission business acquired under the High Court approved Composite Scheme of Arrangement in an earlier year is amortised by the Company in terms of the said Scheme over its useful life, which based on an expert opinion is estimated to be of 20 years. Brand in respect of the railway signalling business transferred to the Company pursuant to the High Court approved Scheme of Amalgamation is amortised over 10 year being its useful life, as estimated by the management.
Computer Software are amortised on straight line basis over the estimated useful life ranging between 4-6 years.
1.13 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.
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.
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 the Statement of Profit and Loss.
1.14 Investments
Investment in equity shares of subsidiaries are measured at cost. Investments in equity instruments are measured at fair value through other comprehensive income.
The Company classifies its financial assets in the measurement categories as those to be measured subsequently at fair value (through other comprehensive income or through profit and loss) and those measured at amortised cost. The classification depends on the Companyâs business model for managing the financial asset and the contractual terms of the cash flows. (Also refer 3.17)
1.15 Inventories
Inventories (Raw material, work-in-progress, finished goods, stores and spares and erection material) are stated at the lower of cost and net realisable value. Cost of purchased material is determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Scrap is valued at net realisable value.
Cost of work-in-progress and finished goods includes material cost, labour cost, and manufacturing overheads absorbed on the basis of normal capacity of production.
1.16 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event; it is probable that the Company will be required to settle the obligation in respect of which 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 costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
Contingent assets: 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. Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
1.17 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 Profit or 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 or loss are recognised immediately in the Statement of Profit and Loss.
Purchases or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
1.18 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
1.18.1 Effective interest method
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as FVTPL. Interest income is recognised in the Statement of Profit and Loss.
1.18.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. Gains or losses arising on remeasurement are recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item.
1.18.3 Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for all financial assets is measured at an amount equal to lifetime ECL. The Company has used practical expedient by computing expected credit loss allowance for trade receivable by taking into consideration historical credit loss experience and adjusted for forward looking information. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the Statement of Profit and Loss.
1.18.4 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. 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 the Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
1.18.5 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.
For foreign currency denominated financial assets measured at amortised cost, the exchange differences are recognised in the Statement of Profit and Loss except for those which are designated as hedging instruments in a hedging relationship.
1.19 Financial liabilities and equity instruments
1.19.1 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.
1.19.2 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.
1.19.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
1.19.31 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.
1.19.3.2 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair value and, if not designated as at FVTPL, are subsequently measured at the higher of:
the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109, âFinancial Instrumentsâ; and
the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18, âRevenueâ.
1.19.3.3 Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are included in the Statement of Profit and Loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.
1.19.3.4 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 new 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 and Loss.
1.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks and commodity price risks, including foreign exchange forward contracts, and commodity contracts - Over the Counter (OTC) derivatives. Further, details of derivative financial instruments are disclosed in Note 45.
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 the 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 the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged item.
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
1.21 Hedge accounting
The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, commodity price risk as cash flow hedges. Hedges of foreign exchange risk and commodity price 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 the hedged risk.
Note 46 sets out details of the fair values of the derivative instruments used for hedging purposes.
Cash flow hedges
The effective portion of changes in the 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 the 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 the Statement of Profit and 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 and 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 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 the 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 the Statement of Profit and Loss.
1.22 Cash and cash equivalents
For the purpose of presentation in statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of 3 months or less that are readily convertible to known amount of cash and which are subject to a insignificant risk of change in value.
1.23 Operating Cycle
Assets and liabilities other than those relating to long-term contracts (i.e. supply or construction contracts) are classified as current if it is expected to realize or settle within 12 months after the balance sheet date.
In case of long-term contracts, the time between acquisition of assets for processing and realisation of the entire proceeds under the contracts in cash or cash equivalent exceeds one year. Accordingly, for classification of assets and liabilities related to such contracts as current, duration of each contract is considered as its operating cycle.
1.24 Earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the group
by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
the after income tax effect of interest and other financing costs associated with dilutive potential equity shares and
the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.25 Rounding off amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakh as per the requirement of Schedule III, unless otherwise stated.
Mar 31, 2017
1.1 Statement of compliance
The financial statements of the Company have been prepared in accordance with Ind ASs notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016.
Up to the year ended March 31, 2016, the Company prepared its financial statements in accordance with the Accounting Standards notified under Section 133 of the Companies Act, 2013 (Previous GAAP). These financial statements for the year ended March 31, 2017 are the Companyâs first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015. Refer Note 4 for the details of first-time adoption exemptions availed by the Company.
1.2 Basis of preparation and presentation
The financial statements have been 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 below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The functional currency of the Company is Indian rupee. These financial statements are presented in Indian rupees.
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. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of lnd AS 17, âLeasesâ and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2, âInventoriesâ or value in use in Ind AS 36 âImpairment of Assetsâ, as applicable.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
1.3 Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Company undertakes its activities under joint operations, the Company as a joint operator recognises in relation to its interest in a joint operation:
1. its assets, including its share of any assets held jointly;
2. its liabilities, including its share of any liabilities incurred jointly;
3. its revenue from the sale of its share of the output arising from the joint operation;
4. its share of the revenue from the sale of the output by the joint operation; and
5. its expenses, including its share of any expenses incurred jointly.
The Company accounts for the assets, liabilities, revenues, and expenses relating to its interest in a joint operation in accordance with the Ind AS applicable to the assets, liabilities, revenues, and expenses.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Companyâs financial statements only to the extent of other partiesâ interests in the joint operation.
When a Company transacts with a joint operation in which a Company is a joint operator (such as a purchase of assets), the Company does not recognise its share of the gains and losses until it resells those assets to a third party.
1.4 Non-current assets held for sale
Non-current assets are classified as held for sale, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
1.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, and amounts collected on behalf of third parties.
The Company recognises revenue when the amount of revenue can be measured reliably, it is probable that the economic benefit will flow to the Company and specific criteriaâs have been met for each of the Companyâs activities as described below:
1.5.1. Sale of goods:
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:
- the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.5.2 Rendering of services:
Sale of services is recognised in the accounting period in which the services are rendered.
1.5.3 Construction contract:
When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
The outcome of a construction contract is considered as estimated reliably when all critical approvals necessary for commencement of the project have been obtained.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the balance sheet under trade receivables.
Liquidated damages / penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Company.
1.5.4 Dividend and interest income
Dividend income is recognised when the right to receive payment has been established.
Interest income is recognised using effective interest method.
1.6 Leasing
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.
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 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 the 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 (see Note 3.8 below). Contingent rentals are recognised as expenses in the periods in which they are incurred.
Rental expense from operating leases is generally 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.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.7 Foreign currencies
In preparing these financial statements, the Company has applied following policies:
A) Foreign Branches:-
1. Income and expense items are translated at the average exchange rate and all resulting exchange differences are recognised in the Statement of Profit and Loss.
2. Non-monetary assets and liabilities are measured in terms of historical cost in foreign currencies and are not retranslated. Foreign currency denominated monetary assets and liabilities are retranslated at the rates prevailing at the end of each reporting period. Exchange differences on translations are recognised in the Statement of Profit and Loss.
B) Joint Operations outside India with functional currency other than presentation currency:
1. Assets and liabilities, both monetary and nonmonetary are translated at the rates prevailing at the end of each reporting period.
2. Income and expense items are translated at the average exchange rate and all resulting exchange differences are accumulated in the foreign currency translation reserve in the statement of changes in equity.
C) Other foreign currency 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 the 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
- exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 3.21 below for hedging accounting policies);and
- exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
Forward Exchange Contracts:
The forward exchange contracts are marked to market and gain/loss on such contracts is recognised in the Statement of Profit and Loss at the end of each reporting period.
1.8 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.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
1.9 Employee benefits
1.9.1 Retirement benefit costs:
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund and the Companyâs contribution towards provident fund are recognised as an expense when employees have rendered service entitling them to the contributions.
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 changes to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss. Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense or income; and
- remeasurement
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual 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.
1.9.2 Short-term and other long-term employee benefits:
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.
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.
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.
1.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1.10.1 Current tax
The tax currently payable is based on 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.
1.10.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities 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.
Deferred tax liabilities are recognised for taxable temporary differences associated with interests in joint operations 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 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.
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.
Minimum Alternate Tax (MAT) 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 against which the MAT paid will be adjusted.
1.10.3 Current and deferred tax for the year
Current and deferred tax are recognised in the 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.
1.11 Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold land is not depreciated.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss, if any. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Companyâs accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
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. 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.
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.
Depreciation on other items of Property, Plant and Equipment has been provided on the straight-line method as per the useful life as estimated by the Management. The estimate of the useful life of the assets has been based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. The estimated useful life of these Property, Plant and Equipment is mentioned below:
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.
1.12 Intangible assets
1.12.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 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.
1.12.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, if any on the same basis as intangible assets that are acquired separately.
1.12.3 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of Profit and Loss when the asset is derecognised.
1.12.4 Useful lives of intangible assets
Brand in respect of the power transmission business acquired under the High Court approved Composite Scheme of Arrangement in an earlier year is amortised by the Company in terms of the said Scheme over its useful life, which based on an expert opinion is estimated to be of 20 years. Brand in respect of the railway signalling business transferred to the Company pursuant to the High Court approved Scheme of Amalgamation is amortised over 10 year being its useful life, as estimated by the management.
Computer Softwares are amortised on straight line basis over the estimated useful life ranging between 4-6years.
1.13 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.
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.
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 the Statement of Profit and Loss.
1.14 Investments
Investment in equity shares of subsidiaries and associate are measured at cost.
Investment in preference shares have been analysed by the Company to determine the underlying business model and whether the contractual cash flows are solely payments of principal and interest. Basis the evaluation, the criteria of solely payments of principal and interest is not met, the Company has classified the investment in preference shares as at fair value through Profit or Loss.
1.15 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of purchased material is determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Cost of work-in-progress and finished goods includes material cost, labour cost, and manufacturing overheads absorbed on the basis of normal capacity of production.
1.16 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event; it is probable that the Company will be required to settle the obligation in respect of which 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 costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
1.17 Financial instruments
Financial assets and financial liabilities are recognised when a Company entity 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 (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 or loss are recognised immediately in the Statement of Profit and Loss.
1.18 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
1.18.1 Effective interest method
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as FVTPL. Interest income is recognised in the Statement of Profit and Loss.
1.18.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. Gains or losses arising on remeasurement are recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item.
1.18.3 Impairment of financial assets
The Company recognises loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for all financial assets is measured at an amount equal to lifetime ECL. The Company has used practical expedient by computing expected credit loss allowance for trade receivable by taking into consideration historical credit loss experience and adjusted for forward looking information. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the Statement of Profit and Loss.
1.18.4. 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. 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 the Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
1.18.5 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.
For foreign currency denominated financial assets measured at amortised cost, the exchange differences are recognised in the Statement of Profit and Loss except for those which are designated as hedging instruments in a hedging relationship.
1.19 Financial liabilities and equity instruments
1.19.1 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.
1.19.2 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.
1.19.3. Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
1.19.3.1 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.
1.19.3.2 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109,âFinancial lnstrumentsâ; and
- the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18, âRevenueâ.
1.19.3.3 Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are included in the Statement of Profit and Loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.
1.19.3.4 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 new 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 and Loss.
1.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks and commodity price risks, including foreign exchange forward contracts, and commodity contracts- Over the Counter (OTC) derivatives. Further details of derivative financial instruments are disclosed in Note 48.
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 the 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 the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged item.
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
1.21 Hedge accounting
The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, commodity price risk as cash flow hedges. Hedges of foreign exchange risk and commodity price risk on Arm 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 the hedged risk.
Note 48 sets out details of the fair values of the derivative instruments used for hedging purposes.
Cash flow hedges
The effective portion of changes in the 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 the 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 the Statement of Profit and 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 and 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 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 the 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 the Statement of Profit and Loss.
1.22 Cash and cash equivalents (for purposes of the Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
1.23 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.24 Operating Cycle
Assets and liabilities other than those relating to longterm contracts (i.e. supply or construction contracts) are classified as current if it is expected to realise or settle within 12 months after the balance sheet date.
In case of long-term contracts, the time between acquisition of assets for processing and realisation of the entire proceeds under the contracts in cash or cash equivalent exceeds one year. Accordingly for classification of assets and liabilities related to such contracts as current, duration of each contract is considered as its operating cycle.
Mar 31, 2016
A. Basis of accounting and preparation of the financial statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and other accounting principles
generally accepted in India. The financial statements have been
prepared on accrual basis under the historical cost convention. The
accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year.
B. Uses of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
C. Revenue Recognition:
i. Sale of goods is recognised, on transfer of significant risks and
rewards of ownership to the buyer, which generally coincides with the
delivery of goods to customers. Sale of services is recognised when
services are rendered. Sales exclude sales tax/ value added tax and
service tax charged to the customers.
ii. Revenue from turnkey contracts is recognised based on the stage of
completion determined with reference to the costs incurred on contracts
and their estimated total costs.
When it is probable that the total contract cost will exceed total
contract revenue, expected loss is recognised as an expense
immediately. Total contract cost is determined based on technical and
other assessment of cost to be incurred.
Liquidated damages/ penalties are accounted as per the contract terms
wherever there is a delayed delivery attributable to the Company.
iii. Revenue from turnkey contracts awarded to a Jointly Controlled
Entity at Saudi Arabia but executed by the Company under the
arrangement with the Joint Venture Partner [being in substance in the
nature of Jointly Controlled Operations, in terms of Accounting
Standard (AS) 27 "Financial Reporting of Interests in Joint Ventures"],
is recognised on the same basis as similar turnkey contracts
independently executed by the Company.
iv. Share in profit/loss of the projects undertaken by the jointly
controlled entities, is accounted on its appropriation to the venturers
as per the terms of the respective joint venture contracts.
v. Dividend income is accounted as and when the right to receive the
same is established.
vi. Interest income is accounted on time proportion basis.
D. Inventories:
i. Raw materials, work-in-progress, finished goods and stores and
erection materials are valued at the lower of cost and net realisable
value (NRV). Cost of purchased material is determined on the weighted
average basis. Cost of Erection tools and spares is amortised over its
estimated useful life. Scrap is valued at net realisable value.
ii. Cost of work-in-progress and finished goods includes material cost,
labour cost, and manufacturing overheads absorbed on the basis of
normal capacity of production.
E. Fixed Assets:
Fixed assets are stated at cost of acquisition or construction net of
impairment loss, if any less accumulated depreciation/ amortisation.
Cost comprises of purchase/ acquisition price, non-refundable taxes and
any directly attributed cost of bringing the asset to its working
condition for its intended use. Financing cost on borrowings for
acquisition or construction of qualifying fixed assets, for the period
upto the date of acquisition of fixed assets or when the assets are
ready to be put in use/ the date of commencement of commercial
production, is included in the cost of fixed assets.
Fixed assets retired from active use and held for sale are stated at
the lower of their net book value and net realisable value and are
disclosed separately.
Assessment of indication of impairment of an asset is made at the year
end and impairment loss, if any, is recognised.
F. Depreciation/ Amortisation:
i. Tangible Assets:
a) Leasehold land is amortised over the remaining period of the lease.
b) Depreciation on other tangible fixed assets has been provided on the
straight-line method as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the certain assets has
been assessed as under based on technical advice, taking into account
the nature of the asset, the estimated usage of the asset, the
operating conditions of the asset, past history of replacement,
anticipated technological changes, etc.
Plant and Equipment/ Office Equipment  7 to 23 years, Buildings-40
years, and Vehicles  7 years.
ii. Intangible Assets:
a) Brand is amortised over twenty years being the useful life certified
by the independent valuer.
In terms of the Scheme of Arrangement sanctioned in the year 2007-08,
out of the balance in ''Reserve for Amortisation of Brand Account'' an
amount equal to annual amortisation of brand is credited to the
Statement of profit and Loss each year so that overall depreciation and
amortisation gets reduced to that extent. Accordingly, Rs. Nil
(Previous Year Rs. 157 lacs) being the amortisation of brand during the
year is credited to the Statement of profit and Loss by netting it with
Depreciation and amortisation expense.
b) Brand transferred pursuant to the Scheme of Amalgamation referred to
in ''Note 42'' is amortised over ten year being its useful life as
estimated by the Company.
c) Computer softwares are amortised on straight line method over the
estimated useful life ranging between 4-6 years.
G. Investments:
Long-term investments are stated at cost. Provision is made for
diminution, other than temporary, in the value of investments.
H. Trade receivables as at the year end under the contracts are
disclosed net of advances received relating to the respective contracts
for work to be done and outstanding at the year end.
I. Foreign Currency Transactions:
i. Foreign branches ( Integral)
a) Fixed assets are translated at the rates on the date of
purchase/acquisition of assets and inventories are translated at the
rates that existed when costs were incurred.
b) All foreign currency monetary items outstanding at the year end are
translated at the year end exchange rates. Income and expenses are
translated at average rates of exchange and depreciation/amortisation
is translated at the rates referred to in (i) (a) above for fixed
assets.
c) The resulting exchange gains and losses are recognised in the
Statement of profit and Loss.
ii. Jointly Controlled Operations (Non Integral)
Assets and liabilities, both monetary and non monetary are translated
at the year end exchange rates, income and expense items are translated
at the average rate of exchange and all resulting exchange differences
are accumulated in a Foreign Currency Translation Reserve.
iii. Other foreign currency transactions:
a) Foreign currency transactions during the year are recorded at the
rates of exchange prevailing at the date of transaction. Exchange gains
or losses realised and arising due to translation of the foreign
currency monetary items outstanding at the year end are accounted in
the Statement of profit and Loss. Non-monetary items of the Company are
carried at historical cost.
b) Forward Exchange Contracts:
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, premium or
discounts are amortised as expense or income over the life of the
contract.
Exchange differences on such contracts are recognised in the Statement
of profit and Loss in the year in which the exchange rate changes.
profit or loss arising on cancellation or renewal of such forward
exchange contracts are recognised as income or as expense for the year.
J. Excise duty payable is accounted on production of finished goods.
K. Employee Benefits:
a) Defined Contribution Plans:
The Company''s contribution to provident fund and superannuation fund
are considered as defined contribution plans and are charged as an
expense based on the amount of contribution required to be made and
when services are rendered by the employees.
b) Defined Benefit Plan / Long Term employee benefits:
The Company''s liability towards defined benefit plan (viz. gratuity) and
long term employee benefits (viz. long term compensated absences) is
determined on the basis of year end actuarial valuation done by an
independent actuary. The actuarial gains or losses determined by the
actuary are recognised in the Statement of profit and Loss as income or
expense.
c) 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
during the year when the employees render the service.
L. Leases
a) Assets acquired under lease where the Company has substantially all
the risks and rewards incidental to ownership are classified as finance
leases. Such assets are capitalised at the inception of the lease at
the lower of the fair value and the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
b) Assets acquired on leases where significant portions of the risks and
rewards incidental to ownership are retained by the lessors, are
classified as operating leases. Lease rentals are charged to the
Statement of profit and Loss on a straight line basis over the term of
the relevant lease.
M. Taxation:
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the applicable tax rates and the
provisions of the Income-tax Act, 1961 and other applicable tax laws.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets are recognised for timing differences of items other than
unabsorbed depreciation and carry forward losses only to the extent
that reasonable certainty exists that sufficient future taxable income
will be available against which these can be realised. However, if
there are unabsorbed depreciation and carry forward of losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that there will be sufficient future taxable
income available to realise the assets. Deferred tax assets and
liabilities are offset if such items relate to taxes on income levied
by the same governing tax laws and the Company has a legally
enforceable right for such set off. Deferred tax assets are reviewed at
each balance sheet date for their realisability.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income tax during the specified period. The carrying amount of
MAT credit asset, if any, is reviewed at each Balance Sheet date.
N. Receivables and loans and advances identified as doubtful of
recovery are provided for / written off.
O. Provisions and contingencies :
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognised in the
financial statements.
P. Derivative Contracts and Hedge Accounting
a) Derivative Contracts:
Derivative instrument are used to hedge risk associated with foreign
currency fluctuations, interest rates and commodity prices. The Company
enters into derivative contracts in the nature of foreign currency
swaps, currency options, forward contracts with an intention to hedge
its existing assets and liabilities, firm commitments and highly
probable transactions in foreign currency. Derivative contracts which
are closely linked to the existing assets and liabilities are accounted
as per the policy stated for Foreign currency transactions and
translations. The Company does not enter into any derivative contracts
for speculations or trading purposes.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
b) Hedge Accounting:
To designate contract as an effective hedge, the management objectively
evaluates and evidences with appropriate supporting documents at the
inception of each contract whether the contract is effective in
achieving offsetting cash flows attributable to the hedged risk.
The Company designates financial instruments as hedging instrument for
hedging foreign currency risk. Changes in the fair value of financial
instrument that are designated and qualify as cash flow hedges and are
determined to be an effective hedge are recognized in the ''Hedging
Reserve'' under Reserve and Surplus, net of applicable deferred taxes.
The gain or losses on the contracts which do not qualify for hedge
accounting or considered as ineffective hedge transactions are charged
to Statement of profit and Loss. Amounts accumulated in the Hedging
Reserve are reclassified to the Statement of profit and Loss in the same
periods when the hedged item affects profit and loss.
Q. Operating Cycle
Assets and liabilities other than those relating to long-term contracts
(i.e. supply or turnkey contracts) are classified as current if it is
expected to realize or settle within 12 months after the balance sheet
date.
In case of long-term contracts, the time between acquisition of assets
for processing and realisation of the entire proceeds under the
contracts in cash or cash equivalent exceeds one year. Accordingly for
classification of assets and liabilities related to such contracts as
current, duration of each contract is considered as its operating
cycle.
R. Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
S. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
T. Basis of Incorporation of integral foreign operations:
Figures in respect of the Company''s overseas branches in Afghanistan,
Algeria, Bangladesh, Congo, Egypt, Ethiopia, Georgia, Ghana, Indonesia,
Ivory Coast, Kazakhstan, Kenya, Laos, Lebanon, Libya, Malaysia, Nepal,
Nigeria, Oman, Philippines, South Africa, Sri Lanka, Tanzania, Tunisia,
Uganda, United Arab Emirates and Zambia have been incorporated on the
basis of financial statements (the Branch Returns) audited by the
auditors of the respective branches. Further, in respect of overseas
branches in Bhutan, Cameroon, Kuwait and Namibia, the financial
statements have been prepared and audited in India.
Mar 31, 2014
A) Basis of accounting and preparation of financial statements :
The financial statements of the Company have been prepared in accordance
with the Generally Accepted Accounting Principles in India (Indian
GAAP) to comply with the Accounting Standards notified under Section
211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to
be applicable in respect of Section 133 of the Companies Act, 2013
("the 2013 Act") in terms of General Circular 15/2013 dated September
13, 2013 of the Ministry of Corporate Affairs) and the relevant
provisions of the 1956 Act/ 2013 Act, as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
B) uses of Estimates :
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
C) Revenue Recognition :
i. Sale of goods is recognised, on transfer of Significant risks and
rewards of ownership to the buyer, which generally coincides with the
delivery of goods to customers. Sale of services is recognised when
services are rendered. Sales exclude sales tax/ value added tax and
service tax charged to the customers.
ii. Revenue from turnkey contracts is recognised based on the stage of
completion determined with reference to the costs incurred on contracts
and their estimated total costs.
When it is probable that the total contract cost will exceed total
contract revenue, expected loss is recognised as an expense
immediately. Total contract cost is determined based on technical and
other assessment of cost to be incurred. Liquidated damages/ penalties
are accounted as per the contract terms wherever there is a delayed
delivery attributable to the Company.
iii. Revenue from turnkey contracts awarded to a Jointly Controlled
Entity at Saudi Arabia but executed by the Company under the
arrangement with the Joint Venture Partner [being in substance in the
nature of Jointly Controlled Operations, in terms of Accounting
Standard (AS) 27 "Financial Reporting of Interests in Joint Ventures"],
is recognised on the same basis as similar turnkey contracts
independently executed by the Company.
iv. Share in profit/loss of the projects undertaken by the jointly
controlled entities, is accounted on its appropriation to the ventures
as per the terms of the respective joint venture contracts.
v. Subsidy is accounted on accrual basis.
vi. Dividend income is accounted as and when the right to receive the
same is established.
vii. Interest income is accounted on time proportion basis.
D) Inventories :
i. Raw materials, work-in-progress, finished goods and stores and
erection materials are valued at the lower of cost and net realisable
value (NRV). Cost of purchased material is determined on the weighted
average basis. Cost of Tools and Dies is amortised over its estimated
useful life. Scrap is valued at net realisable value.
ii. Cost of work-in-progress and finished goods includes material cost,
labour cost, and manufacturing overheads absorbed on the basis of
normal capacity of production.
E) Fixed Assets :
Fixed assets are stated at cost of acquisition or construction net of
impairment loss, if any less accumulated depreciation/ amortisation.
Cost comprises of purchase/ acquisition price, non-refundable taxes and
any directly attributed cost of bringing the asset to its working
condition for its intended use. Financing cost on borrowings for
acquisition or construction of qualifying fixed assets, for the period
upto the date of acquisition of fixed assets or when the assets are
ready to be put in use/ the date of commencement of commercial
production, is included in the cost of fixed assets.
Assessment of indication of impairment of an asset is made at the year
end and impairment loss, if any, is recognised.
F) Depreciation/ Amortisation :
i. Tangible Assets :
a) Leasehold land is amortised over the remaining period of the lease.
b) Cost of buildings of semi-permanent nature is amortised over 3
years.
c) Depreciation on other tangible fixed assets is provided on straight
line method at the rates so as to reduce them to their estimated
salvage value at the end of their useful lives or at the rates
prescribed in Schedule XIV to the Companies Act, 1956 whichever is
higher.
The estimated useful lives of assets which are different from the
estimated useful lives derived from the principal rates specified in
Schedule XIV to the Companies Act, 1956 are as follows:
Plant and Equipment/ Office Equipment  1 to 19 years, Furniture and
Fixtures  10 years, Vehicles  7 years and Computers  4 years.
ii. Intangible Assets :
a) Brand is amortised over twenty years being the useful life certified
by the independent valuer.
In terms of the Scheme of Arrangement sanctioned in the year 2007-08,
out of the balance in ''Reserve for Amortisation of Brand Account'' an
amount equal to annual amortisation of brand is credited to the
Statement of Profit and Loss each year so that overall depreciation and
amortisation gets reduced to that extent. Accordingly, Rs. 1,200 lacs
being the amortisation of brand during the year (Previous year Rs. 1,200
lacs) have been credited to the Statement of Profit and Loss by netting
it with Depreciation and amortisation expense.
b) Computer softwareÂs are amortised on straight line method over the
estimated useful life ranging between 4-6 years.
G) Investments :
Long-term investments are stated at cost. Provision is made for
diminution, other than temporary, in the value of investments.
H) Trade receivables as at the year end under the contracts are
disclosed net of advances received relating to the respective contracts
for work to be done and outstanding at the year end.
I) Foreign Currency Transactions :
i. Foreign branches (Integral) :
a) Fixed assets are translated at the rates on the date of
purchase/acquisition of assets and inventories are translated at the
rates that existed when costs were incurred.
b) All foreign currency monetary items outstanding at the year end are
translated at the year end exchange rates. Income and expenses are
translated at average rates of exchange and depreciation and
amortisation is translated at the rates referred to in i. a) above for
fixed assets.
c) The resulting exchange gains and losses are recognised in the
Statement of Profit and Loss.
ii. Jointly Controlled operations (Non Integral) :
Assets and liabilities, both monetary and non monetary are translated
at the year end exchange rates, income and expense items are translated
at the average rate of exchange and all resulting exchange differences
are accumulated in a Foreign Currency Translation Reserve.
iii. other foreign currency transactions :
a) Foreign currency transactions during the year are recorded at the
rates of exchange prevailing at the date of transaction. Exchange gains
or losses realised and arising due to translation of the foreign
currency monetary items outstanding at the year end are accounted in
the Statement of Profit and Loss.
b) Forward Exchange Contracts
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, premium or
discounts are amortised as expense or income over the life of the
contract.
Exchange differences on such contracts are recognised in the Statement
of Profit and Loss in the year in which the exchange rate changes.
Profit or loss arising on cancellation or renewal of such forward
exchange contracts are recognised as income or as expense for the year.
J) Excise duty payable is accounted on production of finished goods.
K) Employee Benefits :
a) Defined Contribution Plans :
The Company''s contribution to provident fund and superannuation fund
are considered as defined contribution plans and are charged as an
expense based on the amount of contribution required to be made and
when services are rendered by the employees.
b) Defined Benefit Plan / Long Term employee Benefits :
The Company''s liability towards defined benefit plan (viz. gratuity) and
long term employee Benefits (viz. long term compensated absences) is
determined on the basis of year end actuarial valuation done by an
independent actuary. The actuarial gains or losses determined by the
actuary are recognised in the Statement of Profit and Loss as income or
expense.
c) 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
during the year when the employees render the service.
L) Leases :
a) Assets acquired under lease where the Company has substantially all
the risks and rewards incidental to ownership are classified as finance
leases. Such assets are capitalised at the inception of the lease at
the lower of the fair value and the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
b) Assets acquired on leases where Significant portions of the risks and
rewards incidental to ownership are retained by the lessors, are
classified as operating leases. Lease rentals are charged to the
Statement of Profit and Loss on a straight line basis over the term of
the relevant lease.
M) Taxation :
Current tax is determined as the amount of tax payable in respect of
estimated taxable income for the period.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets are recognised for timing differences of items other than
unabsorbed depreciation and carry forward losses only to the extent
that reasonable certainty exists that sufficient future taxable income
will be available against which these can be realised. However, if
there are unabsorbed depreciation and carry forward of losses, deferred
tax assets are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise the
assets. Deferred tax assets and liabilities are offset if such items
relate to taxes on income levied by the same governing tax laws and the
Company has a legally enforceable right for such set off. Deferred tax
assets are reviewed at each balance sheet date for their reliability.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
N) Receivables and loans and advances identified as doubtful of recovery
are provided for.
O) Provisions and contingencies :
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
Benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognised in the
financial statements.
P) Derivative Contracts :
The Company enters into derivative contracts in the nature of full
currency swaps, interest rate swaps, currency options, forward
contracts and commodity hedges with an intention to hedge its existing
assets, liabilities, raw material requirements and firm commitments.
Derivative contracts which are closely linked to the underlying
transactions are recognised in accordance with the contract terms. All
contracts are marked-to-market and losses are recognised in the
Statement of Profit and Loss. Gains arising on the same are not
recognized on grounds of prudence.
q) Operating Cycle :
Assets and liabilities other than those relating to long-term contracts
(i.e. supply or turnkey contracts) are classified as current if it is
expected to realize or settle within 12 months after the balance sheet
date.
In case of long-term contracts, the time between acquisition of assets
for processing and realisation of the entire proceeds under the
contracts in cash or cash equivalent exceeds one year. Accordingly for
classification of assets and liabilities related to such contracts as
current, duration of each contract is considered as its operating
cycle.
R) Cash and cash equivalents (for purposes of Cash Flow Statement) :
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
S) Cash Flow Statement :
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated based
on the available information.
T) Basis of Incorporation of integral foreign operations :
Figures in respect of the Company''s overseas branches in Afghanistan,
Algeria, Bangladesh, Congo, Egypt, Ethiopia, Georgia, Ghana, Ivory
Coast, Kazakhstan, Kenya, Lebanon, Libya, Malaysia, Nepal, Nigeria,
Oman, Philippines, South Africa, Sri Lanka, Tanzania, Tunisia, Uganda
and United Arab Emirates have been incorporated on the basis of
Financial Statements (the Branch Returns) audited by the auditors of
the respective branches. Further, in respect of overseas branches in
Bhutan, Cameroon, Indonesia, Kuwait, Laos, Namibia and Tajikistan the
accounts have been prepared and audited in India.
Mar 31, 2013
A. Basis of preparation of Financial Statements:
The Financial Statements have been prepared on historical cost
convention. The Company follows the accrual basis of accounting. The
Financial Statements are prepared in accordance with the accounting
standards specified in the Companies (Accounting Standards) Rules, 2006
notified by the Central Government in terms of Section 211(3C) of the
Companies Act, 1956.
B. Revenue Recognition:
i. Sales of Products and Services are recognised on delivery. Sales
and services exclude sales tax/ value added tax and service tax charged
to the customers.
ii. Revenue from turnkey contracts is recognised based on the stage of
completion determined with reference to the costs incurred on contracts
and their estimated total costs.
When it is probable that the total contract cost will exceed total
contract revenue, expected loss is recognised as an expense
immediately. Total contract cost is determined based on technical and
other assessment of cost to be incurred. Liquidated damages/ penalties
are accounted as per the contract terms wherever there is a delayed
delivery attributable to the Company.
iii. Revenue from turnkey contracts awarded to Jointly Controlled
Entity at Saudi Arabia but executed by the Company under the
arrangement with the Joint Venture Partner [being in substance in the
nature of Jointly Controlled Operations, in terms of Accounting
Standard (AS) 27 "Financial Reporting of Interests in Joint Ventures"],
is recognised on the same basis as similar turnkey contracts
independently executed by the Company.
iv. Share in profit/loss of the projects undertaken by the jointly
controlled entities, is accounted on its appropriation to the venturers
as per the terms of the respective joint venture contracts.
v. Subsidy is accounted on accrual basis.
vi. Dividend income is accounted as and when the right to receive the
same is established.
vii. Interest income is accounted on time proportion basis.
C. Inventories:
i. Raw materials, work-in-progress, finished goods and stores and
erection materials are valued at the lower of cost and net realisable
value (NRV). Cost of purchased material is determined on the weighted
average basis. Cost of Tools and Dies is amortised over its estimated
useful life. Scrap is valued at net realisable value.
ii. Cost of work-in-progress and finished goods includes material
cost, labour cost, and manufacturing overheads absorbed on the basis of
normal capacity of production.
D. Fixed Assets:
Fixed assets are stated at cost of acquisition or construction net of
impairment loss, if any less accumulated depreciation/ amortisation.
Cost comprises of purchase/ acquisition price, non-refundable taxes and
any directly attributed cost of bringing the asset to its working
condition for its intended use. Financing cost on borrowings for
acquisition or construction of qualifying fixed assets, for the period
upto the date of acquisition of fixed assets or when the assets are
ready to be put in use/ the date of commencement of commercial
production, is included in the cost of fixed assets. Assessment of
indication of impairment of an asset is made at the year end and
impairment loss, if any, is recognised.
E. Depreciation/ Amortisation:
i. Tangible Assets:
a) Leasehold land is amortised over the remaining period of the lease.
b) Cost of buildings of semi-permanent nature is amortised over 3
years.
c) Depreciation on other tangible fixed assets is provided on straight
line method at the rates so as to reduce them to their estimated
salvage value at the end of their useful lives or at the rates
prescribed in Schedule XIV to the Companies Act, 1956 whichever is
higher.
The estimated useful lives of assets which are different from the
estimated useful lives derived from the principal rates specified in
Schedule XIV to the Companies Act, 1956 are as follows:
Plant and Equipment/ Office Equipment - 1 to 19 years, Furniture and
Fixtures - 10 years, Vehicles - 7 years and Computers - 4 years.
ii. Intangible Assets:
a) Brand is amortised over twenty years being the useful life certified
by the independent valuer.
In terms of the Scheme of Arrangement sanctioned in the year 2007-08,
out of the balance in ''Reserve for Amortisation of Brand Account'' an
amount equal to annual amortisation of brand is credited to the
Statement of Profit and Loss each year so that overall depreciation and
amortisation gets reduced to that extent. Accordingly, Rs. 1,200 lacs
being the amortisation of brand during the year (Previous Year Rs.
1,200 lacs) have been credited to the Statement of Profit and Loss by
netting it with Depreciation and amortisation expense.
b) Computer softwares are amortised on straight line method over the
estimated useful life ranging between 4-6 years.
F. Investments:
Long-term investments are stated at cost. Provision is made for
diminution, other than temporary, in the value of investments.
G. Trade receivables as at the year end under the contracts are
disclosed net of advances received relating to the respective contracts
for work to be done and outstanding at the year end.
H. Foreign Currency Transactions:
i. Foreign branches ( Integral)
a) Fixed assets are translated at the rates on the date of
purchase/acquisition of assets and inventories are translated at the
rates that existed when costs were incurred.
b) All foreign currency monetary items outstanding at the year end are
translated at the year end exchange rates. Income and expenses are
translated at average rates of exchange and depreciation and
amortisation is translated at the rates referred to in (i) (a) above
for fixed assets.
c) The resulting exchange gains and losses are recognised in the
Statement of Profit and Loss.
ii. Jointly Controlled Operations (Non Integral)
Assets and liabilities, both monetary and non monetary are translated
at the year end exchange rates, income and expense items are translated
at the average rate of exchange and all resulting exchange differences
are accumulated in a Foreign Currency Translation Reserve.
iii. Other foreign currency transactions:
a) Foreign currency transactions during the year are recorded at the
rates of exchange prevailing at the date of transaction. Exchange gains
or losses realised and arising due to translation of the foreign
currency monetary items outstanding at the year end are accounted in
the Statement of Profit and Loss.
b) Forward Exchange Contracts:
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, premium or
discounts are amortised as expense or income over the life of the
contract.
Exchange differences on such contracts are recognised in the Statement
of Profit and Loss in the year in which the exchange rate changes.
Profit or loss arising on cancellation or renewal of such forward
exchange contracts are recognised as income or as expense for the year.
I. Excise duty payable is accounted on production of finished goods.
J. Employee Benefits:
i. Defined Contribution Plans:
The Company''s contributions to the Provident Fund and the
Superannuation Fund are charged to the Statement of Profit and Loss.
ii. Defined Benefit Plan / Long Term Compensated Absences:
The Company''s liability towards gratuity and compensated absences is
determined on the basis of year end actuarial valuation done by an
independent actuary. The actuarial gains or losses determined by the
actuary are recognised in the Statement of Profit and Loss as income or
expense.
K. Taxation:
Current tax is determined as the amount of tax payable in respect of
estimated taxable income for the period.
Deferred tax is calculated at current statutory income tax rate and is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods.
Deferred tax assets are recognised on unabsorbed depreciation and carry
forward of the losses only to the extent that there are timing
differences, the reversal of which will result in sufficient income or
there is virtual certainty that sufficient taxable income will be
available against which such deferred tax assets can be realised. The
carrying amount of deferred tax assets is reviewed at each Balance
Sheet date.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
L. Receivables and loans and advances identified as doubtful of
recovery are provided for.
M. Contingencies/ provisions :
Provision is recognised when the Company has a present obligation as a
result of past event; it is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation,
in respect of which a reliable estimate can be made. Provisions
(excluding retirement benefits) are not discounted to its present value
and are determined based on best estimates of the expenditure required
to settle the obligation at the Balance Sheet date. These are reviewed
at each Balance Sheet date and adjusted to reflect the current best
estimates. A contingent liability is disclosed, unless the possibility
of an outflow of resources embodying economic benefits is remote.
N. Uses of Estimates:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of financial statements and the reported amount
of revenue and expenses during the reporting period. Difference between
the actual results and estimates are recognised in the period in which
results are known/ materialised.
O. Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, interest rate swaps, currency options, forward
contracts and commodity hedges with an intention to hedge its existing
assets, liabilities, raw material requirements and firm commitments.
Derivative contracts which are closely linked to the underlying
transactions are recognised in accordance with the contract terms. All
contracts are marked-to-market and losses are recognised in the
Statement of Profit and Loss. Gains arising on the same are not
recognised on grounds of prudence.
P. Operating Cycle
Assets and liabilities other than those relating to long-term contracts
(i.e. supply or turnkey contracts) are classified as current if it is
expected to realise or settle within 12 months after the balance sheet
date.
In case of long-term contracts, the time between acquisition of assets
for processing and realisation of the entire proceeds under the
contracts in cash or cash equivalent exceeds one year. Accordingly for
classification of assets and liabilities related to such contracts as
current, duration of each contract is considered as its operating
cycle.
Q. Basis of Incorporation of integral foreign operations:
Figures in respect of the Company''s overseas branches in Afghanistan,
Algeria, Bangladesh, Congo, Egypt, Ethiopia, Georgia, Ghana,
Kazakhstan, Kenya, Lebanon, Libya, Malaysia, Nepal, Nigeria, Oman,
Philippines, South Africa, Sri Lanka, Tunisia, Uganda and United Arab
Emirates have been incorporated on the basis of Financial Statements
(Branch Returns) audited by the auditors of the respective branches.
Further, in respect of overseas branches in Bhutan, Cameroon, Ivory
Coast, Kuwait, Namibia and Tajikistan the accounts have been prepared
and audited in India.
Mar 31, 2011
1 Basis of preparation of Financial Statements:
The Financial Statements have been prepared on historical cost
convention. The Company follows the accrual basis of accounting. The
Financial Statements are prepared in accordance with the accounting
standards specified in the Companies (Accounting Standards) Rules, 2006
notified by the Central Government in terms of Section 211(3C) of the
Companies Act, 1956.
2 Revenue Recognition:
a) Sales of Products and Services are recognised on delivery. Sales and
services exclude sales tax/value added tax and service tax charged to
the customers.
b) Revenue from long-term contracts is recognised based on the stage of
completion determined with reference to the costs incurred on contracts
and their estimated total costs.
When it is probable that the total contract cost will exceed total
contract revenue, expected loss is recognised as an expense
immediately. Total contract cost is determined based on technical and
other assessment of cost to be incurred. Liquidated damages/penalties
are accounted as per the contract terms wherever there is a delayed
delivery attributable to the Company.
c) Revenue from long- term contracts awarded to Jointly Controlled
Entity at Saudi Arabia but executed by the Company under the
arrangement with the Joint Venture Partner [being in substance in the
nature of Jointly Controlled Operations, in terms of Accounting
Standard (AS) 27 ÃFinancial Reporting of Interests in Joint VenturesÃ],
is recognised on the same basis as similar long-term contracts
independently executed by the Company.
d) Share in profit/loss of the projects undertaken by the jointly
controlled entities, is accounted on its appropriation to the venturers
as per the terms of the respective joint venture contracts.
e) Subsidy is accounted on accrual basis.
f) Dividend declared by subsidiary company after the date of the
balance sheet is recognised as income during the year if it relates to
the period which closes on or before the date of the balance sheet. In
respect of investment in other companies dividend income is accounted
as and when right to receive dividend is established.
g) Interest income is accounted on time proportion basis.
3 Inventories:
a) Raw materials, work-in-process, finished goods and stores and
erection materials are valued at the lower of cost and net realisable
value (NRV). Cost of purchased material is determined on the weighted
average basis. Cost of Tools and Dies is amortised over its estimated
useful life of five years. Scrap is valued at net realisable value.
b) Cost of work-in-process and finished goods includes material cost,
labour cost, and manufacturing overheads absorbed on the basis of
normal capacity of production.
4 Fixed Assets:
Fixed assets are stated at cost of acquisition or construction net of
impairment loss, if any less accumulated depreciation/ amortisation.
Cost comprises of purchase/acquisition price, non-refundable taxes and
any directly attributed cost of bringing the asset to its working
condition for its intended use. Financing cost on borrowings for
acquisition or construction of fixed assets, for the period upto the
date of acquisition of fixed assets or when the assets are ready to be
put in use/ the date of commencement of commercial production, is
included in the cost of fixed assets. Assessment of indication of
impairment of an asset is made at the year end and impairment loss, if
any, is recognised.
5 Depreciation/Amortisation:
a) Tangible Assets:
(i) Leasehold land is amortised over the remaining period of the lease.
(ii) Cost of buildings of semi-permanent nature is amortised over 3
years.
(iii) Depreciation on other tangible fixed assets is provided on
straight line method at the rates so as to reduce
them to their estimated salvage value at the end of their useful lives
or at the rates prescribed in Schedule XIV to the Companies Act, 1956
whichever is higher.
The estimated useful lives of assets which are different from the
principal rates specified in Schedule XIV to the Companies Act, 1956
are as follows:
Plant and Machinery à 1 to 19 years, Furniture and Fixtures à 10 years,
Vehicles à 7 years and Computers à 4 years.
b) Intangible Assets:
(i) Brand is amortised over twenty years being the useful life
certified by the independent valuer and goodwill is amortised over five
years.
In terms of the Scheme of Arrangement sanctioned in the year 2007-08,
out of the balance in ÃReserve for Amortisation of Brand Accountà an
amount equal to annual amortisation of brand is credited to the Profit
and Loss Account each year so that overall depreciation/amortisation
gets reduced to that extent. Accordingly, Rs. 1,200 lacs being the
amortisation of brand during the year (previous year Rs. 1,200 lacs)
has been credited to the Profit and Loss Account by netting it with
Depreciation/Amortisation.
(ii) Computer softwares are amortised on straight line method over the
estimated useful life ranging between 4-6 years.
6. Investments:
Long-term investments are stated at cost. Provision is made for
diminution, other than temporary, in the value of investments.
7. Sundry debtors as at the year end under the contract are disclosed
net of advances relating to the respective contracts received and
outstanding at the year end.
8. Foreign Currency Transactions:
a) Foreign branches (Integral):
(i) Fixed assets are translated at the rates on the date of
purchase/acquisition of assets and inventories are translated at the
rates that existed when costs were incurred.
(ii) All foreign currency monetary items outstanding at the year end
are translated at the year end exchange rates. Income and expenses are
translated at average rates of exchange and depreciation/amortisation
is translated at the rates referred to in (a) (i) above for fixed
assets.
The resulting exchange gains and losses are recognised in the Profit
and Loss Account.
b) Jointly Controlled Operations (Non Integral):
Assets and liabilities, both monetary and non monetary are translated
at the year end exchange rates, income and expense items are translated
at the average rate of exchange and all resulting exchange differences
are accumulated in a foreign currency translation reserve.
c) Other foreign currency transactions:
(i) Foreign currency transactions during the year are recorded at the
rates of exchange prevailing at the date of transaction. Exchange gains
or losses realised and arising due to translation of the foreign
currency monetary items outstanding at the year end are accounted in
the Profit and Loss Account.
(ii) Forward Exchange Contracts:
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, premium or
discounts are amortised as expense or income over the life of the
contract.
Exchange differences on such contracts are recognised in the Profit and
Loss Account in the year in which the exchange rate changes.
Profit or loss arising on cancellation or renewal of such forward
exchange contracts are recognised as income or as expense for the year.
9. Excise duty payable is accounted on production of finished goods.
10. Employee Benefits:
(i) Defned Contribution Plans:
The CompanyÃs contributions to the Provident Fund and the
Superannuation Fund are charged to the Profit and Loss Account.
(ii) Defned Benefit Plan/Long Term Compensated Absences:
The CompanyÃs liability towards gratuity and compensated absences is
determined on the basis of year end actuarial valuation done by an
independent actuary. The actuarial gains or losses determined by the
actuary are recognised in the Profit and Loss Account as income or
expense.
11. Taxation:
Current tax is determined as the amount of tax payable in respect of
estimated taxable income for the period.
Deferred tax is calculated at current statutory income tax rate and is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods.
Deferred tax assets are recognised on unabsorbed depreciation and carry
forward of the losses only to the extent that there are timing
differences, the reversal of which will result in sufficient income or
there is virtual certainty that sufficient taxable income will be
available against which such deferred tax assets can be realised. The
carrying amount of deferred tax assets is reviewed at each Balance
Sheet date.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
12. Debts and loans and advances identified as doubtful of recovery
are provided for.
13. Contingencies/Provisions:
Provision is recognised when the Company has a present obligation as a
result of past event; it is probable that an outf low of resources
embodying economic benefit will be required to settle the obligation,
in respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best
estimates of the expenditure required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to refect the current best estimates. A contingent liability
is disclosed, unless the possibility of an outflow of resources
embodying economic benefits is remote.
14. Uses of Estimates:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of financial statements and the reported amount
of revenue and expenses during the reporting period. Difference between
the actual results and estimates are recognised in the period in which
results are known/materialised.
15. Derivative Contracts:
The Company enters into derivative contracts in the nature of full
currency swaps, interest rate swaps, currency options, forward
contracts and commodity hedges with an intention to hedge its existing
assets, liabilities, raw material requirements and firm commitments.
Derivative contracts which are closely linked to the underlying
transactions are recognised in accordance with the contract terms. All
contracts are marked-to-market and losses are recognised in the Profit
and Loss Account. Gains arising on the same are not recognised on
grounds of prudence.
16. Basis of Incorporation of integral foreign operations:
Figures in respect of the CompanyÃs overseas branches in Afghanistan,
Algeria, Bangladesh, Egypt, Ethiopia, Georgia, Ghana, Kazakhstan,
Kenya, Lebanon, Libya (for the nine months ended December 31, 2010),
Malaysia, Mali, Namibia, Nigeria, Oman, Philippines, South Africa,
Tajikistan, Tunisia and United Arab Emirates have been incorporated on
the basis of Financial Statements audited by the auditors of the
respective branches. The Company has incorporated figures in respect of
Libya for the period January 1, 2011 to March 31, 2011 based on the
management accounts. Further, in respect of overseas branches in
Bhutan, Cameroon, Kuwait, Nepal and Srilanka the accounts have been
prepared and audited in India.
Mar 31, 2010
1 Basis of preparation of Financial Statements:
The accounts have been prepared on historical cost convention. The
Company follows the accrual basis of accounting. The Financial
Statements are prepared in accordance with the accounting standards
specified in the Companies (Accounting Standards) Rules, 2006 notified
by the Central Government in terms of section 211(3C) of the Companies
Act, 1956.
2 Revenue Recognition:
a) Sales and Services are recognised on delivery. Sales exclude sales
tax/ value added tax and service tax charged to the customers.
b) Revenue from erection contracts is recognised based on the stage of
completion determined with reference to the costs incurred on contracts
and their estimated total costs.
When it is probable that the total contract cost will exceed total
contract revenue, expected loss is recognised as an expense
immediately. Total contract cost is determined based on technical and
other assessment of cost to be incurred. Liquidated damages/ penalties
are accounted as per the contract terms wherever there is a delayed
delivery attributable to the Company.
c) i) Revenue from contracts awarded to Jointly Controlled Entity at
Saudi Arabia but executed by the Company under the arrangement with the
Joint Venture Partner [being in substance in the nature of Jointly
Controlled Operations, in terms of Accounting Standard (AS) 27
ÃFinancial Reporting of Interests in Joint VenturesÃ], is recognised on
the same basis as similar contracts independently executed by the
Company.
ii) Profit/ Loss on contracts awarded to Jointly Controlled Entity and
executed under profit sharing arrangement, is accounted for when
determined by the Jointly Controlled Entity.
d) Subsidy is accounted on accrual basis.
e) Dividend income is accounted as and when right to receive dividend
is established.
f) Interest income is accounted on time proportion basis.
3 Inventories:
a) Raw materials, work-in-process, finished goods and stores and
erection materials are valued at the lower of cost and net realisable
value (NRV). Cost of purchased material is determined on the weighted
average basis. Cost of Tools and Dies is amortised over its estimated
useful life of five years. Scrap is valued at net realisable value.
b) Cost of work-in-process and finished goods includes material cost,
labour cost, and manufacturing overheads absorbed on the basis of
normal capacity of production.
4 Fixed Assets:
Fixed assets are stated at cost of acquisition or construction net of
impairment loss less accumulated depreciation/ amortisation. Cost
comprises of purchase/ acquisition price, import duties, taxes and any
directly attributed cost of bringing the asset to its working condition
for its intended use. Financing cost on borrowings for acquisition or
construction of fixed assets, for the period upto the date of
acquisition of fixed assets or when the assets are ready to be put in
use/ the date of commencement of commercial production, is included in
the cost of fixed assets. Assessment of indication of impairment of an
asset is made at the year-end and impairment loss, if any, is
recognised.
5 Depreciation/ Amortisation: a) Tangible Assets:
(i) Leasehold land is amortised over the remaining period of the lease.
(ii) Cost of buildings of semi-permanent nature is amortised over 3
years.
(iii) Depreciation on other tangible fixed assets is provided on
straight line method at the rates so as to reduce them to their
estimated salvage value at the end of their useful lives or at the
rates prescribed in Schedule XIV to the Companies Act, 1956 whichever
is higher.
The estimated useful lives of assets which are different from the
principal rates specified in Schedule XIV to the Companies Act, 1956
are as follows:
Plant and Machinery - 1 to 19 years, Furniture and Fixtures - 10 years,
Vehicles - 7 years and Computers - 4 years.
b) Intangible Assets:
(i) Brand is amortised over twenty years being the useful life
certified by the independent valuer and goodwill is amortised over five
years.
In terms of the Scheme of Arrangement sanctioned in the year 2007-08,
out of the balance in ÃReserve for Amortisation of Brand Accountà an
amount equal to annual amortisation of brand is credited to the profit
and loss account each year so that overall depreciation/amortisation
gets reduced to that extent. Accordingly, Rs. 1,200 lacs being the
amortization of brand during the year (previous year Rs. 1,200 lacs)
has been credited to the profit and loss account by netting it with
Depreciation/Amortisation.
(ii) Computer softwares are amortised on straight line method over the
estimated useful life ranging between 4-6 years.
6 Investments:
Long-term investments are stated at cost. Provision is made for
diminution, other than temporary, in the value of investments.
7 Sundry debtors as at the year end under the contract are disclosed
net of advances relating to the respective contracts received and
outstanding at the year end.
8 Foreign Currency Transactions:
a) Foreign branches (Integral):
(i) Fixed assets are translated at the rates on the date of
purchase/acquisition of assets and Inventories are translated at the
rates that existed when costs were incurred.
(ii) All foreign currency monetary items outstanding at the year end
are translated at the year-end exchange rates. Income and expenses are
translated at average rates of exchange and depreciation is translated
at the rates referred to in (a) (i) above for fixed assets.
The resulting exchange gains and losses are recognised in the profit
and loss account.
b) Jointly Controlled Operations (Non Integral):
Assets and liabilities, both monetary and non monetary are translated
at the year end exchange rates, income and expense items are translated
at the average rate of exchange and all resulting exchange differences
are accumulated in a foreign currency translation reserve.
c) Other foreign currency transactions:
(i) Foreign currency transactions during the year are recorded at the
rates of exchange prevailing at the date of transaction. Exchange gains
or losses realised and arising due to translation of the foreign
currency monetary items outstanding at the year end are accounted in
the profit and loss account.
(ii) Forward Exchange Contracts:
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, premium or
discounts are amortised as expense or income over the life of the
contract.
Exchange differences on such contracts are recognised in the profit and
loss account in the year in which the exchange rate changes.
Profit or loss arising on cancellation or renewal of such forward
exchange contracts are recognised as income or as expense for the year.
9 Excise duty payable is accounted on production of finished goods.
10 Employee Benefits:
(i) Defined Contribution Plans:
The CompanyÃs contributions to the Provident Fund and the
Superannuation Fund are charged to the profit and loss account.
(ii) Defined Benefit Plan / Long Term Compensated Absences:
The CompanyÃs liability towards gratuity and compensated absences is
determined on the basis of year end actuarial valuation done by an
independent actuary. The actuarial gains or losses determined by the
actuary are recognised in the profit and loss account as income or
expense.
11 Taxation:
Current tax is determined as the amount of tax payable in respect of
estimated taxable income for the period.
Deferred tax is calculated at current statutory income tax rate and is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods.
Deferred tax assets are recognised on unabsorbed depreciation and carry
forward of the losses only to the extent that there are timing
differences, the reversal of which will result in sufficient income or
there is virtual certainty that sufficient taxable income will be
available against which such deferred tax assets can be realised. The
carrying amount of deferred tax assets is reviewed at each Balance
Sheet date.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
12 Debts and loans and advances identified as doubtful of recovery are
provided for.
13 Contingencies/ Provisions:
Provision is recognised when the Company has a present obligation as a
result of past event; it is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation,
in respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best
estimates of the expenditure required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. A contingent liability
is disclosed, unless the possibility of an outflow of resources
embodying economic benefits is remote.
14 Uses of Estimates:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of financial statements and the reported amount
of revenue and expenses during the reporting period. Difference between
the actual results and estimates are recognised in the period in which
results are known/ materialized.
15 Basis of Incorporation of integral foreign operations:
Figures in respect of the CompanyÃs overseas branches in Afghanistan,
Algeria, Bangladesh, Egypt, Ethiopia, Ghana, Kazakhstan, Kenya,
Lebanon, Libya, Mali, Namibia, Nigeria, Oman, Tajikistan, Tunisia, and
United Arab Emirates have been incorporated on the basis of Financial
Statements audited by the auditors of the respective branches. In
respect of overseas branches in Cameroon, Iran, Iraq and Kuwait the
accounts for the year have been prepared and audited in India.
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