Mar 31, 2016
1. Corporate information
Petron Engineering Construction Limited (''the Company'') is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company is primarily engaged in the business of engineering, procurement and construction of plants for oil & gas refineries, power, cement, petrochemical, fertilizer and other industries. Its shares are listed on two stock exchanges in India. The Company has mechanical fabrication and manufacturing facilities in Maharashtra and Gujarat regions. The Company also provides electrical & instrumentation services and insulation & refractory application/maintenance services to above industries.
2. Basis of preparation
The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply with all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year except for the change in accounting policies explained below.
2.1 Summary of significant accounting policies
Change in accounting policy
i. Accounting for additional depreciation on account of revaluation of assets
On 31 March 1994, the Company revalued all its building existing as on that date and till year ended 31 March 2014, the Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets issued by the ICAI allowed companies to transfer an amount equivalent to the additional depreciation arising due to upward revaluation of fixed assets from revaluation reserve to the Statement of profit and loss. In the year 2014-15 (effective from 01.04.2014), Schedule II to the Companies Act, 2013 is applicable which states that depreciable amount of an asset is the cost of an asset or other amount substituted for cost. Hence, in case of revalued assets, depreciation computed on the revalued amount needs to be charged to the Statement of profit and loss, without any recoupment from revaluation reserve account. The Company has discontinued the practice of recouping the impact of additional depreciation from revaluation reserve. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after 1 April 2014.
A. Revenue recognition
Revenue is recognized based on the nature of activity to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured with reasonable certainty of its recovery.
Contract Revenue
"Revenue from engineering and construction contracts and project-related activities is recognized in accordance with Accounting Standard (the ''AS'') - 7 (Revised), Construction Contracts, by adding the aggregate cost and proportionate margin using the percentage completion method, The Company collects service tax and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the company, hence, they are deducted from revenue. Percentage of completion is determined as a proportion of cost incurred-to-date for work performed to estimated contract cost. Revenue is recognized when the percentage completion of the project achieved is 5% or above. Till such time the expenses incurred for the project is considered as project inventory. As the contract necessarily extends beyond one year, revision of cost and revenue estimated during the course of the contract are reflected in the accounting period in which the facts requiring such revision become known. Provision for expected loss is recognized immediately when it is probable that the total estimated contract costs will exceed the total contract revenue.
The revenue on account of extra claims and the expenditure on account of liquidated damages /cost escalations, warrantees on construction contracts are accounted for at the time of acceptance/settlement by the customers due to uncertainties attached thereto. Similarly, insurance claims are accounted for on settlement with insurers."
Sale of goods
Revenue from sale of goods is recognized when substantial risks and rewards of ownership are transferred to the buyer under the terms of the contract, usually on the delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Income from services
Revenue from service related activities including hire charges, maintenance services & management support services are recognized, pro rata over the period of contract as and when services are rendered, in accordance with the terms of agreements with the customers. The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue.
Interest income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.
B. Retirement and other employee benefits
(a) Short-term benefits
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
(b) Defined contribution plans
The Company has defined contribution plans for post employments benefits in the form of superannuation fund for management employees, provident fund for all employees and employees'' state insurance (the ''ESI'') scheme, as applicable, which are managed by the Life Insurance Corporation of India, Regional Provident Fund Office and the ESI Corporation respectively. These contributions are recognized as expenses of the period when employees have rendered services entitling them to contributions. The Company has no obligation, other than the contribution payable to the Life Insurance Corporation of India, Provident Fund and Employees'' State Insurance Corporation.
(c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in the form of gratuity for all employees which are managed by a separate trust. The liability for such benefits are accounted as an expense for the period to which it relates based on actuarial valuation carried out by the independent actuary using the projected unit credit method.
(d) Other long-term benefits
Liability for leave encashment is recognized as an expense for the period to which it relates based on the actuarial valuation carried out by the independent actuary using the projected unit credit method.
Actuarial gains/losses in respect of post-employment and other long-term benefits are charged to the Statement of profit and loss.
C. Fixed assets
(a) Tangibles
Fixed assets are stated at cost of acquisition (except for the items of revalued assets which are stated at the values determined by the approved valuers) less accumulated depreciation, amortization and impairment losses, if any. The cost of acquisition includes attributable interest and all expenses of bringing the respective fixed assets to working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Own manufactured fixed assets are capitalized at cost including an appropriate share of overheads.
On 31 March 1994, the Company revalued freehold land, office building at Swastik Chambers and certain heavy plant & machinery existing as on that date. These are measured at fair value on revaluation date less accumulated depreciation and impairment losses, if any, recognized after the date of the revaluation. In case of revaluation of fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the Statement of profit and loss, in which case the increase is recognized in the Statement of profit and loss. A revaluation deficit is recognized in the Statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of profit and loss for the period during which such expenses are incurred.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of profit and loss when the asset is derecognized.
(b) Intangibles
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the effect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of profit and loss when the asset is derecognized.
D. Depreciation and Amortization
Leasehold land is amortized on a straight line basis over the period of 99 years.
Depreciation on fixed assets is calculated on a Straight Line Method (the ''SLM'') using the rates arrived at based on the useful lives estimated by the management which is in line with Schedule II useful life, except for (a) for the temporary buildings at sites which are depreciated over the expected life of the project or 3 years whichever is earlier and (b) on certian plant and machinery where depreciation is provided considerering life of 12 years as technically assessed and estimated by the management.
Depreciation on assets costing Rs.5,000 or less at the rate of 100%.
Proportionate depreciation is provided on other fixed assets in the period of addition/disposal.
Intangible assets comprises of computer software which are amortized over an estimated life of 3 to 5 years.
E. Impairment of assets
(a) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized where the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the asset''s net selling price 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. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
(b) After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining useful life.
(c) Impairment loss recognized in an earlier period will be reversed in a later period depending on changes in circumstances to the extent that the discounted future net cash flows are higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset will be increased to the lower of its original carrying value or the carrying value that would have been determined (net of depletion) had no impairment loss been recognized in prior periods.
F. Leases
Lease arrangements where the risks and benefits incidental to ownership and control of the leased item substantially vest with the lessor, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of profit and Loss account on a straight line basis over the lease term.
G. Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.
Current investments are carried in the financial Statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of profit and loss.
H. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
I. Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials, finished goods and traded goods are valued at the lower of cost and net realizable value. Excise duty is included in the value of finished goods inventory. Cost is determined on first in first out basis.
Work-in-progress is valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis.
The net realizable value of work-in-progress is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realizable value.
J. Foreign exchange transactions and translations
(a) Initial recognition
The reporting currency of the Company is Indian Rupee. The Company translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date.
(b) Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.
(c) Exchange differences
i) Exchange differences arising on a monetary item that, in substance, forms part of the Company''s net investment in a non-integral foreign operation is accumulated in the foreign currency translation reserve until the disposal of the net investment. On the disposal of such net investment, the cumulative amount of the exchange differences which have been deferred and which relate to that investment is recognized as income or as expenses in the same period in which the gain or loss on disposal is recognized.
ii) Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset.
iii) TExchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortized over the remaining life of the concerned monetary item.
iv) T ll other exchange differences are recognized as income or as expenses in the period in which they arise.
K. Cash and cash equivalents
Cash and cash equivalents for the purposes of Cash Flow Statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
L. Income-taxes
Tax expense comprises of current and deferred tax. Current income-tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income-tax Act, 1961 enacted in India, and based on the expected outcome of assessments/appeals. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
M. Segment reporting
The Company''s operation comprise of only one business segment ''Engineering, Procurement & Construction'' as its primary segment. The analysis of Geographical segments is based on the areas in which a Company operates. The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company.
N. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares equity outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
O. Provisions, contingent liabilities
(a) Provision is recognized when there is a present obligation as a result of past event 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 are not discounted to their present value and are determined based on 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 estimates.
(b) Contingent liabilities are disclosed where there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
P. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the Statement of profit and loss. The Company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement, the Company does not include depreciation and amortization expense, interest income, finance costs and tax expense.
Q. Use of estimates
The preparation of financial Statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Difference between the actual results and estimates are recognized in the period in which determined.
Mar 31, 2014
A. Revenue recognition
Revenue is recognised based on the nature of activity to the extent it
is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured with reasonable certainty of its
recovery.
Contract Revenue
Revenue from engineering and construction contracts and project-related
activities is recognised in accordance with Accounting Standard (the
''AS'') - 7 (Revised), Construction Contracts, by adding the aggregate
cost and proportionate margin using the percentage completion method,
it include adjustments towards price variation as per contracts,
wherever applicable. The Company collects service tax and value added
taxes (VAT) on behalf of the government and, therefore, these are not
economic benefits flowing to the Company. Hence, they are deducted from
revenue. Percentage of completion is determined as a proportion of
cost incurred-to-date for work performed to estimated contract cost. As
the contract necessarily extends beyond one year, revision of cost and
revenue estimated during the course of the contract are reflected in
the accounting period in which the facts requiring such revision become
known.
The revenue on account of extra claims and the expenditure on account
of liquidated damages/cost escalations on construction contracts are
accounted for at the time of acceptance/settlement by the customers due
to uncertainties attached thereto. Similarly, insurance claims are
accounted for on settlement with insurers.
Sale of goods
Revenue from sale of goods is recognised when substantial risks and
rewards of ownership are transferred to the buyer under the terms of
the contract, usually on the delivery of the goods.
Income from services
Revenue from service related activities including hire charges &
management support services are recognised, pro- rata over the period
of contract as and when services are rendered, in accordance with the
terms of agreements with the customers.
Interest income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
Statement of profit and loss.
B. Retirement and other employee benefits
a) Short-term benefits
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
b) Defined contribution plans
The Company has defined contribution plans for post employment benefits
in the form of superannuation fund for management employees, provident
fund for all employees and employees'' state insurance (the ''ESI'')
scheme, as applicable, which are managed by the Life Insurance
Corporation of India, Regional Provident Fund Office and the ESI
Corporation respectively. These contributions are recognised as
expenses of the period when employees have rendered services entitling
them to contributions. The Company has no obligation, other than the
contribution payable to the LIC, provident fund, and ESI.
c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in
the form of gratuity for all employees which are managed by a separate
trust. The liability for such benefits is accounted as an expense of
the period to which it relates based on actuarial valuation carried out
by the independent actuary using the projected unit credit method.
d) Other long-term benefits
Liability for leave encashment is recognised as an expense of the
period to which it relates based on the actuarial valuation carried out
by the independent actuary using the projected unit credit method.
Actuarial gains/losses in respect of post-employment and other
long-term benefits are charged to the statement of profit and loss.
C. Fixed assets
a) Tangibles
Fixed assets are stated at cost of acquisition (except for the items of
revalued assets which are stated at the values determined by the
approved valuers) less accumulated depreciation, amortisation and
impairment losses, if any. The cost of acquisition includes
attributable interest and all expenses of bringing the respective fixed
assets to working condition for the intended use. Any trade discounts
and rebates are deducted in arriving at the purchase price. Own
manufactured fixed assets are capitalised at cost including an
appropriate share of overheads.
On 31 March 1994, the Company revalued freehold land, office building
at Swastik Chambers and certain heavy plant & machinery existing as on
that date. These are measured at fair value on revaluation date less
accumulated depreciation and impairment losses, if any, recognized
after the date of the revaluation. In case of revaluation of fixed
assets, any revaluation surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the Statement of profit and loss,
in which case the increase is recognized in the Statement of profit and
loss. A revaluation deficit is recognized in the Statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the Statement of profit and loss for the period during which
such expenses are incurred.
The Company adjusts exchange differences arising on transiation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the Statement of profit and
loss when the asset is derecognized.
b) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttably
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets not yet available for use are tested for impairment
annually, either individually or at the cash- generating unit level.
All other intangible assets are assessed for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the Statement of
profit and loss when the asset is derecognized.
D. Depreciation and Amortisation
Depreciation on fixed assets is provided based on Straight Line Method
(the ''SLM'') using the rates arrived at based on the useful lives
estimated by the management, or those prescribed under the Schedule XIV
to the Companies Act, 1956 read with the General Circular 08/2014 dated
04 April 2014 issued by the Ministry of Corporate Affairs, whichever is
higher (except lease hold land which is amortised over the period of
lease i.e 99 years and temporary buildings at sites which are
depreciated over the expected life of the project or three years
whichever is earlier).
Depreciation on assets costing Rs. 5,000 or less at the rate of 100%.
Proportionate depreciation is provided on other fixed assets in the
period of addition/disposai.
Intangible assets comprises of computer software which are amortized
over an estimated life of 3 to 6 years.
E. Impairment of assets
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internai/externai factors. An impairment loss is recognised where the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is greater of the asset''s net selling price 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. In determining net selling
price, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation
model is used.
b) After impairment, depreciation/depietion is provided in subsequent
periods on the revised carrying amount of the asset over its remaining
useful life.
c) Impairment loss recognised in an earlier period will be reversed in
a later period depending on changes in circumstances to the extent that
the discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion)
had no impairment loss been recognised in prior periods.
F. Leases
a) Lease arrangements where the risks and benefits incidental to
ownership and control of the leased item substantially vest with the
lessor, are classified as operating leases. Operating lease payments
are recognised as an expense in the Statement of Profit and Loss
account on a straight line basis over the lease term.
b) Where the company is the lessor, assets leased out under operating
lease are capitalised. Lease income on an operating lease is recognized
in the statement of profit and loss on a straight-line basis over the
lease term.
G. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial Statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
Statement of profit and loss.
H. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying fixed asset are capitalised as part of
cost of such asset till such time as the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
I. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a first in first out basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of work- in-progress is determined on weighted average
basis.
Finished goods includes excise duty and is determined on a first in
first out basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
J. Foreign exchange transactions and translations
a) Initial recognition
The reporting currency of the Company is Indian Rupee. The Company
translates foreign currency transactions into Indian Rupees at the rate
of exchange prevailing at the transaction date.
b) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
c) Exchange differences
From accounting periods commencing on or after 7 December 2006, the
Company accounts for exchange differences arising on
transiation/settiement of foreign currency monetary items as below:
i) Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as "iong-term
foreign currency monetary item", if it has a term of 12 months or more
at the date of its origination.
ii) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
K. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow Statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
L. Income-taxes
Tax expense comprises of current and deferred tax. Current income-tax
on income for the current period is determined on the basis of taxable
income and tax credits computed in accordance with the provisions of
the Income-tax Act, 1961 enacted in India, and based on the expected
outcome of assessments/appeais.The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted,
at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets against deferred
tax liabilities and deferred taxes relate to the same taxable entity
and the same taxation authority.
M. Segment reporting
Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operates.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
Statements of the Company as a whole.
N. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares equity outstanding during the
period are adjusted for the effects of all dilutive potential equity
shares, if any.
O. Provisions, contingent liabilities
a) Provision is recognised when there is a present obligation as a
result of past event 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 are not discounted to their
present value and are determined based on 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 estimates.
b) Contingent liabilities are disclosed where there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. The Company does not recognize a
contingent liability but discloses its existence in the financial
Statements.
P. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the Statement of profit and loss. In its
measurement, the Company does not include depreciation and amortization
expense, interest income, finance costs and tax expense.
Q. Use of estimates
The preparation of financial Statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods. Difference between the actual results
and estimates are recognised in the period in which determined.
Mar 31, 2013
A. Revenue recognition
a) Sales and contract revenue include duty, taxes and adjustments
towards price variation as per contracts, wherever applicable.
b) Revenue is recognised based on the nature of activity to the extent
it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured with reasonable certainty of its
recovery.
c) Revenue from sale of goods is recognised when substantial risks and
rewards oi ovmprship are transferred to the buyer under the terms of
the contract, usually on the delivery of the goods.
d) Revenue from engineering and construction contracts and project-
related activities is recognised in accordance with Accounting Standard
(the ''AS'') - 7 (Revised), Construction Contracts, issued by the
Institute of Chartered Accountants of India (the ''ICAI'') by adding the
aggregate cost and proportionate margin using the percentage completion
method. Percentage of completion is determined as a proportion of cost
incurred-to-date for work performed to estimated contract cost.
Unbilled revenue is carried as project work-in- progress. As the
long-term contract necessarily extends beyond one year, revision of
cost and revenue estimated during the course of the contract are
reflected in the accounting period in which the facts requiring such
revision become known.
e) The revenue on account of extra claims and the expenditure on
account of liquidated damages/cost escalations on construction
contracts are accounted for at the time of acceptance/settlement by the
customers due to uncertainties attached thereto. Similarly, insurance
claims are accounted for on settlement with insurers.
f) Revenue from service related activities including hire charges and
management support services are recognised, pro rata over the period of
contract as and when services are rendered, in accordance with the
terms of agreements with the customers.
g) Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head
"other income" in the statement of profit and loss.
h) Other items of income are accounted as and when the right to receive
arises.
B. Retirement and other employee benefits
a) Short-term benefits
These are recognised as an expense at the undiscounted amount in the
profit and loss account of the period in which the related services are
rendered.
b) Defined contribution plans
The Company has defined contribution plans for post employments
benefits in the form of superannuation fund for management employees,
provident fund for all employees and employees'' state insurance (the
''ESI'') scheme, as applicable, which are managed by the Life Insurance
Corporation of India, Regional Provident Fund Office and the ESI
Corporation respectively. These contributions are recognised as
expenses of the period when employees have rendered services entitling
them to contributions. The Company has no obligation, other than the
contribution payable to the provident fund.
c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in
the form of gratuity for all employees which are managed by a separate
trust. The provisions for such benefits are accounted as an expense of
the period to which it relates based on the basis of actuarial
valuation carried out by the independent actuary using the projected
unit credit method.
other long-term benefits
Liability for leave encashment is recognised as an expense of the
period to which it relates based on the actuarial valuation carried out
by the independent actuary using the projected unit credit method.
Actuarial gains/losses in respect of post-employment and other
long-term benefits are charged to the prof it and loss account.
C. Fixed assets
a) Tangibles
Fixed assets are stated at cost of acquisition (except for the items of
revalued assets which are stated at the values determined by the
approved valuers) less accumulated depreciation, amortisation and
impairment losses, if any. The cost of acquisition includes
attributable interest and all expenses of bringing the respective fixed
assets to working condition for the intended use. Any trade discounts
and rebates are deducted in arriving at the purchase price. Own
manufactured fixed assets are capitalised at cost including an
appropriate share of overheads.
On 31 March 1994, the Company revalued freehold land, office building
at Swastik Chambers and certain heavy plant and machinery existing as
on that date. These are measured at fair value on revaluation date less
accumulated depreciation and impairment losses, if any, recognized
after the date of the revaluation. In case of revaluation of fixed
assets, any revaluation surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the statement of profit and loss,
in which case the increase is recognized in the statement of profit and
loss. A revaluation deficit is recognized in the statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
changed to the statement of profit and loss for the period during which
such expenses are incurred.
The company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
b) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets not yet available for use are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment wheneverthere is an
indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
prof it and loss when the asset is derecognized.
D. Depreciation and Amortisation a) Owned assets
Depreciation on owned fixed assets is provided based on Straight Line
Method (the ''SLM'') using the rates arrived at based on the useful lives
estimated by the management, or those prescribed under the Schedule XIV
to the Companies Act, 1956, whichever is higher (except lease hold land
which is amortised over the period of lease and temporary buildings at
sites which are depreciated overthe expected life of the project).
Leasehold land is amortized on a straight line basis overthe period of
lease, i.e., 91-99 years.
b) Revalued assets
Depreciation is provided as per the SLM on the values and at the rates
given by the approved value. The difference between depreciation
provided based on revalued amount and that on historical cost is
transferred from revaluation reserve to prof it and loss account.
c) Assets carried at historical cost
For additions to fixed assets prior to 1st June, 1986 - by applying the
rates of depreciation prescribed under the Income-tax Act, 1961 and
rules made thereunder in force as on the respective dates of additions.
For additions to fixed assets on or after 1st June, 1986 - by applying
the rates of depreciation in force on the respective dates of additions
as prescribed in Schedule XIV to the Act as per the SLM (except on
temporary buildings at sites which are depreciated over the expected
life of the project).
Depreciation on assets costing Rs. 5,000 or less at the rate of 100%.
Proportionate depreciation is provided on other fixed assets in the
period of addition/disposal.
d) Leased assets
Assets acquired under finance leases are depreciated on straight-line
basis over shorter of lease term, useful life envisaged in Schedule XiV
to the Companies Act, 1956, whichever is lower. Where there is
reasonable certainty that the Company shall obtain ownership of the
assets at the end of the lease term, such assets are depreciated at the
rates prescribed under Schedule XIV to the Act or at the higher rates
adopted by the Company forsimilarassets.
e) Intangible assets comprises of computer software which are amortized
over an estimated life of 3 to 6 years.
E. Impairment of assets
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised where the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is greater of the asset''s net selling price 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. In determining net selling
price, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation
model is used.
b) After impairment, depreciation/depletion is provided in subsequent
periods on the revised carrying amount of the asset over its remaining
useful life.
c) Impairment loss recognised in an earlier period will be reversed in
a later period depending on changes in circumstances to the extent that
the discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion)
had no impairment loss been recognised in prior periods.
F. Leases
a) Lease arrangements where the risks and benefits incidental to
ownership and control of the leased item substantially vest with the
lessor, are classified as operating leases. Operating lease payments
are recognised as an expense in the Profit and Loss account on a
straight tine basis overthe lease term.
b) Where the company is the lessor, assets leased out under operating
lease are capitalised. Rental income is recognised on accrual basis
overthe lease term. <--j
G. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to thefair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of prof it and loss.
H. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying fixed asset are capitalised as part of
cost of such asset till such time as the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
I. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a first in first out basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale. --.
J. Foreign exchange transactions and translations
a) Initial recognition
The reporting currency of the Company is Indian Rupee. The Company
translates foreign currency transactions into Indian Rupees at the rate
of exchange prevailing at the transaction date.
b) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
c) Exchange differences
From accounting periods commencing on or after7 December 2006, the
Company accounts for exchange differences arising on
translation/settlement of foreign currency monetary items as below:
i. Exchange differences arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
ii. Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as "long-term
foreign currency monetary item", if it has a term of 12 months or more
at the date of its origination.
iii. Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item but not beyond 31 March 2020.
iv. All other exchange differences are recognized as income or as
expenses in the period in which they arise.
d) Translation of integral and non-integral foreign operation
The Company classifies all its foreign operations as either "integral
foreign operations" or "non- integral foreign operations."
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
The assets and liabilities of a non-integral foreign operations are
translated into the reporting currency at the exchange rate prevailing
at the reporting date. Their statement of profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the revised classification are
applied from the date of the change in the classification.
K. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flows statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
L. Income-taxes
Tax expense comprises of current and deferred tax. Current income-tax
on income for the current period is determined on the basis of taxable
income and tax credits computed in accordance with the provisions of
the Income-tax Act, 1961 enacted in India, and based on the expected
outcome of assessments/appeals.The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted,
at the reporting date.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the period, and quantified using the
tax rates and laws enacted or substantively enacted as at the balance
sheet date.
Deferred tax assets are recognised and carried forward to the extent
there is a reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of prof it and loss.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
M. Segment reporting
Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operates.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the
financialstatements of the Company as a whole.
N. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares equity outstanding during the
period are adjusted for the effects of all dilutive potential equity
shares, if any.
0. Provisions, contingent liabilities
a) Provision is recognised when there is a present obligation as a
result of past event 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 are not discounted to their
present value and are determined based on 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 estimates.
(b) Contingent liabilities are disclosed where there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. The Company does not recognize a
contingent liability but discloses its existence in the financial
statements.
P. Sales tax, service tax and excise duty on works contract
Where the Company has contractual right to claim amounts, invoiced as
taxes, from the clients, the same are not charged as expenditure and in
other case where liabilty would be on the Company, it is accounted for
on accrual basis.
Q. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, interest income, finance costs
and taxexpense.
a) Cash credit/Working capital demand loan and Buyer''s Credit
facilities from banks are secured by way of:
I. Pari passu charge on whole of the current assets including stock of
raw materials, stock-in- process, semi-finished and finished qoods,
consumables, stores, spares, book debts and all other movables both
present and future.
II. Collateral securities as follows:
1. Pari passu charge on the following assets of the Company:
a) Office Blocks at Swastik Chambers, Chembur, Mumbai.
b) Factory land and building at Dabhasa, Gujarat.
2. Pari passu charge on entire heavy plant and machinery, fixtures and
certain crawler cranes.
3. Corporate guarantee by the holding company - Petron Investments
Private Limited.
III. The Company has also offered the following security for project
specific credit facilities from banks byway of;
a) Exclusive charge on all current assets specific to the project
contracts (including but not limited to raw material, finished goods,
work in progress, receivables and the contract receipts from the
obligors).
b) Exclusive charge on all monies deposited/credited or caused to be
deposited/credited into the project accounts.
IV. The cash credit /working capital demand loan is repayable on
demand and carries interest in the range of 11% to 16%.
b) Short term INR loan from bank
a) Term loan from bank amounting to Rs. Nil (Previous year:Rs.
80,369,863) carried interest @13.5% p.a. The loan was repayable in 5
monthly installments of Rs. 160 lakhs excluding interest, from the date
of loan, viz., March, 2012. The loan has been completely repaid in the
current year. The loan was secured against the securities listed above.
c) Inter corporate deposits
a) Inter corporate deposits carries interest in the range of 11 % to 17
% and are repayable on the expiry of the term for which it was taken.
Inter corporate deposits include Rs. 134,988,118 (PY. Rs. 29,353,959/-
taken from related parties.
Mar 31, 2012
A. Changes in accounting policy
Presentation and disclosure of financial statements :-
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year. For further details, Refer to note #43.
B. Basis of accounting, preparation of financial statements and use of
estimates
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention, except for certain building, land and plant
and machinery acquired before 31st March 1994 which are carried at
revalued amounts. The accounting policies adopted in the preparation of
financial statements are consistent with those of previous year except,
for the change in accounting policy explained below.
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods. Difference between the actual results
and estimates are recognised in the period in which determined.
C. Revenue recognition
(a) Sales and contract revenue include duty, taxes and adjustments
towards price variation as per contracts, wherever applicable.
(b) Revenue is recognised based on the nature of activity to the extent
it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured with reasonable certainty of its
recovery.
(c) Revenue from sale of goods is recognised when substantial risks and
rewards of ownership are transferred to the buyer under the terms of
the contract, usually on the delivery of the goods.
(d) Revenue from engineering and construction contracts and
project-related activities is recognised in accordance with Accounting
Standard (the'AS') - 7 (Revised), Construction Contracts, issued by the
Institute of Chartered Accountants of India (the 'ICAI') by adding the
aggregate cost and proportionate margin using the percentage completion
method. Percentage of completion is determined as a proportion of cost
incurred-to- date for work performed to estimated contract cost.
Unbilled revenue is carried as project work-in-progress.
As the long-term contract necessarily extends beyond one year, revision
of cost and revenue estimated during the course of the contract are
reflected in the accounting period in which the facts requiring such
revision become known.
(e) The revenue on account of extra claims and the expenditure on
account of liquidated damages/cost escalations on construction
contracts are accounted for at the time of acceptance/settlement by the
customers due to uncertainties attached thereto. Similarly, insurance
claims are accounted for on settlement with insurers.
(f) Revenue from service related activities including hire charges &
management support services are recognised, pro rata over the period of
contract as and when services are rendered, in accordance with the
terms of agreements with the customers.
(g) Interest income is recognized on a time proportion basis taking
into account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(h) Other items of income are accounted as and when the right to
receive arises.
D. Retirement and other employee benefits
(a) Short-term benefits
These are recognised as an expense at the undiscounted amount in the
profit and loss account of the period in which the related services are
rendered.
(b) Defined contribution plans
The Company has defined contribution plans for post employments
benefits in the form of superannuation fund for management employees,
provident fund for all employees and employee's state insurance (the
'ESI') scheme, as applicable, which are managed by the Life Insurance
Corporation of India, Regional Provident Fund Office and the ESI
Corporation respectively. These contributions are recognised as
expenses of the period when employees have rendered services entitling
them to contributions. The Company has no obligation, other than the
contribution payable to the provident fund.
(c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in
the form of gratuity for all employees which are managed by a separate
trust. The provisions for such benefits are accounted as an expense of
the period to which it relates based on the basis of actuarial
valuation carried out by the independent actuary using the projected
unit credit method.
(d) Other long-term benefits
Liability for leave encashment is recognised as an expense of the
period to which it relates based on the actuarial valuation carried out
by the independent actuary using the projected unit credit method. The
provision for sick leave, if warranted, is made based on prudent
accounting practices.
Actuarial gains/losses in respect of post-employment and other
long-term benefits are charged to the profit and loss account.
E. Fixed assets
(a) Tangibles
Fixed assets are stated at cost of acquisition (except for the items of
revalued assets which are stated at the values determined by the
approved valuers) less accumulated depreciation, amortisation and
impairment losses, if any. The cost of acquisition includes
attributable interest and all expenses of bringing the respective fixed
assets to working condition for the intended use. Any trade discounts
and rebates are deducted in arriving at the purchase price. Own
manufactured fixed assets are capitalised at cost including an
appropriate share of overheads.
On 31 March 1994, the Company revalued freehold land, office building
at Swastik Chambers and certain heavy plant & machinery existing as on
that date. These are measured at fair value less accumulated
depreciation and impairment losses, if any, recognized after the date
of the revaluation. In case of revaluation of fixed assets, any
revaluation surplus is credited to the revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same asset
previously recognized in the statement of profit and loss, in which
case the increase is recognized in the statement of profit and loss. A
revaluation deficit is recognized in the statement of profit and loss,
except to the extent that it offsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
changed to the statement of profit and loss for the period during which
such expenses are incurred.
From accounting periods commencing on or after 7 December 2006, the
Company adjusts exchange differences arising on translation/settlement
of long-term foreign currency monetary items pertaining to the
acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(b) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use a re
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
F. Depreciation and Amortisation
a) Owned assets
Depreciation on owned fixed assets is provided based on Straight Line
Method (the 'SLM') in accordance with the rates and manner provided in
the Schedule XIV to the Act (except lease hold land which is amortised
over the period of lease).
b) Revalued assets
Depreciation is provided as per the SLM on the values and at the rates
given by the approved valuer's The difference between depreciation
provided based on revalued amount and that on historical cost is
transferred from revaluation reserve to profit and loss account.
c) Assets carried at historical cost
For additions to fixed assets prior to 1st June, 1986 - by applying the
rates of depreciation prescribed under the Income-tax Act, 1961 and
rules made thereunder in force as on the respective dates of additions.
For additions to fixed assets on or after 1st June, 1986 - by applying
the rates of depreciation in force on the respective dates of additions
as prescribed in Schedule XIV to the Act as per the SLM (except on
temporary buildings at sites which are depreciated over the expected
life of the project).
Depreciation on assets costing Rs. 5,000 or less at the rate of 100%.
Proportionate depreciation is provided on other fixed assets in the
period of addition/disposal.
d) Leased assets
Assets acquired under finance leases are depreciated based on SLM over
the lease term ie; 91 to 99 years. Where there is reasonable certainty
that the Company shall obtain ownership of the assets at the end of the
lease term, such assets are depreciated at the rates prescribed under
Schedule XIV to the Act or at the higher rates adopted by the Company
for similar assets.
e) Intangible assets comprises of computer software which are amortized
over an estimated life of 3 to 6 years.
G. Impairment of assets
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised where the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is greater of the asset's net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
b) After impairment, depreciation/depletion is provided in subsequent
periods on the revised carrying amount of the asset over its remaining
useful life.
c) Impairment loss recognised in an earlier period will be reversed in
a later period depending on changes in circumstances to the extent that
the discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion]
had no impairment loss been recognised in prior periods.
H. Leases
a) Lease arrangements where the risks and benefits incidental to
ownership and control of the leased item substantially vest with the
lessor, are classified as operating leases. Operating lease payments
are recognised as an expense in the Profit and Loss account on a
straight line basis over the lease term.
b) Assets leased out under operating lease are capitalised. Rental
income is recognised on accrual basis over the lease term.
I. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
J. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying fixed asset are capitalised as part of
cost of such asset till such time as the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
K. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a first in first out basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
L Foreign exchange transactions and translations
a) Initial recognition
The reporting currency of the Company is Indian Rupee. The Company
translates foreign currency transactions into Indian Rupees at the rate
of exchange prevailing at the transaction date.
b) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fairvalue or other
Similar valuation denominated in a foreign currency, are translated
using the exchange rate at the date when such value was determined.
c) Exchange differences
From accounting periods commencing on or after 7 December 2006, the
Company accounts for exchange differences arising on
translation/settlement of foreign currency monetary items as below:
(i) Exchange differences arising on a monetary item that, in substance,
forms part of the Company's net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
(ii) Exchange differences arising on long-term foreign currency
monetary items related to acquisition of a fixed asset are capitalized
and depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as "long-term
foreign currency monetary item", if it has a term of 12 months or more
at the date of its origination.
(in) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
(iv) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
d) Translation of integral and non-integral foreign operation
The Company classifies all its foreign operations as either "integral
foreign operations" or "non-integral foreign operations".
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
The assets and liabilities of a non-integral foreign operation are
translated into the reporting currency at the exchange rate prevailing
at the reporting date. Their statement of profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the revised classification are
applied from the date of the change in the classification.
M. Cash and cash equivalents
Cash and cash equivalents for the purposes of Cash flows statement
comprise cash at bank and in hand and short- term investments with an
original maturity of three months or less.
N. Income-taxes
Tax expense comprises of current and deferred tax. Current income-tax
on income for the current period is determined on the basis of taxable
income and tax credits computed in accordance with the provisions of
the Income-tax Act, 1961 enacted in India , and based on the expected
outcome of assessments/appeals. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted,
at the reporting date.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the period, and quantified using the
tax rates and laws enacted or substantively enacted as at the balance
sheet date.
Deferred tax assets are recognised and carried forward to the extent
there is a reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
0. Segment reporting
Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
P. Earnings pershare
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividend and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares equity outstanding during the
period are adjusted for the effects of all dilutive potential equity
shares, if any.
Q. Provisions, contingent liabilities
(a) Provision is recognised when there is a present obligation as a
result of past event 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 are not discounted to their
present value and are determined based on 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 estimates.
(b) Contingent liabilities are disclosed where there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. The Company does not recognize a
contigent liability but discloses its existence in the financial
statements
R. Sales tax. service tax and excise duty on works contract
Where the Company has contractual right to claim amounts, invoiced as
taxes, from the clients, the same are not charged as expenditure and in
other case where liability would be on the Company, it is accounted for
on accrual basis.
S. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has chosen to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on on the face of the statement of profit and loss. The
Company measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, finance costs and tax expense.
Mar 31, 2011
1. Background & nature of operations
Petron Engineering Construction Limited is a company incorporated on
19th July, 1976 under the Companies Act, 1956 (the Act). The Company
is primarily engaged in the business of engineering, procurement and
construction of plants for oil refineries, power, cement,
petrochemical, fertiliser and other industries.
2. Basis of accounting, use of estimates and preparation of financial
statements
The Company maintains its accounts on accrual basis, unless stated
otherwise, following the historical cost convention (except for the
revaluation of certain fixed assets) in accordance with generally
accepted accounting principles in India (the GAAP) and comply with
the applicable accounting standards (theAS).
The preparation of financial statements in conformity with the GAAP
requires that the management of the Company makes estimates and
assumptions that affect the reported amounts of income and expenses of
the period, the reported balances of assets and liabilities and the
disclosures relating to contingent liabilities as at the date of the
financial statements. Actual results could differ from these estimates.
Difference between the actual results and estimates are recognised in
the period in which determined.
3. Revenue recognition
a) Sales and contract revenue include duty, taxes and adjustments
towards price variation as per contracts, wherever applicable.
b) Revenue is recognised based on the nature of activity to the extent
it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured with reasonable certainty of its
recovery.
c) Revenue from sale of goods is recognised when substantial risks and
rewards of ownership are transferred to the buyer under the terms of
the contract.
d) Revenue from engineering and construction contracts and
project-related activities is recognised in accordance with Accounting
Standard (the AS) -7 (Revised), Construction Contracts, issued by the
Institute of Chartered Accountants of India (the ICAI) by adding the
aggregate cost and proportionate margin using the percentage completion
method. Percentage of completion is determined as a proportion of cost
incurred-to- date for work performed to estimated contract cost.
Unbilled revenue is carried as project work-in-progress.
As the long-term contract necessarily extends beyond one year, revision
of cost and revenue estimated during the course of the contract are
reflected in the accounting period in which the facts requiring such
revision become known.
e) The revenue on account of extra claims and the expenditure on
account of liquidated damages/cost escalations on construction
contracts are accounted for at the time of acceptance/settlement by the
customers due to uncertainties attached thereto. Similarly, insurance
claims are accounted for on settlement with insurers.
f) Revenue from service related activities including hire charges are
recognised in accordance with the terms of agreements with the
customers.
g) Other items of income are accounted as and when the right to receive
arises.
4. Employee benefits
a) Short-term benefits
These are recognised as an expense at the undiscounted amount in the
profit and loss account of the period in which the related services are
rendered.
b) Defined contribution plans
The Company has defined contribution plans for post employment benefits
in the form of superannuation fund for management employees, provident
fund for all employees and employees state insurance (the ESI)
scheme, as applicable, which are managed by the Life Insurance
Corporation of India, Regional Provident Fund Office and the ESI
Corporation respectively. These contributions are recognised as
expenses of the period when employees have rendered services entitling
them to contributions.
c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in
the form of gratuity for all employees which are managed by a separate
trust. The provisions for such benefits are accounted as an expense of
the period to which it relates based on the basis of actuarial
valuation carried out by the independent actuary using the projected
unit credit method.
d) Other long-term benefits
Liability for leave encashment is recognised as an expense of the
period to which it relates based on the actuarial valuation carried out
by the independent actuary using the projected unit credit method. The
provision for sick leave, if warranted, is made based on prudent
accounting practices.
Actuarial gains/losses in respect of post-employment and other
long-term benefits are charged to the profit and loss account.
5. Fixed assets
Fixed assets are stated at cost of acquisition (except for the items of
revalued assets which are stated at the values determined by the
approved valuers) less accumulated
depreciation/amortisation/impairment. The cost of acquisition includes
attributable interest and all expenses of bringing the respective fixed
assets to working condition for the intended use. Own manufactured
fixed assets are capitalised at cost including an appropriate share of
overheads.
6. Leases
a) Finance leases, which effectively transfer substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalised leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Lease arrangements where the risks and benefits incidental to ownership
and control of the leased item substantially vest with the lessor, are
classified as operating leases. Operating lease payments are recognised
as an expense in the Profit and Loss account on a straight line basis
over the lease term.
b) Assets given under finance lease are recognised as receivables at an
amount equal to the net investment in the lease. Lease income is
recognised over the period of the lease so as to yield a constant rate
of return on the net investment in the lease.
c) Assets leased out under operating lease are capitalised. Rental
income is recognised on accrual basis over the lease term.
d) Initial direct costs relating to assets given on finance leases are
charged to profit and loss account.
7. Depreciation & Amortisation
a) Owned assets
Depreciation on owned fixed assets is provided based on Straight Line
Method (the SLM) in accordance with the rates and manner provided in
the Schedule XIV to the Act (except leasehold land which is amortised
over the period of lease).
b) Revalued assets
Depreciation is provided as per the SLM on the values and at the rates
given by the approved valuers. The difference between depreciation
provided based on revalued amount and that on historical cost is
transferred from revaluation reserve to profit and loss account.
c) Assets carried at historical cost
For additions to fixed assets prior to 1st June, 1986 - by applying the
rates of depreciation prescribed under the Income-tax Act, 1961 and
rules made thereunder in force as on the respective dates of additions.
For additions to fixed assets on or after 1st June, 1986 - by applying
the rates of depreciation in force on the respective dates of additions
as prescribed in Schedule XIV to the Act as per the SLM (except on
temporary/construction buildings which are depreciated over the
expected life of the project). Depreciation on assets costing Rs.
5,000 or less is at the rate of 100%.
d) Leased assets
Assets acquired under finance leases are depreciated based on SLM over
the lease term. Where there is reasonable certainty that the Company
shall obtain ownership of the assets at the end of the lease term, such
assets are depreciated at the rates prescribed under Schedule XIV to
the Act or at the higher rates adopted by the Company for similar
assets.
8. Impairment of assets
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised where the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
b) After impairment, depreciation/depletion is provided in subsequent
periods on the revised carrying amount of the asset over its remaining
useful life.
c) Impairment loss recognised in an earlier period will be reversed in
a later period depending on changes in circumstances to the extent that
the
discounted future net cash flows are higher than the net book value at
the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion)
had no impairment loss been recognised in prior periods.
9. Investments
Long-term investments are measured at cost. However, provision for
diminution in value is made to recognise a decline, other than
temporary, in the value of the investments.
10. Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying fixed asset are capitalised as part of
cost of such asset till such time as the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
11. Inventories
Inventories are valued after providing for obsolescence, as under:
a) Finished & semi-finished goods, raw materials, components,
construction materials, stores, spares and loose tools & tackles at
lower of cost or net realisable value.
b) Cost includes related overheads determined on the first in first out
basis.
12. Foreign exchange transactions and translations
a) The reporting currency of the Company is Indian Rupee. The Company
translates foreign currency transactions into Indian Rupees at the rate
of exchange prevailing at the transaction date. Monetary assets and
liabilities (for e.g. cash, receivables, payables etc.) denominated in
foreign currency are translated into Indian Rupees at the rate of
exchange prevailing at the balance sheet date. Non-monetary items
(fixed assets, inventories, investments etc.) which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction.
b) All exchange differences arising on the settlement/restatement are
recognised as income or expenses in the period in which they arise
except those arising from investments in non-integral operations.
c) All transactions of integral foreign operations are translated as if
the transactions of those foreign operations were the transactions of
the Company itself. In translating the financial statements of a
non-integral foreign operation for incorporating in financial
statements, the Company translates the assets and liabilities at the
rate of exchange prevailing at the balance sheet date. Income and
expenses of non-integral operations are translated using rates at the
date of transactions.
13. Sales tax and excise duty on works contract
Where the Company has contractual right to claim amounts, invoiced as
taxes, from the clients, the same are not charged as expenditure and in
other case where liability would be on the Company, it is accounted for
on accrual basis.
14. Income taxes
Tax expense comprises of current and deferred tax. Current income-tax
and fringe benefit tax on income for the current period is determined
on the basis of taxable income and tax credits computed in accordance
with the provisions of the Income-tax Act, 1961, and based on the
expected outcome of assessments/appeals.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the period, and quantified using the
tax rates and laws enacted or substantively enacted as at the balance
sheet date.
Deferred tax assets are recognised and carried forward to the extent
there is a reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised.
15. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted number of equity shares outstanding during the period is
adjusted for events of bonus issue, share split, and reverse share
split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares equity outstanding during the
period are adjusted for the effects of all dilutive potential equity
shares, if any.
16. Provisions, contingent liabilities and contingent assets
a) Provision is recognised when there is a present obligation as a
result of past event 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 are not discounted to their
present value and are determined based on 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 estimates.
b) Contingent liabilities are disclosed where there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources.
c) Contingent assets are not recognised.
Mar 31, 2010
1. Background & nature of operations
Petron Engineering Construction Limited is a company incorporated on
19th July, 1976 under the Companies Act, 1956 (the Act). The Company
is primarily engaged in the business of engineering, procurement and
construction of plants for oil refineries, power, cement,
petrochemical, fertiliser and other industries.
2. Basis of accounting, use of estimates and preparation of financial
statements
The Company maintains its accounts on accrual basis, unless stated
otherwise, following the historical cost convention (except for the
revaluation of certain fixed assets) in accordance with generally
accepted accounting principles in India (the GAAP) and comply with
the accounting standards notified under section 211 (3C) of the Act
read with Companies (Accounting Standards) Rules, 2006.
The preparation of financial statements in conformity with the GAAP
requires that the management of the Company makes estimates and
assumptions that affect the reported amounts of income and expenses of
the period, the reported balances of assets and liabilities and the
disclosures relating to contingent liabilities as at the date of the
financial statements. Actual results could differ from these estimates.
Difference between the actual results and estimates are recognised in
the period in which determined.
3. Revenue recognition
(a) Sales and contract revenue include duty, taxes and adjustments
towards price variation as per contracts, wherever applicable.
(b) Revenue is recognised based on the nature of activity to the extent
it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured with reasonable certainty of its
recovery.
(c) Revenue from sale of goods is recognised when substantial risks and
rewards of ownership are transferred to the buyer under the terms of
the contract.
(d) Revenue from engineering and construction contracts and
project-related activities is recognised in accordance with Accounting
Standard (the AS) -7 (Revised), Construction Contracts, issued by the
Institute of Chartered Accountants of India (the ICAI) by adding the
aggregate cost and proportionate margin using the percentage completion
method. Percentage of completion is determined as a proportion of cost
incurred-to-date for work performed to estimated contract cost.
Unbilled revenue is carried as project work-in-progress.
As the long-term contract necessarily extends beyond one year, revision
of cost and revenue estimated during the course of the contract are
reflected in the accounting period in which the facts requiring such
revision become known.
(e) The revenue on account of extra claims and the expenditure on
account of liquidated damages/cost escalations on construction
contracts are accounted for at the time of acceptance/settlement by the
customers due to uncertainties attached thereto. Similarly, insurance
claims are accounted for on settlement with insurers.
(f) Revenue from service related activities including hire charges are
recognised in accordance with the terms of agreements with the
customers.
(g) Other items of income are accounted as and when the right to
receive arises.
4. Employee benefits
(a) Short-term benefits
These are recognised as an expense at the undiscounted amount in the
profit and loss account of the period in which the related services are
rendered.
(b) Defined contribution plans
The Company has defined contribution plans for post employments
benefits in the form of superannuation fund for management employees,
provident fund for all employees and employees state insurance (the
ESI) scheme, as applicable, which are managed by the Life Insurance
Corporation of India, Regional Provident Fund Office and the ESI
Corporation respectively. These contributions are recognised as
expenses of the period when employees have rendered services entitling
them to contributions.
(c) Defined benefit plans
The Company has defined benefit plans for post-employment benefits in
the form of gratuity for all employees which are managed by a separate
trust. The provisions for such benefits are accounted as an expense of
the period to which it relates based on the basis of actuarial
valuation carried out by the independent actuary using the projected
unit credit method.
(d) Other long-term benefits
Liability for leave encashment is recognised as an expense of the
period to which it relates based on the actuarial valuation carried out
by the independent actuary using the projected unit credit method. The
provision for sick leave, if warranted, is made based on prudent
accounting practices.
Actuarial gains/losses in respect of post-employment and other
long-term benefits are charged to the profit and loss account.
5. Fixed assets
Fixed assets are stated at cost of acquisition (except for the items of
revalued assets which are stated at the values determined by the
approved valuers) less accumulated
depreciation/amortisation/impairment. The cost of acquisition includes
attributable interest and all expenses of bringing the respective fixed
assets to working condition for the intended use. Own manufactured
fixed assets are capitalised at cost including an appropriate share of
overheads.
6. Leases
(a) Finance leases, which effectively transfer substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalised leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Lease arrangements where the risks and benefits incidental to ownership
and control of the leased item substantially vest with the lessor, are
classified as operating leases. Operating lease payments are recognised
as an expense in the Profit and Loss account on a straight line basis
over the lease term.
(b) Assets given under finance lease are recognised as receivables at
an amount equal to the net investment in the lease. Lease income is
recognised over the period of the lease so as to yield a constant rate
of return on the net investment in the lease.
(c) Assets leased out under operating lease are capitalised. Rental
income is recognised on accrual basis over the lease term.
(d) Initial direct costs relating to assets given on finance leases are
charged to profit and loss Account.
7. Depreciation and Amortisation
(a) Owned assets
Depreciation on owned fixed assets is provided based on Straight Line
Method (the SLM) in accordance with the rates and manner provided in
the Schedule XIV to the Act (except lease hold land which is amortised
over the period of lease).
(b) Revalued assets
Depreciation is provided as per the SLM on the values and at the rates
given by the approved valuers. The difference between depreciation
provided based on revalued amount and that on historical cost is
transferred from revaluation reserve to profit and loss account.
(c) Assets carried at historical cost
For additions to fixed assets prior to 1st June, 1986 - by applying the
rates of depreciation prescribed under the Income-tax Act, 1961 and
rules made thereunder in force as on the respective dates of additions.
For additions to fixed assets on or after 1st June, 1986 - by applying
the rates of depreciation in force on the respective dates of additions
as prescribed in Schedule XIV to the Act as per the SLM (except on
temporary buildings at sites which are depreciated over the expected
life of the project).
Depreciation on assets costing Rs.5,000 or less at the rate of 100% on:
I. plant & machinery added from 1st June, 1986 to 31st March, 1993
II. all fixed assets added after 31st March, 1993
Proportionate depreciation is provided on other fixed assets in the
period of addition/disposal.
(d) Leased assets
Assets acquired under finance leases are depreciated based on SLM over
the lease term. Where there is reasonable certainty that the Company
shall obtain ownership of the assets at the end of the lease term, such
assets are depreciated at the rates prescribed under Schedule XIV to
the Act or at the higher rates adopted by the Company for similar
assets.
8. Impairment of assets
(a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognised where the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
(b) After impairment, depreciation/depletion is provided in subsequent
periods on the revised carrying amount of the asset over its remaining
useful life.
(c) Impairment loss recognised in an earlier period will be reversed in
a later period depending on changes in circumstances to the extent that
the discounted future net cash flows are higher than the net book value
at the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion)
had no impairment loss been recognised in prior periods.
9. Investments
Long-term investments are measured at cost. However, provision for
diminution in value is made to recognise a decline, other than
temporary, in the value of the investments.
10. Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying fixed asset are capitalised as part of
cost of such asset till such time as the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
11. Inventories
Inventories are valued after providing for obsolescence, as under:
(a) Finished & semi-finished goods, raw materials, components,
construction materials, stores, spares and loose tools & tackles at
lower of cost or net realisable value.
(b) Cost includes related overheads determined on the first in first
out basis as per the AS-2, Valuation of Inventories, issued by the
ICAI.
12. Foreign exchange transactions and translations
(a) The reporting currency of the Company is Indian Rupee. The Company
translates foreign currency transactions into Indian Rupees at the rate
of exchange prevailing at the transaction date. Monetary assets and
liabilities (for e.g. cash, receivables, payables etc.) denominated in
foreign currency are translated into Indian Rupees at the rate of
exchange prevailing at the balance sheet date. Non-monetary items
(fixed assets, inventories, investments etc.) which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction.
(b) All exchange differences arising on the settlement/restatement are
recognised as income or expenses in the period in which they arise
except those arising from investments in non-integral operations.
(c) All transactions of integral foreign operations are translated as
if the transactions of those foreign operations were the transactions
of the Company itself. In translating the financial statements of a
non- integral foreign operation for incorporating in financial
statements, the Company translates the assets and liabilities at the
rate of exchange prevailing at the balance sheet date. Income and
expenses of non- integral operations are translated using rates at the
date of transactions.
13. Sales tax and excise duty on works contract
Where the Company has contractual right to claim amounts, invoiced as
taxes, from the clients, the same are not charged as expenditure and in
other case where liability would be on the Company, it is accounted for
on accrual basis.
14. Income taxes
Tax expense comprises of current, deferred and fringe benefit tax.
Current income-tax and fringe benefit tax on income for the current
period is determined on the basis of taxable income and tax credits
computed in accordance with the provisions of the Income-tax Act, 1961,
and based on the expected outcome of assessments/appeals.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the period, and quantified using the
tax rates and laws enacted or substantively enacted as atthe balance
sheet date.
Deferred tax assets are recognised and carried forward to the extent
there is a reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised.
15. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted number of equity shares outstanding during the period is
adjusted for events of bonus issue, share split, and reverse share
split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares equity outstanding during the
period are adjusted for the effects of all dilutive potential equity
shares, if any.
16. Provisions, contingent liabilities and contingent assets
(a) Provision is recognised when there is a present obligation as a
result of past event 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 are not discounted to their
present value and are determined based on 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 estimates.
(b) Contingent liabilities are disclosed where there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources.
(c) Contingent assets are not recognised.