Home  »  Company  »  Power Mech Projects  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of Power Mech Projects Ltd. Company

Mar 31, 2015

1. Corporate Information

Power Mech Projects Limited is incorporated in the year 1999 and is engaged in the business of providing ETC, Civil and O&M services for power projects. The company is associated with all power majors in India and Overseas for Public and Private sector power utilities apart from multinational companies. Power Mech is now engaged in several power projects ranging from 135MW to 800MW, besides many projects in lower segment also. Thus, Power Mech is proud to be a vital part of India's Power generation capacity augmentation.

a. Basis of Accounting and preparation

The financial statements are prepared under historical cost convention on accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles in India. The financial statements are prepared to comply in all material respects with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule 7 of Companies (Accounts) Rules, 2014, the pronouncements of the Institute of Chartered Accountants of India, the relevant provisions of the Companies Act, 2013 and Companies Act, 1956 to the extent applicable. The Accounting policies have been consistently applied except where a newly issued Accounting Standard is initially adopted or a revision to an existing Accounting Standard or amendments to the provisions of any statue which requires a change in the accounting policy hitherto in use.

b. Use of Estimates

The preparation of financial statements requires the management of the Company to make judgments, estimates and assumptions that affect the reported balance of assets and liabilities, revenues and expenses and disclosures relating to the contingent liabilities and commitments. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Examples of such estimates includes computation of physical proportion of work completed to the total quantum of contract work order, provisions required for doubtful debts and advances, future obligation under employee retirement benefit plans, bifurcation of assets and liabilities into current and non-current and useful lives of tangible and intangible fixed assets. The judgments, estimates and underlying assumptions are made with the management's best knowledge of the business environment and are reviewed on an ongoing basis. However, future results could differ from these estimates. Any revision to these accounting estimates is recognized prospectively in the current and future periods.

c. Tangible fixed assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of freight, duties and taxes, the cost of installation/erection and other incidental expenses incurred to bring the asset to its present location and condition but exclusive of duties and taxes that are subsequently recoverable from taxing authorities.

Capital Work-in-progress are stated at the amount expended up to the date of balance sheet.

d. Intangible assets

Intangible assets are recorded at the consideration paid for acquisition of such asset and stated at cost less accumulated amortization and impairment.

e. Depreciation and Amortization

The depreciation on tangible assets is provided under the Straight-line method over the useful lives of the assets estimated by the management during the financial year 2012-13 which are different from the useful lives as prescribed in schedule –II of the Companies Act, 2013 which becomes effective from 1.4.2014. The management based on internal assessment and independent technical evaluation carried out by external values, believes that the useful lives given below best represent the period over which the management expects to use these assets. Such estimation is made based on the past experience and working conditions in which assets are put to usage.

Individual assets costing up to Rs. 5,000/- each, other than mobile phones, are fully depreciated in the year of purchase since in the opinion of the management the useful life of such assets are of one year.

Depreciation on assets added/sold during the year is provided on pro-rata basis from the date of acquisition or up to the date of sale, as the case may be.

Intangible assets, comprising of expenditure on computer software, incurred are amortized on a straight line method over a period of five years.

Depreciation and amortization methods, useful lives and residual values are reviewed periodically at the end of each financial year.

f. Impairment of Assets

An asset is treated as impaired when the carrying cost of the same exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

g. Borrowing Costs

Borrowing Costs, that are directly attributable to the acquisition or construction of assets, that necessarily take a substantial period of time to get ready for its intended use, are capitalized as part of the cost of qualifying asset when it is possible that they will result in future economic benefits and the cost can be measured reliably.

Other borrowing costs are recognized as an expense in the period in which they are incurred.

h. Investments

Non-current investments are stated at cost and income thereon is accounted for on accrual. Provision towards decline in the value of long term investments is made only when such decline is other than temporary.

i. Inventories

a) Stores and consumables are valued at lower of cost or Net realizable value.

b) Work-in-progress:

Contracts in progress and not due for billing to the customer as on date of balance sheet are valued at agreed contract price.

c) Contracts awarded to the company and not commenced as on date of balance sheet, the cost incurred in securing the contract, mobilization expenses of labor and material and other related expenses incurred are shown as asset as per the requirements of AS-7.

j. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

The company undertakes erection, civil and maintenance contracts and revenue from these contracts is recognized by following the percentage of completion method and is measured with reference to actual completion of physical proportion of the work to the extent of work certified by the customer. The portion of the work which was completed, but pending for certification by the customer, is also recognized as revenue by treating the same as uncertified revenue. Any claims, variations and incentives is recognized as revenue only when the customer accepts the same. Provision for expected loss is recognized immediately when it is probable that the total estimated cost will exceed total contract revenue.

The contracts receipts are exclusive of service tax.

Revenue from sale of products is recognized when the risks and rewards of ownership are transferred to the buyer under the terms of the contract usually on the dispatch of goods to the customer.

Interest on investments and deposits is booked on a time proportion basis taking into account the amounts invested and the rate of interest when no significant uncertainty as to measurability or collectability exists. Revenue from sale of assets are recognized upon delivery, which is when title passes to the customer.

Dividend income is accounted for in the year in which the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists.

k. Employee Benefits

i) Defined Contribution Plans

Company's contribution to Employees Provident Fund and Employees State Insurance are made under a defined contribution plan, and are accounted for at actual cost in the year of accrual.

ii) Defined Benefit Plans

– Company's liability to Gratuity on retirement of its eligible employees is funded and is being administrated by the Life Insurance Corporation of India. Cost of providing these benefits is determined on the basis of actuarial valuation at the end of each year and the incremental expense thereon is recognised and charged to Profit and Loss Account in the year in which the employee has rendered service.

– For the period from 1.4.2014, the employees of the company are entitled to leave encashment which are both accumulating and non-accumulating in nature. The liability towards accumulated leave encashment, which are to be excisable only at the time of retirement, death while in service or on termination of employment, is determined by actuarial valuation using projected unit credit method.

The liability towards non-accumulated leave encashment over and above accumulated leaves, being short term employee benefit and eligible to encase after the end of each financial year, is provided based on actual liability computed at the end of each year.

– Gains / Losses arrived at in the above actuarial valuations are charged to Profit and Loss Account.

l. Foreign Currency Transactions

i) The reporting currency of the Company is Indian Rupees.

ii) Transactions in foreign currency are initially recorded in the reporting currency at the exchange rate prevailing on the date of transaction, and charged or credited to revenue with the difference in rate of exchange arising on actual receipt/payment during the year.

iii) At each Balance Sheet date

- Foreign currency monetary items are reported using the rate of exchange on that date.

- Foreign currency non-monetary items are reported using the exchange ate at which they were initially recognized.

m. Income-Taxes

Income tax expense comprises current and deferred taxes.

i) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.

ii) Deferred tax is recognized under the liability method, on timing differences, being the difference between taxable income and accounting income that originate in one period and capable of reversal in one or more subsequent periods, at the rate of tax enacted or substantively enacted by the balance sheet date.

n. Provisions, Contingent Liabilities and Contingent assets

Provisions are recognized only when there is a present obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The company does not recognize contingent liabilities but the same are disclosed in the Notes.

Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

o. Dividends

Provision for dividends payable (including income tax thereon) is accounted in the books of account as proposed by the Directors, pending approval of share holders at the Annual General Meeting.

p. Earnings per share

Earnings per share is calculated by dividing the net profit or loss for the year after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. 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 outstanding during the period are adjusted for the effects of all dilutive potential equity shares. Further, if the number of equity shares increases as a result of bonus issue, the above calculations are adjusted retrospectively for the previous year figures also.

q. Leases

Leases where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and loss account on a straight basis over the lease term.

r. Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement comprise of Cash on hand and balances with banks in Current accounts and fixed deposits with a maturity period of less than 3 months.

s. Cash flow statement

Cash flows are reported using the indirect method, whereby the profit before tax is adjusted for the effects of transactions of non-cash nature and items of income or expenses associated with investing and financing activities. The cash flows are segregated into Operating, investing and financing activities.


Mar 31, 2014

1. Corporate Information

Power Mech Projects Limited is incorporated in the year 1999 and is engaged in the business of providing ETC and O&M services for power projects. The company is associated with all power majors in India and Overseas for Public and Private sector power utilities apart from multinational companies. Power Mech is now engaged in several power projects ranging from 135MW to 800MW, besides many projects in lower segment also. Thus, Power Mech is proud to be a vital part of India's Power generation capacity augmentation.

a. Basis of Accounting and preparation

The Company has prepared the financial statements under historical cost convention on accrual basis of accounting and in accordance with generally accepted accounting principles in India. The financial statements are prepared to comply in all material respects with the Accounting Standards notified under Section 211 (3C) of the Companies Act, 1956, the pronouncements of ICAI and the relevant provisions of Companies act, 1956.

The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

Use of Estimates

The preparation of financial statements requires the management of the Company to make judgments, estimates and assumptions that affect the reported balance of assets and liabilities, revenues and expenses and disclosures relating to the contingent liabilities and commitments. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. The judgments, estimates and underlying assumptions are made with the management's best knowledge of the business environment and are reviewed on an ongoing basis. However, future results could differ from these estimates. Any revision to these accounting estimates is recognized prospectively in the current and future periods.

b. Tangible fixed assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of freight, duties and taxes, borrowing costs, if any, on specific borrowings utilized for financing the assets upto the date of commissioning, the cost of installation/erection and other incidental expenses incurred to bring the asset to its present location and condition but exclusive of duties and taxes that are subsequently recoverable from taxing authorities.

Capital Work-in-progress are stated at the amount expended up to the date of balance sheet.

c. Intangible assets

Intangible assets are stated at cost of acquisition less accumulated amortization. All costs, including borrowing costs, if any, on specific borrowings utilized for financing the assets till commencement of commercial production are capitalized

d. Depreciation and Amortization

The depreciation has provided under Straight-line method using the rates arrived at based on the useful lives estimated by the management. The following are the rates of depreciation adopted to provide depreciation.

Individual assets costing up to -5,000/- each are fully depreciated in the year of purchase.

Depreciation on assets added/sold during the year is provided on pro-rata basis from the date of acquisition or up to the date of sale, as the case may be.

Intangible assets, comprising of expenditure on computer software, incurred are amortized on a straight line method over a period of five years.

e. Impairment of Assets

An asset is treated as impaired when the carrying cost of the same exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount

f. Borrowing Costs

Borrowing Costs, that are directly attributable to the acquisition or construction of assets, that necessarily take a substantial period of time to get ready for its intended use, are capitalized as part of the cost of qualifying asset when it is possible that they will result in future economic benefits and the cost can be measured reliably.

Other borrowing costs are recognized as an expense in the period in which they are incurred.

g. Investments

Non-current investments are stated at cost and income thereon is accounted for on accrual. Provision towards decline in the value of long term investments is made only when such decline is other than temporary.

h. Inventories

a) Stores and consumables are valued at lower of cost or Net realizable value.

b) Work-in-progress:

Contracts in progress and not due for billing to the customer as on date of balance sheet are valued at agreed contract price.

c) Contracts awarded to the company and not commenced as on date of balance sheet, the cost incurred in securing the contract and related expenses incurred are shown as asset as per the requirements of AS-7.

i. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

The company undertakes erection and maintenance contracts and revenue from these contracts is recognized by following the percentage of completion method and is measured with reference to actual completion of physical proportion of the work to the extent of work certified by the customer. The portion of the work which was completed, but pending for certification by the customer, is also recognized as revenue by treating the same as unbilled / uncertified revenue. Any claims, variations and incentives is recognized as revenue only when the customer accepts the same. Provision for expected loss is recognized immediately when it is probable that the total estimated cost will exceed total contract revenue.

The contracts receipts are exclusive of service tax.

Revenue from sale of products is recognized when the risks and rewards of ownership are transferred to the buyer under the terms of the contract usually on the dispatch of goods to the customer.

Interest on investments and deposits is booked on a time proportion basis taking into account the amounts invested and the rate of interest when no significant uncertainty as to measurability or collectability exists. Revenue from sale of assets are recognised upon delivery, which is when title passes to the customer.

Dividend income is accounted for in the year in which the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists.

j. Employee Benefits

i) Defined Contribution Plans

Company's contribution to Employees Provident Fund and Employees State Insurance are made under a defined contribution plan, and are accounted for at actual cost in the year of accrual.

ii) Defined Benefit Plans

Company's liability to Gratuity on retirement of its eligible employees is funded and is being administrated by the Life Insurance Corporation of India Limited. Cost of providing these benefits is determined on the basis of actuarial valuation at the end of each year and the incremental expense thereon is recognized and charged to Profit and Loss Account in the year in which the employee has rendered service.

The liability towards leave encashment, being short term employee benefit and which is unfunded is provided based on actual liability computed at the end of each year.

Gains / Losses arrived at in the above actuarial valuations are charged to Profit and Loss Account.

k. Foreign Currency Transactions

i) The reporting currency of the Company is Indian Rupees.

ii) Transactions in foreign currency are initially recorded in the reporting currency at the exchange rate prevailing on the date of transaction, and charged or credited to revenue with the difference in rate of exchange arising on actual receipt/payment during the year.

iii) At each Balance Sheet date

Foreign currency monetary items are reported using the rate of exchange on that date.

Foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized.

l. Income-Taxes

Income tax expense comprises current and deferred taxes.

i) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.

ii) Deferred tax is recognized under the liability method, on timing differences, being the difference between taxable income and accounting income that originate in one period and capable of reversal in one or more subsequent periods, at the rate of tax enacted or substantively enacted by the balance sheet date.

m. Provisions, Contingent Liabilities and Contingent assets

Provisions are recognised only when there is a present obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The company does not recognize contingent liabilities but the same are disclosed in the Notes.

Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

n. Dividends

Provision for dividends payable (including income tax thereon) is accounted in the books of account as proposed by the Directors, pending approval of share holders at the Annual General Meeting

o. Earnings per share

Earnings per share is calculated by dividing the net profit or loss for the year after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. 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 outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

 
Subscribe now to get personal finance updates in your inbox!