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Accounting Policies of Sri Krishna Constructions (India) Ltd. Company

Mar 31, 2016

1. Company Overview

Sri Krishna Construction (India) Limited formerly known as Sri Krishna Constructions (India) Private Limited (‘SKC’ or the ‘Company’) was incorporated on December 5, 2005 and is listed on Bombay Stock Exchange (‘BSE’) in SME Segment. The company is engaged in the business of real estate development, Sale and related services.

2. Significant accounting policies

a. Basis of Preparation

The financial statements have been prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprises Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. (to the extent applicable). The accounting policies have been consistently applied unless otherwise stated.

b. Use of estimates

The preparation of financial statements is in conformity with generally accepted accounting principles which require the management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting periods. Although these estimates are based upon the management’s best knowledge of current events and actions, actual results could differ from those estimates. Significant estimates used by management in the preparation of these financial statements include the percentage completion for projects in progress, estimates of the economic useful lives of the fixed assets, provisions for bad and doubtful debts and accruals for employee benefits.

c. Fixed Assets and Depreciation

Fixed Assets are stated at cost less accumulated depreciation. Cost comprises of purchase price, levies & duties and incidental expenses attributable to bringing the asset to working condition for its intended use.

Depreciation on assets is provided on written down value method at the rates arrived based on the remaining useful life as per schedule II of the Companies Act 2013.

d. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

e. Revenue Recognition

i. Revenue from the sale of sites is recognized when significant risks and rewards of ownership have been transferred to the customer, which coincides with entering into a legally binding agreement / deed.

ii. Revenue from land development charges is recognized on percentage complete method.

iii. Revenue from maintenance of sites is recognized on time basis.

iv. Agricultural lease rental is recognized on time basis.

f. Inventories

Direct expenditure relating to real estate activity is included in value of the inventory. Direct and other expenditure attributable to inventory is determined based on specific identification to the real estate activity.

i. Land Stock: Valued at lower of cost or net realizable value.

ii. Work in Progress: represents cost incurred on projects where the revenue is yet to be recognized. Work in progress is valued at lower of cost or net realizable value.

g. Lease Rentals

Finance leases

Assets acquired on lease which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the assets, are capitalized 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. Lease management fees, legal charges and other initial direct costs are capitalized.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

h. Taxes

Tax expense comprises both current and deferred taxes. The current charge for income taxes is calculated in accordance with the relevant tax regulations. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted as at the Balance Sheet date.

Deferred tax assets are recognized 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. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realized against future taxable profits.

Unrecognized deferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.

i. Employee Benefits:

The company recognizes contribution to provident fund and employee state insurance as expenditure when an employee renders the related service.

Provision for gratuity is made as per Payment of Gratuity Act.

j. Provisions. Contingent liabilities and Contingent Assets:

Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the financial statements. Contingent Assets are neither recognized nor disclosed in the financial statements.

k. 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, 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.

l. Cash & Cash equivalents:

Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

m. Re-grouping of Account Heads

Previous year figures have been regrouped, wherever necessary to confirm to current year’s classification.

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