A Oneindia Venture
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Accounting Policies of Rites Ltd. Company
Mar 31, 2025
1. MATERIAL ACCOUNTING POLICIES
1.1 GENERAL
(a) Statement of Compliance
The financial statements of the Company are being prepared
in accordance with Indian Accounting Standards (Ind AS)
notified under section 133 of the Companies Act 2013, read
with the Companies (Indian Accounting Standards) Rules as
amended from time to time.
Accounting policies have been consistently applied except
where a newly issued accounting standard is initially adopted
or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use.
(b) Basis of Preparation
The financial statements have been prepared on accrual basis
at historical cost, except for the following assets and liabilities
which have been measured at fair value/ amortized cost:
⢠Derivative financial instruments,
⢠Which are specifically indicated in the concerned
accounting policy.
(c) Use of Estimates and Judgments
The preparation of the financial statements requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure
of contingent liabilities and contingent assets as at the date of
the financial statements and reported amounts of revenues
and expenses for the year. Actual results could differ from
these estimates. Future results could differ due to changes in
these estimates and the difference between the actual result
and the estimates are recognized in the period in which the
results are known/materialize.
1.2. REVENUE RECOGNITION
1.2.1 Revenue from Contracts with Customers
Operating revenue is from various streams viz. consultancy
fee, inspection fee, lease services, export sales and
construction projects.
1.2.1.1 Consultancy Fee
Revenue from consultancy services is recognized based on
performance obligation satisfied either over time or at a point
in time.
In case performance obligation is satisfied over time, revenue
is recognised based on the actual service provided to the end
of the reporting period as a proportion of the total services to
be provided. This is determined based on physical progress,
efforts, cost incurred to date bear to the total estimated cost
of the transaction, time spent, percentage of the value of work
done/built-up cost or service performed.
In other cases where performance obligation is not satisfied
over time, revenue is recognized at a point in time.
In case of contracts, where customer pays fixed amount
based on a payment schedule, if services rendered by the
Company exceed the payment, a contract asset is recognised.
If payments exceed services rendered, a contract liability
is recognised.
Mobilization fee is considered as customer advance until
recognized as revenue based on the stage of completion of
activities/transactions as per the terms of contract/work order.
Reimbursable and supplies are accounted for on accrual basis.
In Construction Management/ Supervision Contracts, revenue
is recognised as a percentage of the value of work done/built-
up cost of each contract as determined by the Management,
pending customerâs approval, if any.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of inspection
certificates issued.
1.2.1.3 Export Sales
Export sales are accounted when the Company transfers
control of the assets to the customer which happens at
the point in time the customer has undisputed right on
delivered goods.
1.2.1.4 Construction Projects
In construction contracts/ projects, the company recognises
revenue over time. Due to high degree of interdependence
among various elements of these projects, revenue is
accounted for considering these activities as a single
performance obligation.
To depict the progress by which the Company transfers control
of the promised goods to the customer, and to establish when
and to what extent revenue can be recognised, the Company
measures its progress towards complete satisfaction of the
performance obligation based on work done.
1.2.1.5 Lease Services
Refer Policy no-1.15: - Leases-Company as lessor.
1.2.2 Other Income
Other income is accounted for on accrual basis except claims
(including insurance claims)/supplementary claims / counter
claims/interest on delayed payments / awards in favour of
the Company/ sale of tenders/ premium on sale of licenses
etc. which are accounted for on final settlement / realization.
1.3. PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost net of
accumulated depreciation and impairment losses, if any.
Spares valuing more than T 10 lakh which can be used only in
connection with an item of property, plant and equipment and
whose use is expected to be irregular are capitalized at cost
and depreciated over the useful life of the spares or principal
item of the relevant assets, whichever is lower.
1.3.1 Depreciation
(a) Depreciation on property, plant and equipment are
provided on straight line method over their estimated
useful life determined by management. Depreciation
method, useful lives and residual values are reviewed
at the end of each financial year. The useful lives of
assets are as prescribed in part C of schedule II of the
Companies Act, 2013 except assets indicated in sub
paragraphs (c), (d) and (e) below.
(b) The estimated useful lives of the various assets, are as
under:-
(c) As per companyâs technical assessment, Fixtures, Mobile
Hand Set, Coolers & Air Conditioners and In-Service
Locomotives & Coaches (refurbished) have lower useful
lives than prescribed in part C of schedule II of the
Companies Act, 2013. Therefore depreciation is charged
considering lower useful life than prescribed under the
Companies Act, 2013
(d) In respect of buildings on lease hold land, depreciation is
charged over the period of lease of land or the useful life
stated above for buildings on freehold land, whichever
is lower.
(e) Individual low cost assets of value less than H 5,000/- are
fully depreciated in the year of acquisition.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are carried at
cost, comprising direct cost, related incidental expenses, and
attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property, plant
and equipment outstanding at each balance sheet date are
classified as capital advances under other non-current assets.
1.4. INTANGIBLE ASSETS
Intangible assets acquired/ developed are measured on
recognition at cost less accumulated amortisation and
impairment losses, if any.
1.4.1 Amortization
Estimated useful life of the software is 4 years and amortized
on a straight-line basis over the period. However, software
of value less than H 100,000/- is fully amortized in the year
of acquisition.
1.5. INVESTMENT PROPERTY
Investment properties are measured at cost, including
transaction costs less accumulated depreciation and
impairment loss, if any.
The Company depreciates building component of investment
property over the estimated useful lives of the assets as
prescribed in property, plant and equipment.
Investment properties are de-recognised either on disposal or
on permanent withdrawal from use. The difference between
the net disposal proceeds and the carrying amount of the
asset is recognised in the Statement of Profit and Loss in the
period of de-recognition.
1.6. INVESTMENTS
Equity investments are measured at fair value through profit
and loss except investments in subsidiary, participating joint
venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or
without joint control and associate are measured at cost.
1.7. INVENTORIES
(a) I nventories are valued at the lower of cost and Net
Realizable Value.
(b) Cost is determined on weighted average basis.
(c) The diminution in the value of obsolete, unserviceable,
slow moving, and non-moving stores and spares are
assessed periodically and accordingly provided for.
(d) Consumables and Stores & Spares other than those
held for the purpose of warranty and for maintenance
of rolling stock are charged to the Statement of Profit
and Loss in the year of purchase.
1.8. EMPLOYEE BENEFITS
1.8.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/post-
retirement medical scheme are defined contribution schemes.
The Company has no obligation, other than the contribution
payable to such funds/ schemes. The Company recognizes
contribution payable to such funds/schemes as an expense,
when an employee renders the related service.
Defined contributions towards pension under EPFO,
superannuation pension fund and post retiral medical schemes
are charged to the Statement of Profit and Loss based on
contributions made in terms of applicable schemes on
accrual basis.
1.8.2 Defined benefit plan
1.8.2.1 Gratuity
Company provides gratuity, a defined benefit plan covering
eligible regular and contract employees. The gratuity plan
provides a lump-sum payment to vested employees of an
amount based on the respective employeeâs salary and the
tenure of employment with the company at retirement, death,
incapacitation, or on completion of terms of employment.
The liabilities with regard to the Gratuity plan are determined
by actuarial valuation, performed by an independent actuary,
at the year end.
(a) The Company has set up a separate Gratuity Trust for
managing Gratuity Fund.
(b) The company recognizes the net obligation of a defined
benefit plan in its balance sheet as an asset or liability.
(c) Gain or loss through re-measurements of net
defined benefit liability/(asset) is recognized in Other
Comprehensive Income.
(d) The actual return of the portfolio of plan assets, in
excess of the yields computed by applying the discount
rate used to measure the defined benefit obligation is
recognized in Other Comprehensive Income.
(e) Service cost and net interest cost/(income) on the
net defined benefit liability/(asset) are recognized in
Statement of Profit and Loss.
1.8.2.2 Provident Fund
The Company makes contribution to the recognized provident
fund - âRITES CONTRIBUTORY PROVIDEND FUNDâ for its
employees, which is a defined benefit plan to the extent that
the Company has an obligation to make good the shortfall, if
any, between the returns from the investments of the trust
and the notified interest rate. The Companyâs obligation in this
regard is determined by an independent actuary and provided
for if the circumstances indicate that the Trust may not be
able to generate adequate returns to cover the interest rates
notified by the Government.
1.8.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees), Leave
Encashment (contract employees) and Long Service
Award (regular employees)
i. Accounted for on actuarial valuation made at the
end of year.
ii. The actuarial gains/losses are recognized in the
Statement of Profit and Loss for the year.
(b) Leave Encashment and Medical Leave for
regular employees
i. Liabilities are funded under plan assets through
insurance policies from insurance companies
approved by Insurance Regulatory Development
Authority (IRDA) and are accounted for on actuarial
valuation made at the end of year.
ii. The company recognizes the net obligation of a
defined benefit plan in its balance sheet as an asset
or liability.
iii. Service cost and net interest cost/(income) on the
net defined benefit liability/(asset) are recognized
in Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in the
Statement of Profit and Loss.
1.8.4 Other Benefits
Ex-gratia payments on death are recognized on payment basis
in the Statement of Profit and Loss.
1.9. INCOME TAXES
1.9.1 Current Income Tax
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rate applicable at the reporting date as
per Income Tax Act, 1961 is used to compute the amount of
Current Income Taxes.
Management periodically evaluates positions taken in the tax
assessments with respect to situations in which applicable
tax regulations are subject to interpretation and establishes
provisions where appropriate.
Current tax assets are offset against current tax liabilities.
Additional taxes, interest and/or penalties levied/ imposed
by the tax authorities / Appellate authorities on finality are
recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
1.9.2 Deferred Tax
Deferred tax assets are recognised for all deductible temporary
differences, and the carry forward of unused tax credits.
Deferred tax liabilities are recognised for all taxable
temporary differences.
Deferred tax assets and liabilities are measured at the rate
expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date
as per Income Tax Act, 1961.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
Deferred tax assets are offset against deferred tax liabilities.
1.10. PREPAID EXPENSES
Prepaid expenses up to H 5,00,000/- in each case are treated
as expenditure/income of the current year and accounted for
to the natural head of accounts.
1.11. STATEMENT OF CASH FLOWS
Statement of Cash Flows is made using the indirect method,
whereby profit before tax is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals
of past or future cash receipts or payments and item of income
or expenses associated with investing or financing cash flows.
The cash flows from operating, financing and investing
activities of the Company are segregated.
1.12. IMPAIRMENT OF FINANCIAL ASSETS
(Other than at Fair Value)
In accordance with Ind AS 109, the Company applies expected
credit loss (ECL) model for measurement and recognition of
impairment loss for financial assets.
ECL is the difference between all contractual cash flows that
are due to the Company in accordance with the contract
and all the cash flows that the Company expects to receive.
When estimating the cash flows, the Company consider
the following:
⢠All contractual terms of the financial assets (including
extension) over the expected life of the assets.
⢠Cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
Trade receivables: In respect of trade receivables, the
Company applies the simplified approach of Ind AS 109, which
requires measurement of loss allowance at an amount equal to
lifetime expected credit losses. Lifetime expected credit losses
are the expected credit losses that result from all possible
default events over the expected life of a financial instrument.
Other financial assets: In respect of its other financial assets,
the Company assesses if the credit risk on those financial
assets has increased significantly since initial recognition.
If the credit risk has not increased significantly since initial
recognition, the Company measures the loss allowance at an
amount equal to 12-month expected credit losses, else at an
amount equal to the lifetime expected credit losses.
Mar 31, 2024
1. Material Accounting Policies
1.1 GENERAL
(a) Statement of Compliance
The financial statements of the Company are being prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013, read with the Companies (Indian Accounting Standards) Rules as amended from time to time.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
On March 31, 2023, MCA notified the Companies (Indian Accounting Standards) Amendment Rules, 2023 thereby mandating the companies to disclose only material
accounting policies. Accordingly, erstwhile significant accounting policies have been reviewed and the same has been replaced with material accounting policies. There is no financial implication on this replacement.
(b) Basis of Preparation
The financial statements have been prepared on accrual basis at historical cost, except for the following assets and liabilities which have been measured at fair value/ amortized cost:
⢠Derivative financial instruments,
⢠Which are specifically indicated in the concerned accounting policy.
(c) Use of Estimates and Judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities and contingent assets as at the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Future results could differ due to changes in these estimates and the difference between the actual result and the estimates are recognized in the period in which the results are known/materialize.
1.2. REVENUE RECOGNITION
1.2.1 Revenue from Contracts with Customers
Operating revenue is from various streams viz. consultancy fee, inspection fee, lease services, export sales and construction projects.
1.2.1.1 Consultancy Fee
Revenue from consultancy services is recognized based on performance obligation satisfied either over time or at a point in time.
In case performance obligation satisfied over time, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on physical progress, efforts, cost incurred to date bear to the total estimated cost of the transaction, time spent, percentage of the value of work done/built-up cost or service performed.
In other cases where performance obligation is not satisfied over time, revenue is recognized at a point in time.
In case of contracts, where customer pays fixed amount based on a payment schedule, if services rendered by the Company exceed the payment, a contract asset is recognised. If payments exceed services rendered, a contract liability is recognised.
Mobilization fee is considered as customer advance until recognized as revenue based on the stage of completion of activities/transactions as per the terms of contract/work order.
Reimbursable and supplies are accounted for on accrual basis.
In Construction Management/ Supervision Contracts, revenue is recognised as a percentage of the value of work done/built-up cost of each contract as determined by the Management, pending customerâs approval, if any.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of inspection certificates issued.
1.2.1.3 Export Sales
Export sales are accounted when the Company transfers control of the assets to the customer which happens at the point in time the customer has undisputed right on delivered goods.
1.2.1.4 Construction Projects
In construction contracts/ projects, the company recognises revenue over time. Due to high degree of interdependence among various elements of these projects, revenue is accounted for considering these activities as a single performance obligation.
To depict the progress by which the Company transfers control of the promised goods to the customer, and to establish when and to what extent revenue can be recognised, the Company measures its progress towards complete satisfaction of the performance obligation based on work done.
1.2.1.5 Lease Services
Refer Policy no-1.14: - Leases-Company as lessor.
1.2.2 Other Income
Other income is accounted for on accrual basis except claims (including insurance claims)/supplementary claims / counter claims/interest on delayed payments / awards in favour of the Company/ sale of tenders/ premium on sale of licenses etc. which are accounted for on final settlement / realization.
1.3. PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant, and equipment are stated at cost net of accumulated depreciation and impairment losses, if any.
Spares valuing more than '' 10 lakh which can be used only in connection with an item of property, plant and equipment and whose use is expected to be irregular
are capitalized at cost and depreciated over the useful life of the spares or principal item of the relevant assets, whichever is lower.
1.3.1 Depreciation
(a) Depreciation on property, plant and equipment are provided on straight line method over their estimated useful life determined by management. Depreciation method, useful lives and residual values are reviewed at the end of each financial year. The useful lives of assets are as prescribed in part C of schedule II of the Companies Act, 2013 except assets indicated in sub paragraphs (c), (d) and (e) below.
(c) As per companyâs technical assessment, Fixtures, Mobile Hand Set, Coolers & Air Conditioners and In-Service Locomotives & Coaches (refurbished) have lower useful lives than prescribed in part C of schedule II of the Companies Act, 2013. Therefore depreciation is charged considering lower useful life than prescribed under the Companies Act, 2013
(d) In respect of buildings on lease hold land, depreciation is charged over the period of lease of land or the useful life stated above for buildings on freehold land, whichever is lower.
(e) Individual low cost assets of value less than ''5,000/-are fully depreciated in the year of acquisition.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are carried at cost, comprising direct cost, related incidental expenses, and attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are classified as capital advances under other non-current assets.
1.4. INTANGIBLE ASSETS
Intangible assets acquired/ developed are measured on recognition at cost less accumulated amortisation and impairment losses, if any.
1.4.1 Amortization
Estimated useful life of the software is 4 years and amortized on a straight-line basis over the period. However, software of value less than '' 100,000/- is fully amortized in the year of acquisition.
1.5. INVESTMENTS
Equity investments are measured at fair value through profit and loss except investments in subsidiary, participating joint venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or without joint control and associate are measured at cost.
1.6. INVENTORIES
(a) Inventories are valued at the lower of cost and Net Realizable Value.
(b) Cost is determined on weighted average basis.
(c) The diminution in the value of obsolete, unserviceable, slow moving, and non-moving stores and spares are assessed periodically and accordingly provided for.
(d) Consumables and Stores & Spares other than held for the purpose of warranty are charged to the Statement of Profit and Loss in the year of purchase.
1.7. EMPLOYEE BENEFITS
1.7.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/post-retirement medical scheme are defined contribution schemes. The Company has no obligation, other than the contribution payable to such funds/ schemes. The Company recognizes contribution payable to such funds/schemes as an expense, when an employee renders the related service.
Defined contributions towards pension under EPFO, superannuation pension fund and post retiral medical schemes are charged to the Statement of Profit and Loss based on contributions made in terms of applicable schemes on accrual basis.
1.7.2 Defined benefit plan 1.7.2.1 Gratuity
Company provides gratuity, a defined benefit plan covering eligible regular and contract employees. The gratuity plan provides a lump-sum payment to vested employees of an amount based on the respective employeeâs salary and the tenure of employment with the company at retirement,
death, incapacitation, or on completion of terms of employment.
The liabilities with regard to the Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at the year end.
(a) The Company has set up a separate Gratuity Trust for managing Gratuity Fund.
(b) The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
(c) Gain or loss through re-measurements of net defined benefit liability/(asset) is recognized in Other Comprehensive Income.
(d) The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in Other Comprehensive Income.
(e) Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
1.7.2.2 Provident Fund
The Company makes contribution to the recognized provident fund - âRITES CONTRIBUTORY PROVIDENT FUNDâ for its employees, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the returns from the investments of the trust and the notified interest rate. The Companyâs obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
1.7.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees), Leave Encashment (contract employees) and Long Service Award (regular employees)
i. Accounted for on actuarial valuation made at the end of year.
ii. The actuarial gains/losses are recognized in the Statement of Profit and Loss for the year.
(b) Leave Encashment and Medical Leave for regular employees
i. Liabilities are funded under plan assets through insurance policies from insurance companies approved by Insurance Regulatory Development Authority (IRDA) and are accounted for on actuarial valuation made at the end of year.
ii. The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
iii. Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in the Statement of Profit and Loss.
1.7.4Other Benefits
Ex-gratia payments on death are recognized on payment basis in the Statement of Profit and Loss.
1.8. INCOME TAXES
1.8.1 Current Income Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rate applicable at the reporting date as per Income Tax Act, 1961 is used to compute the amount of Current Income Taxes. Management periodically evaluates positions taken in the tax assessments with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets are offset against current tax liabilities. Additional taxes, interest and/or penalties levied/ imposed by the tax authorities / Appellate authorities on finality are recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
1.8.2 Deferred Tax
Deferred tax assets are recognised for all deductible temporary differences, and the carry forward of unused tax credits.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets and liabilities are measured at the rate expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date as per Income Tax Act, 1961.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
Deferred tax assets are offset against deferred tax liabilities.
1.9. PREPAID EXPENSES
Prepaid expenses up to '' 5,00,000/- in each case are treated as expenditure/income of the current year and accounted for to the natural head of accounts.
1.10.STATEMENT OF CASH FLOWS
Statement of Cash Flows is made using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future cash receipts or
payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, financing and investing activities of the Company are segregated.
1.11. IMPAIRMENT OF FINANCIAL ASSETS (Other than at Fair Value)
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive. When estimating the cash flows, the Company consider the following:
⢠All contractual terms of the financial assets (including extension) over the expected life of the assets.
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables: In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
Other financial assets: In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.
Mar 31, 2023
COMPANY OVERVIEW
RITES Ltd. is a multidisciplinary engineering and consultancy organization providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies. The major business engagements as consultants, engineers and project managers are in railways, highways, airports, ports, ropeways, urban transport and inland waterways in India and abroad. The company also provides services of third party inspection, quality assurance, construction supervision & project management, operations & maintenance, leasing, export of rolling stock and modernization of railways workshop projects, doubling and electrification on turnkey basis.
The Company is a "Miniratnaâ, Schedule-"Aâ, Category-I CPSE and ISO 9001:2015 certified public limited company incorporated and domiciled in India. The address of its registered office is SCOPE Minar, Laxmi Nagar, Delhi-110092 (India) and address of its corporate office is Shikhar, Plot no-1, Sector -29, Gurugram, Haryana-122001 (India). President of India through Ministry of Railways is presently holding 72.20% equity share of the company.
The reporting and functional currency of the company is Indian Rupees (INR). Figures in financial statements are presented in '' crore, by rounding off upto two decimals except for per share data and as otherwise stated. Certain figures that are required to be disclosed but do not appear due to rounding off are detailed in note 57(j). Previous periods figures have been regrouped/recasted/rearranged, wherever necessary.
The standalone financial statements are approved for issue by the company''s Board of Directors in their meeting held on 18th May, 2023.
1. SIGNIFICANT ACCOUNTING POLICIES1.1 GENERAL
(a) Statement of Compliance
The financial statements of the Company are being prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013, read with the Companies (Indian Accounting Standards) Rules as amended from time to time.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Accounting policies at 1.28 on Government Grant has been inserted in place of erstwhile accounting policy on export incentive. Such rearrangement/modification is clarificatory and do not have any impact on financial statement.
(b) Basis of Preparation
The financial statements have been prepared on accrual basis at historical cost, except for the following assets and liabilities which have been measured at fair value/ amortized cost:
⢠Derivative financial instruments,
⢠Which are specifically indicated in the concerned accounting policy.
(c) Use of Estimates and Judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities and contingent assets as at the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Future results could differ due to changes in these estimates and the difference between the actual result and the estimates are recognized in the period in which the results are known/materialize.
1.2.1 Revenue from Contracts with Customers
Operating revenue is from various streams viz. consultancy fee, inspection fee, lease services, export sales and construction projects.
For recognizing revenue from aforesaid streams in the financial statements, general parameters are stated below which are applicable to all streams of revenue while specific parameters are stated in the accounting policy of the respective stream of revenue.
General Parameters
To determine whether to recognise revenue, the Company follows a five step process:
⢠Identifying the contract with a customer
⢠Identifying the performance obligations
⢠Determining the transaction price
⢠Allocating the transaction price to the performance obligations
⢠Recognising revenue when/as performance obligation(s) are satisfied.
The Company often enters into transactions involving a range of the Company''s products and services. In all cases, the total transaction price for a contract is based on performance obligation. The transaction price for a contract excludes amounts received as deposit from client for execution of the project and amount collected on behalf of third party (for example, some GST)
Revenue is recognised either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers.
The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the balance sheet. Similarly, if the Company satisfies a performance obligation before the consideration is due, the Company recognises a contract asset in its balance sheet.
When there is uncertainty as to realisability, recognition of revenue is postponed until such uncertainty is removed.
1.2.1.1 Consultancy Fee
Revenue from providing services is recognized in the accounting period in which services are rendered. Revenue is recognized based on performance obligation satisfied either over time or at a point in time.
In case performance obligation satisfied over time revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on physical progress, efforts, cost incurred to date bear to the total estimated cost of the transaction, time spent, service performed or any other method that management considered appropriate.
In other cases where performance obligation is not satisfied over time, revenue is recognized at a point in time.
In case of contracts, where customer pays fixed amount based on a payment schedule, if services rendered by the Company exceed the payment, a contract asset is recognised. If payments exceed services rendered, a contract liability is recognised.
Mobilization fee is considered as customer advance until recognized as revenue based on the stage of completion of activities/ transactions as per the terms of contract/work order.
Reimbursable and supplies are accounted for on accrual basis.
In Construction Management/ Supervision Contracts, revenue is recognised as a percentage of the value of work done/built-up cost of each contract as determined by the Management, pending customer''s approval, if any.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of inspection certificates issued.
1.2.1.3 Export Sales
Export sales are accounted for on the basis of bills raised when or as the Company transfers control of the assets to the customer which happens at the point in time the customer has undisputed right on delivered goods.
1.2.1.4 Construction Projects
In construction contracts/ projects, the company recognises revenue over time. Due to high degree of interdependence among various elements of these projects, revenue is accounted for considering these activities as a single performance obligation.
To depict the progress by which the Company transfers control of the promised goods to the customer, and to establish when and to what extent revenue can be recognised, the Company measures its progress towards complete satisfaction of the performance obligation based on work done.
Any expected loss is recognized as an expense immediately.
1.2.1.5 Lease Services
Refer Policy no-1.24:- Leases-Company as lessor.
1.2.2 Other Income
1.2.2.1 Interest Income
Interest income is recognized using effective interest method.
1.2.2.2 Dividend
Revenue is recognised when the right to receive the payment is established, which is generally when shareholders approve the dividend.
1.2.2.3 Others
Other income is accounted for on accrual basis except claims(including insurance claims)/supplementary claims / counter claims/ interest on delayed payments / awards in favour of the Company/ sale of tenders/ premium on sale of licenses etc. which are accounted for on final settlement / realization.
1.3 PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost i.e., cost of acquisition or construction inclusive of freight, erection and commissioning charges, non-refundable duties and taxes, expenditure during construction period, borrowing costs, in case of a qualifying asset, upto the date of acquisition/ installation, net of accumulated depreciation and impairment losses, if any.
(a) Incidental expenditure during construction period including interest charges incurred upto the date of completion, net of interest recovered on mobilisation advance, are capitalized.
(b) Spare valuing more than '' 10 lakh which can be used only in connection with an item of property, plant and equipment and whose use is expected to be irregular are capitalised and depreciated over the useful life of the spares or principal item of the relevant assets, whichever is lower.
(c) Expenditure incurred subsequently relating to property, plant & equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.
(d) The initial estimate of the cost of dismantling, removing the item and restoring the site on which PPE is located, the obligation for which is incurred when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period, is capitalized as a component of PPE.
1.3.1 Depreciation
(a) Depreciation on property, plant and equipment are provided on straight line method over their estimated useful life determined by management. Depreciation method, useful lives and residual values are reviewed at the end of each financial year. The useful lives of assets are as prescribed in part C of schedule II of the Companies Act, 2013 except assets indicated in sub paragraphs from (d) to (g) below. In respect of additions to/deductions from the assets during the year, depreciation is charged on pro rata basis.
(b) The estimated useful lives of the various assets, are as under:-
|
Assets |
Useful Life (Years) |
|
|
i) |
Furniture |
10 |
|
ii) |
Fixture |
5 |
|
iii) |
Office Equipment |
5 |
|
iv) |
Mobile Hand Set |
3 |
|
v) |
Coolers & Air Conditioners |
7 |
|
vi) |
Air Conditioning Plant |
15 |
|
vii) |
Computer Hardware |
3 |
|
viii) |
Server & Networks |
6 |
|
ix) |
Survey and Equipments |
10 |
|
x) |
Vehicles |
8 |
|
xi) |
Buildings on Freehold Land |
60 |
|
xii) |
Locomotives-New |
15 |
|
xiii) |
Locomotives-I n-Service |
10 |
|
xiv) |
Coaches-New |
15 |
|
xv) |
Coaches-1 n-Service |
10 |
(c) Any addition or extension, which becomes an integral part of the existing asset and which results in increased economic benefits, is capitalized and depreciated over the remaining useful life of that asset.
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset which is calculated as the difference between the net disposal proceeds and the carrying amount of the asset, is included in the income statement when the asset is de-recognised.
(d) In respect of BOT assets, depreciation is charged over the period of project or the life stated above whichever is lower.
(e) In respect of buildings on lease hold land, depreciation is charged over the period of lease of land or the useful life stated above for buildings on freehold land, whichever is lower.
(f) As per company''s technical assessment, Fixtures, Mobile Hand Set, Coolers & Air Conditioners and In-Service Locomotives & Coaches (refurbished) have lower useful lives than prescribed in part C of schedule II of the Companies Act, 2013. Therefore depreciation is charged at higher rate than prescribed under the Companies Act, 2013.
(g) Individual low cost assets of value less than '' 5,000/- are fully depreciated in the year of acquisition.
(h) A nominal value of '' 1/- is assigned to the fully depreciated assets.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are classified as capital advances under other non-current assets.
Intangible assets acquired/ developed are measured on recognition at cost less accumulated amortisation and impairment losses, if any.
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 recognised in the statement of profit or loss when the asset is de-recognised.
(a) Software of value less than '' 100,000/- is fully amortized in the year of acquisition.
(b) A nominal value of '' 1/- is assigned to the fully amortized assets.
1.4.1 Amortization
Estimated useful life of the software is 4 years and amortized on a straight line basis over the period.
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment loss, if any.
The Company depreciates building component of investment property over the estimated useful lives of the assets as prescribed in property, plant and equipment.
Investment properties are de-recognised either on disposal or on permanent withdrawal from use. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of derecognition.
Equity investments are measured at fair value through profit and loss except investments in subsidiary, participating joint venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or without joint control and associate are measured at cost.
(a) In case of participating joint operations with joint control, company recognizes in relation to its interest in a joint operation as under :-
(i) its assets, including its share of any assets held jointly;
(ii) its liabilities, including its share of any liabilities incurred jointly;
(iii) its revenue from the sale of its share of the output arising from the joint operation;
(iv) its share of the revenue from the sale of the output by the joint operation; and
(v) its expenses, including its share of any expenses incurred jointly.
(b) In case of participating joint operations without having joint control, interest in such arrangements is to be recognized as per aforesaid accounting policy if the company has right to the assets and obligations for the liabilities relating to joint operations otherwise interest in the joint operation is recognized in accordance with applicable Ind AS.
(a) Inventories are valued at the lower of cost and Net Realizable Value.
(b) Cost of inventories comprises of costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(c) The diminution in the value of obsolete, unserviceable, slow moving and non-moving stores and spares are assessed periodically and accordingly provided for.
(d) Consumables and Stores & Spares other than held for the purpose of warranty are charged to the Statement of Profit and Loss in the year of purchase.
1.9.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/post-retirement medical scheme are defined contribution schemes. The Company has no obligation, other than the contribution payable to such funds/ schemes. The Company recognizes contribution payable to such funds/schemes as an expense, when an employee renders the related service. If the contribution payable to the schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined contributions towards pension under EPFO, superannuation pension fund and post retiral medical schemes are charged to the Statement of Profit and Loss based on contributions made in terms of applicable schemes on accrual basis.
1.9.2 Defined Benefit Plan
1.9.2.1 Gratuity
Company provides gratuity, a defined benefit plan covering eligible regular and contract employees. The gratuity plan provides a lump-sum payment to vested employees of an amount based on the respective employee''s salary and the tenure of employment with the company at retirement, death, incapacitation, or on completion of terms of employment.
The liabilities with regard to the Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at the year end.
(i) The Company has set up a separate Gratuity Trust for managing Gratuity Fund.
(ii) The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
(iii) Gain or loss through re-measurements of net defined benefit liability/(asset) is recognized in Other Comprehensive Income.
(iv) The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in Other Comprehensive Income.
(v) Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
1.9.2.2 Provident Fund
The Company makes contribution to the recognized provident fund - "RITES CONTRIBUTORY PROVIDEND FUNDâ for its employees, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the returns from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
1.9.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees),Leave Encashment (contract employees) and Long Service Award (regular employees)
i. Accounted for on actuarial valuation made at the end of year.
ii. The actuarial gains/losses are recognized in the Statement of Profit and Loss for the year.
(b) Leave Encashment and Medical Leave for regular employees
i. Liabilities are funded under plan assets through insurance policies from insurance companies approved by Insurance Regulatory Development Authority (IRDA) and are accounted for on actuarial valuation made at the end of year.
ii. The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
iii. Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in the Statement of Profit and Loss.
1.9.4 Other Benefits
Ex-gratia payments on death are recognized on payment basis in the Statement of Profit and Loss.
Revenue expenditure incurred/paid during the year on research is charged to the Statement of Profit and Loss.
Development cost is capitalized if following are demonstrated otherwise it is charged to the Statement of Profit and Loss:
(a) Technical feasibility of completing the intangible asset so that it will be available for use or sell.
(b) Intention to complete the intangible asset and use or sell it.
(c) Ability to use or sell the intangible assets.
(d) Asset will generate future economic benefits.
(e) There is availability of resources to complete the asset.
The developed asset is carried at cost less any accumulated amortisation and impairment loss, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset.
1.11.1 Current Income Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted in India, at the reporting date.
Management periodically evaluates positions taken in the tax assessments with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Additional taxes, interest and/or penalties levied/ imposed by the tax authorities / Appellate authorities on finality are recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
1.11.2 Deferred Tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised,
except:
⢠In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
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 taxes relate to the same taxable entity and the same taxation authority.
Overseas taxes on foreign assignments, service tax, value added tax, alike taxes, professional tax, property tax, entry tax, labour cess, octroi etc. paid/accrued in India or abroad for which credit are not available to the company are charged to the Statement of Profit and Loss.
1.13 PREPAID EXPENSES AND PRIOR PERIOD ADJUSTMENTS
1.13.1 Prepaid Expenses
Prepaid expenses up to '' 5,00,000/- in each case are treated as expenditure/income of the year and accounted for to the natural head of accounts.
1.13.2 Prior Period Adjustments
Material prior period errors are corrected retrospectively by restating the comparative amounts for the prior periods presented in which the error occurred. If the error occurred before the earliest period presented, the opening balances of assets, liabilities and equity for the earliest period presented, are restated unless it is impracticable, in which case, the comparative information is adjusted to apply the new accounting policy prospectively from the earliest date practicable.
1.14 TRANSLATION AND TRANSACTIONS OF FOREIGN CURRENCIES
1.14.1 Functional Currency of the company is Indian Rupees and the financial statements are presented in Indian Rupees.
1.14.2 Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. The company also uses average rate where the average rate approximates the actual rate at the date of the transaction.
1.14.3 Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
1.14.4 Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss
1.15 CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term deposits with an original maturity of three months or less from the date of acquisitions which are readily convertible into known amounts of cash and be subject to an insignificant risk of change in value. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
Statement of Cash Flows is made using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, financing and investing activities of the Company are segregated.
In determining basic earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares outstanding during the period.
In determining diluted earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares considered for deriving basic earning per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at the later date. Dilutive potential equity share are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus share issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.18 IMPAIRMENT OF ASSETS1.18.1 Financial Assets
(Other than at Fair Value)
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive. When estimating the cash flows, the Company consider the following:
⢠All contractual terms of the financial assets (including extension) over the expected life of the assets.
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables: In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
Other financial assets: In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.
(Tangible and Intangible Assets)
An asset is treated as impaired when the carrying cost of assets exceeds its recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use). Impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount and such losses either no longer exists or has decreased. Reversal of impaired loss is recognized in the Statement of Profit and Loss to the extent of previously recognized or balanced impairment loss.
1.19 WRITE OFF1.19.1 Financial Assets
Such assets including trade/lease receivables are written off when, in the opinion of the management, unrealisability has become certain.
Such assets including property, plant, equipment (PPE), intangible assets, investment property and inventory are written off when, in the opinion of the management, such asset has become obsolete, damaged beyond repair, stolen and uneconomical to use.
1.20 PROVISION FOR WARRANTY FOR SALE AND SERVICES RENDERED
Provision for warranties is recognized when products are sold and services are rendered with warranty as per the contract. These provisions are estimated by using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise or incurred. The initial estimate of warranty-related costs is revised annually.
As per the terms of the contracts, the Company provides post-contract services /warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past estimates.
1.21 PROVISION FOR PROFESSIONAL SERVICES (FOR EXPORT SALES)
Provision for professional services for export sales is recognized in the year in which sales are recognized.
1.22 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) Provisions involving substantial degree of estimation in measurement are recognized when there is a present legal or constructive obligation as a result of past events and it is probable that there will be an outflow of resources.
(b) Contingent Liabilities are not recognized but are disclosed in the notes in any of the following cases :-
(i) a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation; or
(ii) a reliable estimate of the present obligation cannot be made; or
(iii) a possible obligation, unless the probability of outflow of resource is remote.
(c) Contingent Liability is net of estimated provisions considering possible outflow on settlement.
(d) Contingent Assets are not recognized but are disclosed where an inflow of economic benefits is probable.
(e) Contingent Assets, Contingent Liabilities and Provisions needed against Contingent Liabilities are reviewed at each balance sheet date.
1.23 LEASES:-COMPANY AS A LESSEE
The Company''s leased asset primarily consists of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset ("ROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over lease term.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
1.24 LEASES:- COMPANY AS A LESSOR
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight line basis/systematic basis over the lease term. However, reimbursable under the contract are accounted for on accrual basis. Initial direct cost are added to the carrying amount of the leased assets and recognized as an expense over the lease term.
1.25 NON-CURRENT ASSETS HELD FOR SALE
The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. Non-current assets classified as held for sale is recognized at lower of its carrying amount and fair value less cost to sell.
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
1.27.1 Initial Recognition
Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and financial liabilities are recognized at fair value on initial recognition except for trade receivables/ trade payables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit and loss are added or deducted to/from the fair value on initial recognition.
1.27.2 Subsequent Measurement
(a) Financial assets are subsequently measured at amortised cost if these are held within a business model whose objective is to hold the assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding using the Effective Interest Rate (EIR) method. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
(b) Financial assets at fair value through profit or loss
The financial assets are measured at fair value through profit or loss unless it is classified at amortised cost.
(c) Financial liabilities
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are de-recognised as well as through the EIR amortisation process.
1.27.3 De-recognition of Financial Instruments
A financial asset is de-recognised when:
⢠The rights to receive cash flows from the asset have expired, or
⢠the Company has transferred substantially all the risks and rewards of the asset, or the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability or a part of financial liability is de-recognised from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
1.27.4 Forward Contracts
Forward contracts are measured at marked to market value at every reporting date.
Grants are recognized when there is a reasonable assurance that the company has complied with the conditions attached to them and the same will be received. Grants which are receivable for the purpose of giving immediate financial support to the company, with no future related costs are recognized in the statement of profit & loss of the period in which they have accrued.
Grants that compensate the Company for the cost of depreciable asset are recognized as income in statement of profit and loss on a systematic basis over the period and in the proportion in which depreciation is charged. Grants that compensate the Company for expenses incurred are recognized over the period in which the related costs are incurred and the same is deducted from the related expenses.
When the Company receives grant as a non-monetary asset, the asset and the grant are recorded at fair value.
The Company is getting Govt grant as export incentive under Foreign Trade Policy (FTP) of the Government of India. The same is recognized/presented as other operating income when there is a reasonable assurance that the incentive will be received, and all the attached conditions have been complied with.
Mar 31, 2022
Company Overview
RITES Ltd. is a multidisciplinary engineering and consultancy organization providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies. The major business engagements as consultants, engineers and project managers are in railways, highways, airports, ports, ropeways, urban transport and inland waterways in India and abroad. The company also provides services of third party inspection, quality assurance, construction supervision & project management, operations & maintenance, leasing, export of rolling stock and modernization of railways workshop projects, doubling and electrification on turnkey basis.
The Company is a "Miniratnaâ, Schedule-"Aâ, Category-I CPSE and ISO 9001:2015 certified public limited company incorporated and domiciled in India. The address of its registered office is SCOPE Minar, Laxmi Nagar, Delhi-110092 (India) and address of its corporate office is RITES Bhawan, No. 1, Sector -29, Gurugram, Haryana-122001 (India). President of India through Ministry of Railways is presently holding 72.20% equity share of the company.
The reporting and functional currency of the company is Indian Rupees (INR). Figures in financial statements are presented in H crore, by rounding off upto two decimals except for per share data and as otherwise stated. Certain figures that are required to be disclosed but do not appear due to rounding off are detailed in note 57(k). Previous periods figures have been regrouped/recasted/rearranged, wherever necessary.
Due to outbreak of COVID-19 globally and in India, in view of the Management assessment, likely impact on the business of the Company is only for short term and no medium to long term risks is perceived which will have an impact on company''s ability to continue as a going concern. Further, considering the Company''s business plans and the availability of sufficient cash reserves as at March 31, 2022, the Management do not foresee any uncertainty in continuing its business operations and meeting its liabilities as and when it become due for payment
The standalone financial statements are approved for issue by the company''s Board of Directors in their meeting held on 24th May, 2022.
1. SIGNIFICANT ACCOUNTING POLICIES
1.1 GENERAL
(a) Statement of Compliance
The financial statements of the Company are being prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013, read with the Companies (Indian Accounting Standards) Rules as amended from time to time.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Accounting policies at 1.2.2.4, 1.3, 1.8, 1.9.2.1 and 1.14 have been modified/reworded to bring more clarity to the users of the financial statements which do not have any impact on the financial statements.
(b) Basis of Preparation
The financial statements have been prepared on accrual basis at historical cost, except for the following assets and liabilities which have been measured at fair value/ amortized cost:
⢠Derivative financial instruments,
⢠Which are specifically indicated in the concerned accounting policy.
(c) Use of Estimates and Judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities and contingent assets as at the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Future results could differ due to changes in these estimates and the difference between the actual result and the estimates are recognized in the period in which the results are known/materialize.
1.2 REVENUE RECOGNITION
1.2.1 REVENUE FROM CONTRACTS WITH CUSTOMERS
Operating revenue is from various streams viz. consultancy fee, inspection fee, lease services, export sales and construction projects.
For recognizing revenue from aforesaid streams in the financial statements, general parameters are stated below which are applicable to all streams of revenue while specific parameters are stated in the accounting policy of the respective stream of revenue.
General Parameters
To determine whether to recognise revenue, the Company follows a five step process:
⢠Identifying the contract with a customer
⢠Identifying the performance obligations
⢠Determining the transaction price
⢠Allocating the transaction price to the performance obligations
⢠Recognising revenue when/as performance obligation(s) are satisfied.
The Company often enters into transactions involving a range of the Company''s products and services. In all cases, the total transaction price for a contract is based on performance obligation. The transaction price for a contract excludes amounts received as deposit from client for execution of the project and amount collected on behalf of third party (for example, some GST)
Revenue is recognised either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers.
The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the balance sheet. Similarly, if the Company satisfies a performance obligation before the consideration is due, the Company recognises a contract asset in its balance sheet.
When there is uncertainty as to realisability, recognition of revenue is postponed until such uncertainty is removed.
1.2.1.1 Consultancy Fee
Revenue from providing services is recognized in the accounting period in which services are rendered. Revenue is recognized based on performance obligation satisfied either over time or at a point in time.
In case performance obligation satisfied over time revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on physical progress, efforts, cost incurred to date bear to the total estimated cost of the transaction, time spent, service performed or any other method that management considered appropriate.
In other cases where performance obligation is not satisfied over time, revenue is recognized at a point in time.
In case of contracts, where customer pays fixed amount based on a payment schedule, if services rendered by the Company exceed the payment, a contract asset is recognised. If payments exceed services rendered, a contract liability is recognised.
Mobilization fee is considered as customer advance until recognized as revenue based on the stage of completion of activities/ transactions as per the terms of contract/work order.
Reimbursable and supplies are accounted for on accrual basis.
In Construction Management/ Supervision Contracts, revenue is recognised as a percentage of the value of work done/built-up cost of each contract as determined by the Management, pending customer''s approval, if any.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of inspection certificates issued.
1.2.1.3 Export Sales
Export sales are accounted for on the basis of bills raised when or as the Company transfers control of the assets to the customer which happens at the point in time the customer has undisputed right on delivered goods.
1.2.1.4 Construction Projects
In construction contracts/ projects, the company recognises revenue over time. Due to high degree of interdependence among various elements of these projects, revenue is accounted for considering these activities as a single performance obligation.
To depict the progress by which the company transfers control of the promised goods to the customer and to establish when and to what extent revenue can be recognised, the Company measures its progress towards complete satisfaction of the performance obligation based on work done.
Any expected loss is recognized as an expense immediately.
1.2.1.5 Lease Services
Refer Policy no-1.24:- Leases-Company as lessor.
1.2.2 Other Income
1.2.2.1 Interest Income
Interest income is recognized using effective interest method.
1.2.2.2 Dividend
Revenue is recognised when the right to receive the payment is established, which is generally when shareholders approve the dividend.
1.2.2.3 Export Incentives
Export incentive is recognized when there is a reasonable assurance that the incentive will be received and all the attached conditions have been complied with.
1.2.2.4 OTHERS
Other income is accounted for on accrual basis except claims (including insurance claims) / supplementary claims / counter claims/ interest on delayed payments / awards in favour of the Company / sale of tenders / premium on sale of licenses etc. which are accounted for on final settlement / realization.
1.3 PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost i.e., cost of acquisition or construction inclusive of freight, erection and commissioning charges, non-refundable duties and taxes, expenditure during construction period, borrowing costs, in case of a qualifying asset, upto the date of acquisition/ installation, net of accumulated depreciation and impairment losses, if any.
(a) Incidental expenditure during construction period including interest charges incurred upto the date of completion, net of interest recovered on mobilisation advance, are capitalized.
(b) Spare valuing more than H 10 lakh which can be used only in connection with an item of property, plant and equipment and whose use is expected to be irregular are capitalised and depreciated over the useful life of the spares or principal item of the relevant assets, whichever is lower.
(c) Expenditure incurred subsequently relating to property, plant & equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.
(d) The initial estimate of the cost of dismantling, removing the item and restoring the site on which PPE is located, the obligation for which is incurred when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period, is capitalized as a component of PPE.
1.3.1 Depreciation
(a) Depreciation on property, plant and equipment are provided on straight line method over their estimated useful life determined by management. Depreciation method, useful lives and residual values are reviewed at the end of each financial year. The useful lives of assets are as prescribed in part C of schedule II of the Companies Act, 2013 except assets indicated in sub paragraphs from (d) to (g) below. In respect of additions to/deductions from the assets during the year, depreciation is charged on pro rata basis.
(b) The estimated useful lives of the various assets, are as under:-
|
Assets |
Useful Life (Years) |
|
i) Furniture |
10 |
|
ii) Fixture |
5 |
|
iii) Office Equipment |
5 |
|
iv) Mobile Hand Set |
3 |
|
v) Coolers & Air Conditioners |
7 |
|
vi) Air Conditioning Plant |
15 |
|
vii) Computer Hardware |
3 |
|
viii) Server & Networks |
6 |
|
ix) Survey and Equipments |
10 |
|
x) Vehicles |
8 |
|
xi) Buildings on Freehold Land |
60 |
|
xii) Locomotives-New |
15 |
|
xiii) Locomotives-In-Service |
10 |
|
xiv) Coaches-New |
15 |
|
xv) Coaches-In-Service |
10 |
(c) Any addition or extension, which becomes an integral part of the existing asset and which results in increased economic benefits, is capitalized and depreciated over the remaining useful life of that asset.
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset which is calculated as the difference between the net disposal proceeds and the carrying amount of the asset, is included in the income statement when the asset is de-recognised.
(d) In respect of BOT assets, depreciation is charged over the period of project or the life stated above whichever is lower.
(e) In respect of buildings on lease hold land, depreciation is charged over the period of lease of land or the useful life stated above for buildings on freehold land, whichever is lower.
(f) As per company''s technical assessment, Fixtures, Mobile Hand Set, Coolers & Air Conditioners and In-Service Locomotives & Coaches (refurbished) have lower useful lives than prescribed in part C of schedule II of the Companies Act, 2013. Therefore depreciation is charged at higher rate than prescribed under the Companies Act, 2013.
(g) Individual low cost assets of value less than H 5,000/- are fully depreciated in the year of acquisition.
(h) A nominal value of H 1/- is assigned to the fully depreciated assets.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are classified as capital advances under other non-current assets.
1.4 INTANGIBLE ASSETS
Intangible assets acquired/ developed are measured on recognition at cost less accumulated amortisation and impairment losses, if any.
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 recognised in the statement of profit or loss when the asset is de-recognised .
(a) Software of value less than H 100,000/- is fully amortized in the year of acquisition.
(b) A nominal value of H1/- is assigned to the fully amortized assets.
1.4.1 Amortization
Estimated useful life of the software is 4 years and amortized on a straight line basis over the period.
1.5 INVESTMENT PROPERTY
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment loss, if any.
The Company depreciates building component of investment property over the estimated useful lives of the assets as prescribed in property, plant and equipment.
Investment properties are de-recognised either on disposal or on permanent withdrawal from use. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of de-recognition.
1.6 INVESTMENTS
Equity investments are measured at fair value through profit and loss except investments in subsidiary, participating joint venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or without joint control and associate are measured at cost.
1.7 JOINT OPERATIONS
(a) In case of participating joint operations with joint control, company recognizes in relation to its interest in a joint operation as under:-
(i) its assets, including its share of any assets held jointly;
(ii) its liabilities, including its share of any liabilities incurred jointly;
(iii) its revenue from the sale of its share of the output arising from the joint operation;
(iv) its share of the revenue from the sale of the output by the joint operation; and
(v) its expenses, including its share of any expenses incurred jointly.
(b) In case of participating joint operations without having joint control, interest in such arrangements is to be recognized as per aforesaid accounting policy if the company has right to the assets and obligations for the liabilities relating to joint operations otherwise interest in the joint operation is recognized in accordance with applicable Ind AS.
1.8 INVENTORIES
(a) Inventories are valued at the lower of cost and Net Realizable Value.
(b) Cost of inventories comprises of costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(c) The diminution in the value of obsolete, unserviceable, slow moving and non-moving stores and spares are assessed periodically and accordingly provided for.
(d) Consumables and Stores & Spares other than held for the purpose of warranty are charged to the Statement of Profit and Loss in the year of purchase.
1.9 EMPLOYEE BENEFITS
1.9.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/post-retirement medical scheme are defined contribution schemes. The Company has no obligation, other than the contribution payable to such funds/ schemes. The Company recognizes contribution payable to such funds/schemes as an expense, when an employee renders the related service. If the contribution payable to the schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined contributions towards pension under EPFO, superannuation pension fund and post retiral medical schemes are charged to the Statement of Profit and Loss based on contributions made in terms of applicable schemes on accrual basis.
1.9.2 DEFINED BENEFIT PLAN
1.9.2.1 Gratuity
Company provides gratuity, a defined benefit plan covering eligible regular and contract employees. The gratuity plan provides a lump-sum payment to vested employees of an amount based on the respective employee''s salary and the tenure of employment with the company at retirement, death, incapacitation, or on completion of terms of employment.
The liabilities with regard to the Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at the year end.
(i) The Company has set up a separate Gratuity Trust for managing Gratuity Fund.
(ii) The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
(iii) Gain or loss through re-measurements of net defined benefit liability/(asset) is recognized in Other Comprehensive Income.
(iv) The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in Other Comprehensive Income.
(v) Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
1.9.2.2 Provident Fund
The Company makes contribution to the recognized provident fund - "RITES CONTRIBUTORY PROVIDEND FUNDâ for its employees, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the returns from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
1.9.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees), Leave Encashment (contract employees) and Long Service Award (regular employees)
i. Accounted for on actuarial valuation made at the end of year.
ii. The actuarial gains/losses are recognized in the Statement of Profit and Loss for the year.
(b) Leave Encashment and Medical Leave for regular employees
i. Liabilities are funded under plan assets through insurance policies from insurance companies approved by Insurance Regulatory Development Authority (IRDA) and are accounted for on actuarial valuation made at the end of year.
ii. The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
iii. Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in the Statement of Profit and Loss.
1.9.4 Other Benefits
Ex-gratia payments on death are recognized on payment basis in the Statement of Profit and Loss.
1.10 RESEARCH & DEVELOPMENT
Revenue expenditure incurred/paid during the year on research is charged to the Statement of Profit and Loss.
Development cost is capitalized if following are demonstrated otherwise it is charged to the Statement of Profit and Loss:
(a) Technical feasibility of completing the intangible asset so that it will be available for use or sell.
(b) Intention to complete the intangible asset and use or sell it.
(c) Ability to use or sell the intangible assets.
(d) Asset will generate future economic benefits.
(e) There is availability of resources to complete the asset.
The developed asset is carried at cost less any accumulated amortisation and impairment loss, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset.
1.11 INCOME TAXES
1.11.1 Current Income Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted in India, at the reporting date.
Management periodically evaluates positions taken in the tax assessments with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Additional taxes, interest and/or penalties levied/ imposed by the tax authorities / Appellate authorities on finality are recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
1.11.2 Deferred Tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
⢠In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
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 taxes relate to the same taxable entity and the same taxation authority.
1.12 RATES & TAXES
Overseas taxes on foreign assignments, service tax, value added tax, alike taxes, professional tax, property tax, entry tax, labour cess, octroi etc. paid/accrued in India or abroad for which credit are not available to the company are charged to the Statement of Profit and Loss.
1.13 PREPAID EXPENSES AND PRIOR PERIOD ADJUSTMENTS
1.13.1 Prepaid Expenses
Prepaid expenses up to H 5,00,000/- in each case are treated as expenditure/income of the year and accounted for to the natural head of accounts
1.13.2 Prior Period Adjustments
Material prior period errors are corrected retrospectively by restating the comparative amounts for the prior periods presented in which the error occurred. If the error occurred before the earliest period presented, the opening balances of assets, liabilities and equity for the earliest period presented, are restated unless it is impracticable, in which case, the comparative information is adjusted to apply the new accounting policy prospectively from the earliest date practicable.
1.14 TRANSLATION AND TRANSACTIONS OF FOREIGN CURRENCIES
1.14.1 Functional Currency of the company is Indian Rupees and the financial statements are presented in Indian Rupees.
1.14.2 Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. The company also uses average rate where the average rate approximates the actual rate at the date of the transaction.
1.14.3 Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
1.14.4 Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss
1.15 CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term deposits with an original maturity of three months or less from the date of acquisitions which are readily convertible into known amounts of cash and be subject to an insignificant risk of change in value. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
1.16 STATEMENT OF CASH FLOWS
Statement of Cash Flows is made using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, financing and investing activities of the Company are segregated.
1.17 EARNINGS PER SHARE
In determining basic earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares outstanding during the period.
In determining diluted earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares considered for deriving basic earning per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at the later date. Dilutive potential equity share are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus share issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.18 IMPAIRMENT OF ASSETS
1.18.1 Financial Assets
(Other than at Fair Value)
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive. When estimating the cash flows, the Company consider the following:
⢠All contractual terms of the financial assets (including extension) over the expected life of the assets.
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables: In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
Other financial assets: In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.
1.18.2 Non-Financial Assets
(Tangible and Intangible Assets)
An asset is treated as impaired when the carrying cost of assets exceeds its recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use). Impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount and such losses either no longer exists or has decreased. Reversal of impaired loss is recognized in the Statement of Profit and Loss to the extent of previously recognized or balanced impairment loss.
1.19 WRITE OFF
1.19.1 Financial Assets
Such assets including trade/lease receivables are written off when, in the opinion of the management, unrealisability has become certain.
1.19.2 Non Financial Assets
Such assets including property, plant, equipment (PPE), intangible assets, investment property and inventory are written off when, in the opinion of the management, such asset has become obsolete, damaged beyond repair, stolen and uneconomical to use.
1.20 PROVISION FOR WARRANTY FOR SALE AND SERVICES RENDERED
Provision for warranties is recognized when products are sold and services are rendered with warranty as per the contract. These provisions are estimated by using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise or incurred. The initial estimate of warranty-related costs is revised annually.
As per the terms of the contracts, the Company provides post-contract services /warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past estimates.
1.21 PROVISION FOR PROFESSIONAL SERVICES (FOR EXPORT SALES)
Provision for professional services for export sales is recognized in the year in which sales are recognized.
1.22 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) Provisions involving substantial degree of estimation in measurement are recognized when there is a present legal or constructive obligation as a result of past events and it is probable that there will be an outflow of resources.
(b) Contingent Liabilities are not recognized but are disclosed in the notes in any of the following cases :-
(i) a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation; or
(ii) a reliable estimate of the present obligation cannot be made; or
(iii) a possible obligation, unless the probability of outflow of resource is remote.
(c) Contingent Liability is net of estimated provisions considering possible outflow on settlement.
(d) Contingent Assets are not recognized but are disclosed where an inflow of economic benefits is probable.
(e) Contingent Assets, Contingent Liabilities and Provisions needed against Contingent Liabilities are reviewed at each balance sheet date.
1.23 LEASES:-COMPANY AS A LESSEE
The Company''s leased asset primarily consists of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset ("ROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over lease term.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
1.24 LEASES:-COMPANY AS A LESSOR
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight line basis/systematic basis over the lease term. However, reimbursable under the contract are accounted for on accrual basis. Initial direct cost are added to the carrying amount of the leased assets and recognized as an expense over the lease term.
1.25 NON-CURRENT ASSETS HELD FOR SALE
The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. Non-current assets classified as held for sale is recognized at lower of its carrying amount and fair value less cost to sell.
1.26 DIVIDENDS
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors
1.27 FINANCIAL INSTRUMENTS
1.27.1 Initial Recognition
Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and financial liabilities are recognized at fair value on initial recognition except for trade receivables/ trade payables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit and loss are added or deducted to/from the fair value on initial recognition.
1.27.2 Subsequent Measurement
(a) Financial assets are subsequently measured at amortised cost if these are held within a business model whose objective is to hold the assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding using the Effective Interest Rate (EIR) method. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
(b) Financial assets at fair value through profit or loss
The financial assets are measured at fair value through profit or loss unless it is classified at amortised cost.
(c) Financial liabilities
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are de-recognised as well as through the EIR amortisation process.
1.27.3 De-recognition of Financial Instruments
A financial asset is de-recognised when:
⢠The rights to receive cash flows from the asset have expired, or
⢠the Company has transferred substantially all the risks and rewards of the asset, or the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability or a part of financial liability is de-recognised from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
1.27.4 Forward Contracts
Forward contracts are measured at marked to market value at every reporting date.
Mar 31, 2018
1.1 general
(a) statement of Compliance
The financial statements of the Company are being prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013, read together with Companies (indian Accounting standards) rules, 2015 and the Companies (indian Accounting standards) Amendment rules, 2016.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
(b) Basis of Preparation
The financial statements have been prepared on accrual basis at historical cost, except for the following assets and liabilities which have been measured at fair value/ amortized cost:
- Derivative financial instruments,
- Which are specifically indicated in the concerned accounting policy.
(c) use of Estimates and Judgements
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities and contingent assets as at the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Future results could differ due to changes in these estimates and the difference between the actual result and the estimates are recognized in the period in which the results are known/materialize.
1.2 revenue recognition
1.2.1 revenue from operations
Operating revenue is from various streams viz. consultancy fee, inspection fee, lease services, export sales and construction projects.
For recognizing revenue from aforesaid streams in the financial statements, general parameters are stated below which are applicable to all streams of revenue while specific parameters are stated in the accounting policy of the respective stream of revenue.
General Parameters
(a) Revenue is recognized on satisfaction of following conditions:-
(i) outcome of the transaction can be estimated or measured reliably.
(ii) it is probable that the economic benefits associated with the transaction will flow to the company.
(iii) the costs incurred and cost to complete the transaction can be measured reliably.
(b) When outcome of transaction cannot be estimated reliably, revenue is recognized to the extent of cost incurred which is recoverable else cost incurred is charged to the Statement of Profit and Loss.
(c) When there is uncertainty as to realisability, recognition of revenue is postponed until such uncertainty is removed.
(d) Revenue is measured at the fair value of the consideration received or receivable.
1.2.1.1 Consultancy Fee
Revenue from rendering of services is recognized on the basis of stage of completion of each transaction using appropriate method.
Physical progress, efforts, cost incurred to date bear to the total estimated cost of the transaction, time spent, service performed or any other method that management considered appropriate are used to measure the stage of completion at the end of the reporting period.
Reimbursable and supplies are accounted for on accrual basis.
In Construction Management/Supervision Contracts, revenue is recognised as a percentage of the value of work done/built-up cost of each contract as determined by the Management, pending customerâs approval, if any.
Mobilization fee is considered as advance until recognized as revenue based on the stage of completion of activities/transactions as per the terms of contract/work order.
1.2.1.2 Inspection Fee
Inspection fee is accounted for on the basis of inspection certificates issued.
1.2.1.3 Lease Services
Lease income arising from operating leases is accounted for on a straight-line basis over the lease terms. However, reimbursables under the contract are accounted for on accrual basis. Initial direct costs are added to the carrying amount of the leased assets and recognized as an expense over the lease term.
1.2.1.4 Export Sales
Export sales are accounted for on the basis of bills raised where all significant risks and rewards of ownership have been transferred to the buyer wherein company neither retain continuing managerial involvement to the degree usually associated with the ownership nor effective control over the goods exported.
1.2.1.5 Construction Projects
Revenue and costs associated with the construction contracts/projects are recognized as revenue and expenses respectively based on stage of completion of contract/project activities at the end of the reporting period.
Stage of completion of contract for recognition of revenue is based on the proportion of the costs incurred for work performed up to the reporting date bear to the estimated total contract/project costs.
Any expected loss is recognized as an expense immediately.
1.2.2 Other Income
1.2.2.1 Interest Income
Interest income is recognized using effective interest method.
1.2.2.2 Dividend
Revenue is recognised when the right to receive the payment is established, which is generally when shareholders approve the dividend.
1.2.2.3 Export Incentives
Export incentive is recognized when there is a reasonable assurance that the incentive will be received and all the attached conditions have been complied with.
1.2.2.4 Others
Other income is accounted for on accrual basis except claims/supplementary claims / counter claims/interest on delayed payments / awards in favour of the Company/ sale of tenders/ premium on sale of licenses etc. which are accounted for on final settlement / realization.
1.3 PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost i.e., cost of acquisition or construction inclusive of freight, erection and commissioning charges, non-refundable duties and taxes, expenditure during construction period, borrowing costs, in case of a qualifying asset, upto the date of acquisition/ installation, net of accumulated depreciation and impairment losses, if any.
(a) Incidental expenditure during construction period including interest charges incurred upto the date of completion, net of interest recovered on mobilisation advance, are capitalized.
(b) Spare valuing more than Rs.10 lakh which can be used only in connection with an item of property, plant and equipment and whose use is expected to be irregular are capitalised and depreciated over the useful life of the spares or principal item of the relevant assets, whichever is lower. Other spares are charged off to the Statement of Profit and Loss in the year of purchase.
(c) Expenditure incurred subsequently relating to property, plant & equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.
(d) The initial estimate of the cost of dismantling, removing the item and restoring the site on which PPE is located, the obligation for which is incurred when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period, is capitalized as a component of PPE.
1.3.1 depreciation
(a) Depreciation on property, plant and equipment are provided on straight line method over their estimated useful life determined by management. Depreciation method, useful lives and residual values are reviewed at the end of each financial year. The useful lives of assets are as prescribed in part C of schedule II of the Companies Act, 2013 except assets indicated in sub paragraphs from (d) to (g) below. In respect of additions to/deductions from the assets during the year, depreciation is charged on prorata basis.
(b) The estimated useful lives of the various assets, are as under:-
(c) Any addition or extension, which becomes an integral part of the existing asset and which results in increased economic benefits, is capitalized and depreciated over the remaining useful life of that asset. An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset which is calculated as the difference between the net disposal proceeds and the carrying amount of the asset, is included in the income statement when the asset is de-recognised.
(d) In respect of BOT assets, depreciation is charged over the period of project or the life stated above whichever is lower.
(e) In respect of buildings on lease hold land, depreciation is charged over the period of lease of land or the useful life stated above for buildings on freehold land, whichever is lower.
(f) As per companyâs technical assessment, Fixtures, Mobile Hand Set, Coolers & Air Conditioners and In-Service Locomotives & Coaches (refurbished) have lower useful lives than prescribed in part C of schedule II of the Companies Act, 2013. Therefore depreciation is charged at higher rate than prescribed under the Companies Act, 2013.
(g) Individual low cost assets of value less than Rs.5,000/- are fully depreciated in the year of acquisition.
(h) A nominal value of Rs.1/- is assigned to the fully depreciated assets.
1.3.2 Capital Work in Progress
Assets which are not ready for the intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
1.3.3 Capital Advances
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are classified as capital advances under other non-current assets.
1.4 intangible assets
Intangible assets acquired/ developed are measured on recognition at cost less accumulated amortisation and impairment losses, if any.
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 recognised in the statement of profit or loss when the asset is de-recognised .
(a) Software of value less than Rs.100,000/- is fully amortized in the year of acquisition.
(b) A nominal value of â1/- is assigned to the fully amortized assets.
1.4.1 Amortization
Estimated useful life of the software is 4 years and amortized on a straight line basis over the period.
1.5 investment property
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment loss, if any.
The Company depreciates building component of investment property over the estimated useful lives of the assets as prescribed in property, plant and equipment.
Investment properties are de-recognised either on disposal or on permanent withdrawal from use. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of de-recognition.
1.6 investments
Equity investments are measured at fair value through profit and loss except investments in subsidiary, participating joint venture with or without joint control and associate.
Investments in subsidiary, participating joint venture with or without joint control and associate are measured at cost.
1.7 joint operations
(a) In case of participating joint operations with joint control, company recognizes in relation to its interest in a joint operation as under :
(i) its assets, including its share of any assets held jointly;
(ii) its liabilities, including its share of any liabilities incurred jointly;
(iii) its revenue from the sale of its share of the output arising from the joint operation;
(iv) its share of the revenue from the sale of the output by the joint operation; and
(v) its expenses, including its share of any expenses incurred jointly.
(b) In case of participating joint operations without having joint control, interest in such arrangements is to be recognized as per aforesaid accounting policy if the company has right to the assets and obligations for the liabilities relating to joint operations otherwise interest in the joint operation is recognized in accordance with applicable ind As.
1.8 inventories
(a) Inventories are valued at cost on First In First Out (FIFO) basis or Net Realizable Value whichever is less.
(b) Cost of inventories comprises of costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
(c) The diminution in the value of obsolete, unserviceable, slow moving and non-moving stores and spares are assessed periodically and accordingly provided for.
(d) Consumables are charged to the Statement of Profit and Loss in the year of purchase irrespective of the value.
1.9 EMPLOYEE BENEFITS
1.9.1 Defined Contribution Plans
Pension Scheme/Post Retiral Medical Schemes
Retirement benefits in the form of pension scheme/post-retirement medical scheme are defined contribution schemes. The Company has no obligation, other than the contribution payable to such funds/ schemes. The Company recognizes contribution payable to such funds/schemes as an expense, when an employee renders the related service. If the contribution payable to the schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined contributions towards pension under EPFO, superannuation pension fund and post retiral medical schemes are charged to the Statement of Profit and Loss based on contributions made in terms of applicable schemes on accrual basis.
1.9.2 Defined Benefit Plan
1.9.2.1 Gratuity
Company provides gratuity, a defined benefit plan covering eligible regular and contract employees. The gratuity plan provides a lump-sum payment to vested employees of an amount based on the respective employeeâs salary and the tenure of employment with the company at retirement, death, incapacitation, or on completion of terms of employment.
The liabilities with regard to the Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at the year end.
(i) Company has set up a Gratuity Trust Fund which is being administered by Life Insurance Corporation of India (LIC) who invests the contribution in the schemes permitted by laws of India.
(ii) The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
(iii) Gain or loss through re-measurements of net defined benefit liability/(asset) is recognized in Other Comprehensive income.
(iv) The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in Other Comprehensive Income.
(v) Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
1.9.2.2 Provident Fund
The Company makes contribution to the recognized provident fund - âRITES CONTRIBUTORY PROVIDENT FUNDâ for its employees, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the returns from the investments of the trust and the notified interest rate. The Companyâs obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
1.9.3 Other Long Term Benefits
(a) Leave Travel Concession (CDA employees), Leave Encashment (contract employees) and Long service Award (regular employees)
i. Accounted for on actuarial valuation made at the end of year.
ii. The actuarial gains/losses are recognized in the Statement of Profit and Loss for the year.
(b) Leave Encashment and Medical Leave for regular employees
i. Liabilities are funded under plan assets through insurance policies from insurance companies approved by Insurance Regulatory Development Authority (IRDA) and are accounted for on actuarial valuation made at the end of year.
ii. The company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
iii. Service cost and net interest cost/(income) on the net defined benefit liability/(asset) are recognized in Statement of Profit and Loss.
iv. Actuarial gains/losses are recognized in the Statement of Profit and Loss.
1.9.4 Other Benefits
Ex-gratia payments on death are recognized on payment basis in the Statement of Profit and Loss.
1.10 research & development
Revenue expenditure incurred/paid during the year on research is charged to the Statement of Profit and Loss.
Development cost is capitalized if following are demonstrated otherwise it is charged to the Statement of Profit and Loss:
(a) Technical feasibility of completing the intangible asset so that it will be available for use or sell.
(b) intention to complete the intangible asset and use or sell it.
(c) Ability to use or sell the intangible assets.
(d) Asset will generate future economic benefits.
(e) There is availability of resources to complete the asset.
The developed asset is carried at cost less any accumulated amortisation and impairment loss, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset.
1.11 income taxes
1.11.1 current Income Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted in india, at the reporting date.
Management periodically evaluates positions taken in the tax assessments with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Additional taxes, interest and/or penalties levied/ imposed by the tax authorities / Appellate authorities on finality are recognized in the Statement of Profit and Loss.
Current tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
1.11.2 Deferred Tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
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 taxes relate to the same taxable entity and the same taxation authority.
1.12 rates & taxes
Overseas taxes on foreign assignments, service tax, value added tax, alike taxes, professional tax, property tax, entry tax, labour cess, octroi etc. paid/accrued in India or abroad for which credit are not available to the company are charged to the Statement of Profit and Loss.
1.13 prepayments
Prepayments towards leasehold land and/or buildings, which are in the nature of operating lease, are amortized over the period of the lease agreement.
prepaid expenses and prior period adjustments
Prepaid expenses and prior period adjustments up to Rs.1,00,000/- in each case are treated as expenditure/ income of the year and accounted for to the natural head of accounts.
1.14 translation and transactions of foreign currencies
1.14.1 Functional Currency
Functional Currency of the company is Indian Rupees and the financial statements are presented in Indian rupees.
1.14.2 Foreign Currencies
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an available average rate if the average approximates the actual rate at the date of the transaction.
1.14.3 Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
1.14.4 Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss.
1.15 cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term deposits with an original maturity of three months or less from the date of acquisitions which are readily convertible into known amounts of cash and be subject to an insignificant risk of change in value. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
1.16 statement of cash flows
Statement of Cash Flows is made using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, financing and investing activities of the Company are segregated.
1.17 earnings per share
In determining basic earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares outstanding during the period.
In determining diluted earnings per share, net profit attributable to equity shareholders is divided by weighted average number of equity shares considered for deriving basic earning per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at the later date. Dilutive potential equity share are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus share issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.18 impairment of assets
1.18.1 Financial Assets
(Other than at Fair Value)
The Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on following financial assets - loans, deposits and trade receivables.
Trade/lease receivables outstanding for a period over 3 years are impaired 100% and others which are outstanding for a period of 3 years or less are impaired on a case to case basis, except in cases where amount is considered recoverable as per the management.
For other receivables impairment is made on the basis of expected credit loss model.
1.18.2 Non-Financial Assets
(Tangible and intangible Assets)
An asset is treated as impaired when the carrying cost of assets exceeds its recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use). Impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount and such losses either no longer exists or has decreased. Reversal of impaired loss is recognized in the Statement of Profit and Loss to the extent of previously recognized or balanced impairment loss.
1.19 WRITE OFF
1.19.1 Financial Assets
Such assets including trade/lease receivables are written off when, in the opinion of the management, unrealisability has become certain.
1.19.2 Non Financial Assets
Such assets including property, plant, equipment (PPE), intangible assets, investment property and inventory are written off when, in the opinion of the management, such assets have become obsolete, damaged beyond repair, stolen and uneconomical to use.
1.20 PROVISION FOR WARRANTY FOR SALE AND SERVICES RENDERED
Provision for warranties is recognized when products are sold and services are rendered with warranty as per the contract. These provisions are estimated by using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise or incurred. The initial estimate of warranty-related costs is revised annually.
As per the terms of the contracts, the Company provides post-contract services /warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past estimates.
1.21 PROVISION FOR PROFESSIONAL SERVICES (FOR EXPORT SALES)
Provision for professional services for export sales is recognized in the year in which sales are recognized.
1.22 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) Provisions involving substantial degree of estimation in measurement are recognized when there is a present legal or constructive obligation as a result of past events and it is probable that there will be an outflow of resources.
(b) Contingent Liabilities are not recognized but are disclosed in the notes in any of the following cases :-
(i) a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation; or
(ii) a reliable estimate of the present obligation cannot be made; or
(iii) a possible obligation, unless the probability of outflow of resource is remote.
(c) Contingent Liability is net of estimated provisions considering possible outflow on settlement.
(d) Contingent Assets are not recognized but are disclosed where an inflow of economic benefits is probable.
(e) Contingent Assets, Contingent Liabilities and Provisions needed against Contingent Liabilities are reviewed at each balance sheet date.
1.23 LEASE EXPENSES
Lease expenses/payments under operating lease are recognized as expenses on straight line basis over the lease term unless the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
1.24 NON-CURRENT Assets HELD FOR SALE
The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. Non-current assets classified as held for sale is recognized at lower of its carrying amount and fair value less cost to sell.
1.25 DIVIDENDs
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the companyâs Board of Directors.
1.26 financial instruments
1.26.1 Initial Recognition
Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and financial liabilities are recognized at fair value on initial recognition except for trade receivables/ trade payables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit and loss are added or deducted to/from the fair value on initial recognition.
1.26.2 subsequent Measurement
(a) Financial assets are subsequently measured at amortised cost if these are held within a business model whose objective is to hold the assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding using the Effective Interest Rate (EIR) method. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
(b) Financial assets at fair value through profit or loss
The financial assets are measured at fair value through profit or loss unless it is classified at amortised cost.
(c) Financial liabilities
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are de-recognised as well as through the EiR amortisation process.
1.26.3 De-recognition of Financial Instruments
A financial asset is de-recognised when:
- The rights to receive cash flows from the asset have expired, or
- the Company has transferred substantially all the risks and rewards of the asset, or the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability or a part of financial liability is de-recognised from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
1.26.4 Forward contracts
Forward contracts are measured at marked to market value at every reporting date.
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