Mar 31, 2018
1. Corporate information
SWELECT ENERGY SYSTEMS LIMITED (''the Company'') was incorporated as a public limited Company on 12 September 1994. The Company is engaged in the business of manufacturing and trading of Solar power projects, off-grid solar photovoltaic modules, based on crystalline silicon technology (c-Si), solar and wind power generation, contract manufacturing services, installation and maintenance services, sale of Solar Photovoltaic inverters and energy efficient lighting systems. The Company is domiciled in India and its shares are listed on BSE and NSE. The registered office of the Company is located at Chennai.
2 Basis of preparation
(i) Statement of compliance
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
(ii) Functional and presentation currency
These financial statements are presented in Indian Rupees (INR/ Rs.), which is the Company''s functional currency. All the financial information have been presented in Indian Rupees except for share data and as otherwise stated.
(iii) Basis of measurement
These financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
(iv) Use of estimates and judgments
In preparing these financial statements, the Management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.
Judgments
Note 5 - Revenue from Service Concession Arrangements Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2018 is included in the following notes:
Note 3 - Useful life of Fixed Assets
Note 22 - Revenue from Service Concession Arrangements Note 38 - Fair valuation of Financial Assets/Liabilities Note 7 & 10 - Impairment of financial assets and other assets Note 9 - Allowance for Non- moving, Slow moving inventories
Note 19 - Provision for Warranty and the underlying projections / assumptions / judgments etc.
Note 32 - Measurement of Defined Benefit Obligations: Key actuarial assumptions
(v) Measurement of fair values
A number of the Company''s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to
the measurement of fair values whereby the valuation is obtained from an external independent valuer which is then reviewed by the Chief Financial Officer for the underlying assumptions used in the valuation.
The Chief Financial Officer regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used by the valuer to measure fair values, then the Chief Financial Officer assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
Note 4 - Investment Property; and
Note 38 - Financial Instruments
2(A) Summary of significant accounting policies (i) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification which is determined based on the operating cycle.
An asset is treated as current when it is:
- Expected to be realized or intended to sold or consumed in the normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- - Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
The Company classifies all other assets as non-current.
- A liability is treated as current when:
- - It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
(ii) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes and duties collected on behalf of the
government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods, its accessories and other traded/manufactured goods are recognized when significant risks and rewards of ownership are passed to the buyer, which generally coincides with dispatch of goods. Revenues under composite contracts comprising supply, installation and commissioning are recognized on dispatch as such services are generally considered insignificant to the contract.
The Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty (until 30 June 2017).
However, Sales Tax/Value Added Tax (VAT), Goods and Service Tax is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
Sale of power
Revenue from sale of power from renewable energy sources is recognized in accordance with the price agreed under the provisions of the Power Purchase Agreement entered into with Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) and other customers. Such revenue is recognized on the basis of actual units generated and transmitted.
Revenue from power distribution business is accounted on the basis of billings to the customers and includes unbilled revenues accrued up to the end of accounting year. Customers are billed as per the tariff rates issued by Electricity Regulatory Commission. Interest is accounted on accrual basis on overdue bills.
Renewable Energy Certificate (REC) Income:
Income arising from REC is initially recognized in respect of the number of units of power exported at the minimum expected realizable value, determined based on the rates specified under the relevant regulations duly considering the entitlements as per the policy, industry specific developments, Management assessment etc and when there is no uncertainty in realizing the same. The difference between the amount recognized initially and the amount realized on sale of such RECs at the Power Exchange are accounted for as and when such sale happens.
Income from service
Revenue from maintenance contracts is recognized in the Statement of Profit and Loss on a periodic basis over the period of the contract according to the terms and conditions of the agreements. Income from installation contracts is recognized when the certificate of installation is received from the customer.
Interest income
Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest income is included in ''Finance Income'' in the Statement of Profit and Loss. For all debt instruments measured either at amortized cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend
Revenue is recognized when the Company''s right as a shareholder/unit holder to receive payment is established by the reporting date.
Rental Income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in Revenue from Operations in the Statement of Profit or Loss due to its operating nature.
(iii) Service Concession Agreement
The Company constructs infrastructure used to provide a public service and operates and maintains that infrastructure (operation services) for a specified period of time.
These arrangements may include Infrastructure used in a public-to-private service concession arrangement for its entire useful life.
Under Appendix A to Ind AS 11 - Service Concession Arrangements, these arrangements are accounted for based on the nature of the consideration. The Intangible asset model is used to the extent that the Company receives a right (i.e. a franchisee) to charge users of the public service. The financial asset model is used when the Company has an unconditional contractual right to receive cash or another financial asset from or at the direction of the granter for the construction services. When the unconditional right to receive cash covers only part of the service, the two models are combined to account separately for each component. If the Company performs more than one service (i.e., construction or upgrade services and operation services) under a single contract or arrangement, consideration received or receivable is allocated with reference to the relative fair values of the services delivered, when the amounts are separately identifiable.
The Company manages concession arrangements which include constructing Solar power distribution assets for distribution of electricity. The Company maintains and services the infrastructure during the concession period. These concession arrangements set out rights and obligations related to the infrastructure and the service to be provided.
The right to consideration gives rise to an Intangible asset and financial receivable and accordingly, both the Intangible asset and financial receivable models are applied. Income from the concession arrangements earned under the Intangible asset model consists of the value of contract revenue, which is deemed to be fair value of consideration transferred to acquire the asset; and payments actually received from the users. The Intangible asset is amortized over its expected useful life in a way that reflects the pattern in which the asset''s economic benefits are consumed by the Company, starting from the date when the right to operate starts to be used. Based on these principles, the Intangible asset is amortized in line with the actual usage of the specific public facility, with a maximum of the duration of the concession.
Financial receivable is recorded at fair value of guaranteed residual value to be received at the end of the concession period. This receivable is subsequently measured at amortized cost.
Any asset carried under concession arrangements is derecognized on disposal or when no future economic benefits are expected from its future use or disposal or when the contractual rights to the financial asset expire.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to make the sale.
(v) Taxes Current income tax
Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the Statement of Profit and Loss except to the extent it relates to items recognized directly in Equity, in which case it is recognized in Equity.
Current Tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in Other Comprehensive Income or in Equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in Equity.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is considered as an asset if there is a convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the Company. The carrying amount of MAT is reviewed at each reporting date and the asset is written down to the extent the Company does not have convincing evidence that it will pay normal income tax during the specified period.
Deferred tax is provided using the liability method 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 recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized 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 utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and written off 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 utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that the 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 realized 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 recognized outside the Statement of Profit and Loss is recognized outside Statement of Profit and Loss (either in Other Comprehensive Income or in Equity). Deferred tax items are recognized in correlation to the underlying transaction either in Other Comprehensive Income or directly 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.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate.
(vi) Employee Benefits Defined Contribution Plan
Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme 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 of the pre-payment.
Employee State Insurance
Contributions to Employees State Insurance Scheme are recognized as expense in the year in which the services are rendered.
Defined Benefit Plan
Gratuity
The Company makes annual contribution to a Gratuity Fund administered by trustees and managed by LIC. The Company accounts its liability for future gratuity benefits based on actuarial valuation, as at the Balance Sheet date, determined every year using the Projected Unit Credit method. Actuarial gains/losses are immediately recognized in Retained Earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not re-classified to profit or loss in subsequent periods. The defined benefit obligation recognized in the balance sheet represents the present value of the Defined Benefit Obligation less the Fair Value of Plan Assets out of which the obligations are expected to be settled.
Long Term Compensated Absences
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year end. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Short Term Employee Benefits
Short Term Employee Benefits includes short term compensated absences which is recognized based on the eligible leave at credit on the Balance Sheet date, and the estimated cost is based on the terms of the employment contract.
(vii) Foreign Currency Transactions and Translations
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Initial Recognition
Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at the average rates that closely approximate the rate at the date of the transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Nonmonetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Treatment of Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk of an existing Asset/Liability
The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
(viii) Earnings per share
Basic earnings per share is computed by dividing the profit / loss after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / loss after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
(ix) Property, Plant and Equipment and Intangible assets
Property, Plant and Equipment and Intangible assets are stated at original cost net of tax/duty credit availed, less accumulated depreciation/amortization and impairment losses, if any. The cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, Intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Subsequent expenditure related to an item of Property, Plant and Equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the year during which such expenses are incurred.
Gains and losses arising from derecognition of Property, Plant and Equipment and intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of the profit and loss when the asset is derecognized.
The Company identifies and determines cost of each component/part of the asset separately, if the component/part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
Capital Work-in-Progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost and attributable interest. Once it has becomes available for use, their cost is re-classified to appropriate caption and subjected to depreciation.
(xi) Useful lives/depreciation rates
Considering the applicability of Schedule II, the Management has estimated the useful lives and residual values of all its Property, Plant and Equipment. The Management believes that the depreciation rates currently used fairly reflect its estimate of the useful life and residual values of Property, Plant and Equipment, though these rates in certain cases are different from the lives prescribed under Schedule II.
The Management has estimated, supported by independent assessment by professionals, the useful lives of the following classes of assets.
The useful life of certain Solar Plant and Machinery to 25 years, respectively. These lives are higher than those indicated in Schedule II.
Leasehold improvements are amortized using the straight-line method over their estimated useful lives (5 years) or the remainder of primary lease period, whichever is lower.
Intangible assets are amortized using the straight-line method over a period of five years.
(xii) Impairment of Property, Plant and Equipment and Intangible assets
The carrying amounts of assets are reviewed at each balance sheet, date if there is any indication of impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
(xiii) Investment Property
Investment Property represents Property (land or a buildingâor part of a buildingâor both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.
Investment Property is measured initially at cost, including transaction costs. Subsequent to initial recognition, Investment Property is stated at cost less accumulated depreciation and accumulated impairment loss, if any.
The cost includes the cost of replacing parts if the recognition criteria are met. When significant parts of the Investment Property are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in Statement of Profit and Loss as incurred. Depreciation on building classified as Investment Property has been provided on the straight-line method based on the useful life as prescribed in Schedule II to the Companies Act, 2013. These are based on the Company''s estimate of their useful lives taking into consideration technical factors.
Though the Company measures Investment Property using cost basis measurement, the fair value of Investment Property is disclosed Note 4. Fair values are determined on an annual evaluation performed by an accredited external independent value applying a valuation model recommended by an independent value.
Investment Property is derecognized when either they have been disposed of or when the Investment Property is permanently withdrawn from use and no future economic benefit from its disposal.
The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the Statement of Profit and Loss in the period of derecognition.
(xiv) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
(xv) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Leases where, the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Statement of Profit and Loss.
(xvi) Provisions and Contingencies
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably The Company does not recognize a contingent liability but discloses its existence in the financial statements.
(xvii) Provision for Warranties
The estimated liability for product warranties is recorded when products are sold. These estimates are established 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 claims will arise, being typically up to twenty five years.
The estimates used for accounting of warranty liability/recoveries are reviewed periodically and revisions are made as required.
(xviii) Financial instruments Financial Assets:
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Financial assets are classified, at initial recognition, as financial assets measured at fair value or as financial assets measured at amortized cost.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in two broad categories:
- Financial assets at fair value
- Financial assets at amortized cost
Where assets are measured at fair value, gains and losses are either recognized entirely in the Statement of Profit and Loss (i.e. fair value through profit or loss), or recognized in Other Comprehensive Income (i.e. fair value through Other Comprehensive Income).
A financial asset that meets the following two conditions is measured at amortized cost (net of any write down for impairment) unless the asset is designated at fair value through profit or loss under the fair value option.
- Business model test: The objective of the Company''s business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realize its fair value changes).
- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option.
- Business model test: The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Even if an instrument meets the two requirements to be measured at amortized cost or fair value through other comprehensive income, a financial asset is measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ''accounting mismatch'') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
All other financial asset is measured at fair value through profit or loss.
All equity investments are measured at fair value in the balance sheet, with value changes recognized in the Statement of Profit and Loss, except for those equity investments for which the entity has elected to present value changes in ''Other Comprehensive Income''.
If an equity investment is not held for trading, an irrevocable election is made at initial recognition to measure it at fair value through other comprehensive income with only dividend income recognized in the Statement of Profit and Loss. Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s statement of financial position) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement and either;
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Investment in associates, joint venture and subsidiaries
The Company has accounted for its investment in subsidiaries and associates, joint venture at cost.
Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL) model to the following:
- Financial assets measured at amortized cost;
- Financial assets measured at fair value through other comprehensive income (FVTOCI);
Expected credit losses are measured through a loss allowance at an amount equal to:
- the 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
- full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
The Company follows ''simplified approach'' for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables; and
- All lease receivables
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECL''s at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-months ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12-months ECL.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
Financial Liabilities:
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
- Financial liabilities at fair value through profit or loss
- 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.
- Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
- Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
- Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.
Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss. Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. 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 derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
(xix) Fair value measurement
The Company measures specific financial instruments of certain investments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarizes the accounting policy for fair value. Other fair value related disclosures are given in relevant notes.
(xx) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand including cheques on hand and short-term investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
(xxi) Cash dividend
The Company recognizes a liability to make cash, when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
Dividends paid/payable are recognized in the year in which the related dividends are approved by the Shareholders or Board of Directors as appropriate.
(xxii) Cash flow statement
Cash flows are presented using indirect method, whereby profit after tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from operating, investing and financing activities of the Company is segregated based on the available information.
(xxiii) Business combinations
In accordance with Ind AS 101 provisions related to first time adoption, the Company has elected to apply Ind AS accounting for business combinations prospectively from 1 April 2015. As such, Indian GAAP balances relating to business combinations entered into before that date, have been carried forward.
Business combinations involving entities under the common control are accounted for using the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts. No adjustments are made to reflect fair values, or recognize any new assets or liabilities. The only adjustments that are made are to harmonies accounting policies.
The identity of the reserves shall be preserved and shall appear in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor. Any consideration in excess of the net worth of the acquire Company is adjusted against the reserves of the acquiring Company.
(xxiv) Exceptional items
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.
(xxv) Segment Reporting
Operating segments reflect the Company''s Management structure and the way the financial information is regularly reviewed by the Company''s Chief Executive Officer (CEO). The CEO considers the business from both business and product perspective based on the dominant source, nature of risks and returns and the internal organization and Management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under unallocated revenue / expenses / assets / liabilities.
Measurement of fair values:
Description of valuation techniques used and key inputs for valuation of Investment Properties:
As at 31 March 2018 and 31 March 2017, the fair value of the Property is Rs. 3,063.78 lakhs and Rs. 2,818.13 lakhs, respectively. The valuation is based on fair value assessment performed by the Management. A valuation model as recommended by the International Valuation Standards Committee has been applied. The fair value is not based on the valuation by an independent valuer.
The Company has no restrictions on the reliability of its Investment Properties and has no contractual obligations to purchase, construct or develop Investment properties or has any plans for major repairs, maintenance and enhancements. Fair Value Hierarchy disclosures for Investment Properties have been provided in Note 38.
This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield is normally separately determined and differs from the discount rate.
Under the Discounted cash flow method, fair value is estimated using assumptions regarding the fair market value of the Property.
In this regard, the key assumptions used for fair value calculations are as follows:
- It is presumed that the vacancy durations of the Property will have no material impact on the cash flow projections, as they are immaterial
- Existing rental escalation terms will continue to exist in the future without any modification
- It is presumed that no brokerage, commission costs will be incurred on the let out of Properties
The weighted average cost of capital (WACC) is the rate that a Company is expected to pay on average to all its security holders to finance its assets. The weighted average cost of capital is calculated by Capital Asset Pricing Model (CAPM). This model takes into account the asset''s sensitivity to non-diversifiable risk (also known as systematic risk or market risk), represented by the quantity beta (p) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset.
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related relating, redevelopment, or refurbishment. The appropriate duration is typically driven by market behavior that is characteristic of the class of real property. Periodic cash flow is typically estimated as gross income, non-recoverable expenses, collection losses, lease incentives, maintenance cost, and other operating and Management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
Significant increase or decrease in estimated rental value and rent growth per annum in isolation would result in a significantly higher or lower fair value of the properties. Significant increase or decrease in long term vacancy rate and discount rate (and exit yield) in isolation would result in a significantly lower or higher fair value.
Generally, a change in the assumption made for the estimated rental value is accompanied by:
i. A directionally similar change in the rent growth per annum and discount rate (and exit yield)
ii. An opposite change in the long term vacancy rate
Mar 31, 2017
1. Corporate information
SWELECT ENERGY SYSTEMS LIMITED (''the Company'') was incorporated as a public limited company on 12 September 1994. The Company is engaged in the business of manufacturing and trading of Solar power projects, off-grid solar photovoltaic modules, based on crystalline silicon technology (c-Si), solar and wind power generation, contract manufacturing services, installation and maintenance services, sale of Solar Photovoltaic inverters and energy efficient lighting systems. The company is domiciled in India and its shares are listed on two recognized stock exchanges in India. The registered office of the company is located at Chennai.
During the year the company received approval of scheme of Amalgamation from the Hon''ble High Court of Madras for merger of one of its subsidiary, HHV Solar Technologies Limited (âHHVâ) with the Company with the appointed date of 1st April 2015. HHV was primarily engaged in the manufacturing and supply of off-grid solar photovoltaic modules based on crystalline silicon technology (c-Si). Details about the merger is explained in Note 43 to the financial statements.
The financial statements were authorized for issue in accordance with a resolution of the directors on May 25, 2017.
2. Significant accounting policies:
2.1. Basis of preparation:
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
For all periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with Indian GAAP, including accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. These standalone financial statements for the year ended 31 March 2017 are the first the Company has prepared in accordance with Ind AS. Refer to note 48 for information on how the Company adopted Ind AS.
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments).
The standalone financial statements are presented in INR and all values are rounded to the nearest lacs(INR 00,000), except when otherwise indicated
2.2. Summary of significant accounting policies:
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
- Expected to be realized or intended to sold or consumed in the normal operating cycle.
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
b. Use of Estimates
The preparation of standalone financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. Estimates include provision for employee benefits, provision for doubtful trade receivables/advances/ contingencies, provision for warranties, allowance for slow/non-moving inventories, useful life of Fixed Assets, provision for taxation, etc., during and at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
c. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes and duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods, its accessories and other traded/manufactured goods are recognized when significant risks and rewards of ownership are passed to the buyer, which generally coincides with dispatch of goods. Revenues under composite contracts comprising supply, installation and commissioning are recognized on dispatch as such services are generally considered insignificant to the contract.
The Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax/value added tax (VAT) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
Sale of power
Revenue from sale of power from renewable energy sources is recognized in accordance with the price agreed under the provisions of the power purchase agreement entered into with Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) and other customers. Such revenue is recognized on the basis of actual units generated and transmitted.
Revenue from power distribution business is accounted on the basis of billings to the customers and includes unbilled revenues accrued up to the end of accounting year. Customers are billed as per the tariff rates issued by Electricity Regulatory Commission. Interest is accounted on accrual basis on overdue bills.
Income from Sale of Renewable Energy Certificates
The revenue from sale of Renewable Energy Certificates (REC) is recognized on delivery thereof or sale of right therein, as the case may be, in accordance with the terms of contract with the respective buyer.
Income from service
Revenue from maintenance contracts and installation contracts are recognized pro-rata over the period of the contract as and when services are rendered. The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing to the Company. Service tax is excluded from revenue.
Interest income
Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest income is included under the head âother incomeâ in the statement of profit and loss. For all debt instruments measured either at amortized cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Dividend
Revenue is recognized when the Company''s right as a shareholder/unit holder to receive payment is established by the reporting date.
Rental Income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature.
d. Service Concession Arrangement
The Company constructs infrastructure used to provide a public service and operates and maintains that infrastructure (operation services) for a specified period of time.
These arrangements may include Infrastructure used in a public-to-private service concession arrangement for its entire useful life.
Under Appendix A to Ind AS 11 - Service Concession Arrangements, these arrangements are accounted for based on the nature of the consideration. The intangible asset model is used to the extent that the Company receives a right (i.e. a franchisee) to charge users of the public service. The financial asset model is used when the Company has an unconditional contractual right to receive cash or another financial asset from or at the direction of the granter for the construction services. When the unconditional right to receive cash covers only part of the service, the two models are combined to account separately for each component. If the Company performs more than one service (i.e., construction or upgrade services and operation services) under a single contract or arrangement, consideration received or receivable is allocated by reference to the relative fair values of the services delivered, when the amounts are separately identifiable.
The Company manages concession arrangements which include constructing Solar power distribution assets for distribution of electricity. The Company maintains and services the infrastructure during the concession period. These concession arrangements set out rights and obligations related to the infrastructure and the service to be provided.
The right to consideration gives rise to an intangible asset and financial receivable and accordingly, both the intangible asset and financial receivable models are applied. Income from the concession arrangements earned under the intangible asset model consists of the value of contract revenue, which is deemed to be fair value of consideration transferred to acquire the asset; and (ii) payments actually received from the users. The intangible asset is amortized over its expected useful life in a way that reflects the pattern in which the asset''s economic benefits are consumed by the Company, starting from the date when the right to operate starts to be used. Based on these principles, the intangible asset is amortized in line with the actual usage of the specific public facility, with a maximum of the duration of the concession.
Financial receivable is recorded at a fair value of guaranteed residual value to be received at the end of the concession period. This receivable is subsequently measured at amortized cost.
Any asset carried under concession arrangements is derecognized on disposal or when no future economic benefits are expected from its future use or disposal or when the contractual rights to the financial asset expire.
f. Taxes
Current income tax
Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the statement of profit and loss except to the extent it relates to items recognized directly in equity, in which case it is recognized in equity.
Current Tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company. The carrying amount of MAT is reviewed at each reporting date and the asset is written down to the extent the Company does not have convincing evidence that it will pay normal income tax during the specified period.
Deferred tax is provided using the liability method 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 recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized 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 utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and written off 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 utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized 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 realized 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 recognized outside the Statement of profit and loss is recognized outside Statement of profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly 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.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate.
g. Employee Benefits Defined Contribution Plan
Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme 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 of the prepayment.
Employee State Insurance
Contributions to Employees State Insurance Scheme are recognized as expense in the year in which the services are rendered.
Defined Benefit Plan
Gratuity
The Company makes annual contribution to a Gratuity Fund administered by trustees and managed by LIC. The Company accounts its liability for future gratuity benefits based on actuarial valuation, as at the Balance Sheet date, determined every year using the Projected Unit Credit method. Actuarial gains/losses are immediately recognized in retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not re-classified to profit or loss in subsequent periods. The defined benefit obligation recognized in the balance sheet represents the present value of the Defined Benefit Obligation less the Fair Value of Plan Assets out of which the obligations are expected to be settled.
Long Term Compensated Absences
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Short Term Employee Benefits
Short term employee benefits includes short term compensated absences which is recognized based on the eligible leave at credit on the Balance Sheet date, and the estimated cost is based on the terms of the employment contract.
h. Foreign Currency Transactions and Translations:
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Initial recognition
Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at the average rates that closely approximate the rate at the date of the transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Treatment of Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ Liability
The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
i. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares, if any.
j. Property, Plant and Equipment and intangible fixed assets
The Company has elected to adopt the carrying value of Property, Plant and Equipment and intangible fixed assets under the Indian GAAP as on 31st March 2015, as the deemed cost for the purpose of transition to IND AS.
Tangible and intangible fixed assets are stated at original cost net of tax/duty credit availed, less accumulated depreciation/ amortization and impairment losses, if any. The cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the year during which such expenses are incurred.
Gains and losses arising from derecognition of tangible assets and intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of the profit and loss when the asset is derecognized.
The Company identifies and determines cost of each component/part of the asset separately, if the component/part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
Capital Work-in-Progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost and attributable interest. Once it has becomes available for use, their cost is re-classified to appropriate caption and subjected to depreciation.
l. Useful lives/depreciation rates
Considering the applicability of Schedule II, the management has estimated the useful lives and residual values of all its fixed assets. The management believes that the depreciation rates currently used fairly reflect its estimate of the useful life and residual values of fixed assets, though these rates in certain cases are different from the lives prescribed under Schedule II. The management has estimated, supported by independent assessment by professionals, the useful lives of the following classes of assets.
The useful lives of certain Solar Plant and Machinery to 25 years, respectively. These lives are higher than those indicated in Schedule II.
Leasehold improvements are amortized using the straight-line method over their estimated useful lives (5 years) or the remainder of primary lease period, whichever is lower.
Intangible assets are amortized using the straight-line method over a period of five years.
m. Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
n. Investment Properties
The Company has elected to adopt the carrying value of Investment property under the Indian GAAP as on 31st March 2015, as the deemed cost for the purpose of transition to IND AS.
Investment property represents property (land or a buildingâor part of a buildingâor both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
The cost includes the cost of replacing parts if the recognition criteria are met. When significant parts of the investment property are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in Statement of profit and loss as incurred.
Depreciation on building classified as investment property has been provided on the straight-line method based on the useful life as prescribed in Schedule II to the Companies Act, 2013. These are based on the Company''s estimate of their useful lives taking into consideration technical factors.
Though the Company measures investment property using cost basis measurement, the fair value of investment property is disclosed in the notes. Fair values are determined on an annual evaluation performed by an accredited external independent valuer applying a valuation model recommended by an independent valuer.
Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit from its disposal.
The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the statement of profit and loss in the period of derecognition.
o. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
p. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Leases where, the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
q. Provisions and Contingencies
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably The Company does not recognize a contingent liability but discloses its existence in the financial statements.
r. Provision for warranty
Provisions for warranty related costs are recognized when the product is sold or service provided. Provision is based on historical experience. The estimate of such warranty related costs is revised annually. A provision is recognized for expected warranty claims on product sold, based on past experience of the levels of repairs and returns. Assumptions used to calculate the provision for warranties are based on the current sales levels and current information available about returns based on the average warranty period for the product portfolio of the Company.
s. Financial instruments:
(i) Financial Assets:
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Financial assets are classified, at initial recognition, as financial assets measured at fair value or as financial assets measured at amortized cost.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified in two broad categories:
- Financial assets at fair value
- Financial assets at amortized cost
Where assets are measured at fair value, gains and losses are either recognized entirely in the statement of profit and loss (i .e. fair value through profit or loss), or recognized in other comprehensive income (i.e. fair value through other comprehensive income).
A financial asset that meets the following two conditions is measured at amortized cost (net of any write down for impairment) unless the asset is designated at fair value through profit or loss under the fair value option.
- Business model test: The objective of the Company''s business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realize its fair value changes).
- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option.
- Business model test: The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
- Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Even if an instrument meets the two requirements to be measured at amortized cost or fair value through other comprehensive income, a financial asset is measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ''accounting mismatch'') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
All other financial asset is measured at fair value through profit or loss.
All equity investments are measured at fair value in the balance sheet, with value changes recognized in the statement of profit and loss, except for those equity investments for which the entity has elected to present value changes in ''other comprehensive income''.
If an equity investment is not held for trading, an irrevocable election is made at initial recognition to measure it at fair value through other comprehensive income with only dividend income recognized in the statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s statement of financial position) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement and either;
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Investment in associates, joint venture and subsidiaries
The Company has accounted for its investment in subsidiaries and associates, joint venture at cost.
Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL) model to the following:
- Financial assets measured at amortized cost;
- Financial assets measured at fair value through other comprehensive income (FVTOCI);
Expected credit losses are measured through a loss allowance at an amount equal to:
- the 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
- full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
The Company follows ''simplified approach'' for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables; and
- All lease receivables
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-months ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12-months ECL.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
(ii) Financial liabilities:
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
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.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.
Gains and losses are recognized in profit or loss when the liabilities are derecognised as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. 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 derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit and loss.
(iii) Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
t. Fair value measurement
The Company measures specific financial instruments of certain investments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarizes the accounting policy for fair value. Other fair value related disclosures are given in relevant notes.
u. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand including cheques on hand and short-term investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
v. Cash dividend
The Company recognizes a liability to make cash, when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
Dividends paid/payable are recognized in the year in which the related dividends are approved by the Shareholders or Board of Directors as appropriate.
w. Cash flow statement
Cash flows are presented using indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from operating, investing and financing activities of the Company is segregated based on the available information.
x. Business combinations :
In accordance with Ind AS 101 provisions related to first time adoption, the Company has elected to apply Ind AS accounting for business combinations prospectively from 1 April 2015. As such, Indian GAAP balances relating to business combinations entered into before that date, have been carried forward.
Business combinations involving entities under the common control are accounted for using the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts. No adjustments are made to reflect fair values, or recognize any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies.
The identity of the reserves shall be preserved and shall appear in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor. Any consideration in excess of the net worth of the acquire company is adjusted against the reserves of the acquiring company.
y. Exceptional items:
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.
z. Segment Reporting
The Executive Management Committee monitors the operating results of its business as a single primary segment âSolar related servicesâ for the purpose of making decisions about resource allocation and performance assessment.
The business of the Company falls under a single primary segment i.e ''Solar and related services'' for the purpose of Ind AS 108.
Mar 31, 2015
(a) Basis of preparation
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act, 2013 read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The financial
statements have been prepared on an accrual basis under the historical
cost convention.
The accounting policies, adopted in the preparation of financial
statements are, except when disclosed otherwise consistent consistent
with those used in the previous years.
(c) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon management's
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to the accounting estimates
is recognised prospectively in the current and future years.
(d) Tangible and intangible fixed assets
Tangible and intangible fixed assets are stated at cost, less
accumulated depreciation/amortisation and impairment losses, if any.
The cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Intangible assets comprise of goodwill and
computer software.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day- to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the year during which
such expenses are incurred.
Gains and losses arising from derecognition of tangible assets and
intangible assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are
recognised in the statement of the profit and loss when the asset is
derecognised.
(e) Depreciation and amortization:
Depreciation is provided using the straight line method as per the
useful lives of the assets estimated by the management as follows:
Building 30 years
Plant and machinery (other than Windmills & Solar Plant) 15 years
Windmills (included under Plant and Machinery) 22 years
Solar Plant 25 years
Office equipment 5 years
Electrical equipment 10 years
Computers 3 years
Furniture and fittings 10 years
Vehicles (Motor cars / Motor Vehicles) 8 years / 10 years
Useful lives / depreciation rates
Till the year ended 31 March 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. From the
current year Schedule VI has been replaced by Schedule II to the
Companies Act, 2013. Schedule II to the Companies Act 2013 prescribes
useful lives for fixed assets which, in many cases, are different from
lives prescribed under the erstwhile Schedule XIV. However, Schedule II
allows Companies to use higher/ lower useful lives and residual values
if such useful lives and residual values can be technically supported
and justification for difference is disclosed in the financial
statements.
Considering the applicability of Schedule II, the management has
reestimated the useful lives and residual values of all its fixed
assets. The management believes that the depreciation rates currently
used fairly reflect its estimate of the useful lives and residual
values of fixed assets, though these rates in certain cases are
different from the lives prescribed under Schedule II. As a result of
change in the estimated useful life the Profit before taxes for the
current year is lower by Rs.4,391,061.
The management, supported by independent assessment by professionals
has estimated, the useful lives of the following classes of assets.
The useful lives of certain Solar Plant and Machinery to 25 years,
respectively. These lives are higher than those indicated in schedule
II.
Leasehold improvements are amortised using the straight-line method
over their estimated useful lives (5 years) or the remainder of primary
lease period, whichever is lower.
Intangible assets are amortised using the straight-line method over a
period of five years.
(f) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
(g) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. On initial
recognition, all investments are measured at cost. The cost comprises
purchase price and directly attributable acquisition charges such as
brokerage, fees and duties.
Current investments are carried in the financial statement at the lower
of cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of long-term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(h) Inventories
Inventories are valued as follows:
Raw-materials, stores and spares
Lower of cost and net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress,goods :
finished Lower of cost and net realisable value. Cost includes direct
materials and labour and a proportion of manufacturing overheads based
on normal operating capacity. Cost of finished goods includes excise
duty. Cost is determined on a weighted average basis.
Traded goods
Lower of cost and net realisable value. Cost includes cost of purchase
and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on a first in first out basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(i) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
Revenue from sale of goods, its accessories and other
traded/manufactured goods are recognised when significant risks and
rewards of ownership are passed to the buyer, which generally coincides
with dispatch of goods. Revenues under composite contracts comprising
supply, installation and commissioning are recognised on dispatch as
such services are generally considered insignificant to the contract.
The Company collects sales taxes and valued added taxes (VAT) on behalf
of the Government and, therefore, these are not economic benefits
flowing to the Company. Hence they are excluded from the revenue.
Excise duty deducted from turnover (gross) is the amount that is
included in the amount of turnover (gross) and not the entire amount of
liability arising during the year.
Sale of power
Income from sale of power
Revenue from sale of power from renewable energy sources is recognised
in accordance with the price agreed under the provisions of the power
purchase agreement entered into with Tamilnadu Generation and
Distribution Corporation Limited (TANGEDCO) and other customers. Such
revenue is recognised on the basis of actual units generated and
transmitted.
Income from Sale of Renewable Energy Certificates
The revenue from sale of Renewable Energy Certificates (REC) is
recognised on delivery thereof or sale of right therein, as the case
may be, in accordance with the terms of contract with the respective
buyer.
Income from service
Revenue from maintenance contracts and installation contracts are
recognised pro-rata over the period of the contract as and when
services are rendered. The Company collects service tax on behalf of
the government and, therefore, it is not an economic benefit flowing to
the Company. Service tax is excluded from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head "other income" in the statement of profit
and loss.
Dividend
Revenue is recognised when the Company's right as a shareholder/unit
holder to receive payment is established by the reporting date.
(j) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting Company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset / liability
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(k) Retirement and other employee benefits
(i) Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognises
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the deficit payable to the scheme is
recognised 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
recognised as an asset to the extent of the pre-payment.
(ii) Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year. Actuarial gains / losses
are immediately taken to statement of profit and loss, and are not
deferred.
(iii) Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year end. Actuarial gains/losses are immediately taken to
the statement of profit and loss and are not deferred. The Company
presents the leave as a current liability in the balance sheet; to the
extent it does not have an unconditional right to defer its settlement
for 12 months after the reporting date.
(l) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only
to the extent that there is a reasonable certainty that sufficient
future taxable income will be available against which such deferred tax
assets can be realised. In situations where the Company has unabsorbed
depreciation or carry forward losses, all deferred tax assets are
recognised only if there is virtual certainity supported by convincing
evidence that they can be realised against the future taxable profits.
At each balance sheet date the Company reassesses unrecognised deferred
tax assets. It recognises unrecognised deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the company recognises MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement."
The company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the company does
not have convincing evidence that it will pay normal tax during the
specified period.
(m) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares, if
any.
(n) Leases
Leases where, the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognised in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognised as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the
statement of profit and loss.
(o) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Provision for warranty:
Provisions for warranty related costs are recognised when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty related costs is revised
annually. A provision is recognised for expected warranty claims on
product sold, based on past experience of the levels of repairs and
returns. Assumptions used to calculate the provision for warranties are
based on the current sales levels and current information available
about returns based on the average warranty period for the product
portfolio of the Company.
(p) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non-
occurrence of one or more uncertain future events beyond the control of
the Company or a present obligation that is not recognised because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognised because it
cannot be measured reliably. The Company does not recognise a
contingent liability but discloses its existence in the financial
statements.
(q) Cash and Cash equivalents
Cash and Cash equivalents for the purpose of cash flow statement
comprise cash at bank and on hand, including cheques on hand and
short-term investments with an original maturity of three months or
less.
(r) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost / inventory of the respective asset. All other
borrowing costs are expended in the period they occur. Borrowing costs
consists of interest and other costs that an entity incurs in
connection with the borrowing of funds.
(s) Cash flow statement
Cash flows are reported using the indirect method, whereby net 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 items associated with investing or financing cash flows.
The cash flows from regular revenue generating, investing and financing
activities of the Company are segregated.
Mar 31, 2014
(a) Basis of preparation
The financial statements of the Company have been prepared to comply in
all material respects with the accounting principles generally accepted
in India, including the Accounting Standards notifed under the
Companies Act, 1956 read with General Circular 8/2014 dated 4 April
2014 issued by the Ministry of Corporate Affairs. The financial
statements have been prepared on an accrual basis under the historical
cost convention.
The accounting policies, in all material respects, have been
consistently applied by the Company and are consistent with those used
in the previous years.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon management''s
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to the accounting estimates
is recognised prospectively in the current and future years.
(c) Tangible and intangible fixed assets
Tangible and intangible fixed assets are stated at cost, less
accumulated depreciation/amortisation and impairment losses, if any.
The cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Intangible assets comprise of goodwill and
computer software.
Subsequent expenditure related to an item of fixed asset is added to its
book value only if it increases the future benefits from the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to- day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of profit and loss for the year during which such expenses are
incurred.
Gains and losses arising from derecognition of tangible assets and
intangible assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are
recognised in the statement of the profit and loss when the asset is
derecognised.
(d) Depreciation and amortisation
Depreciation is provided using the straight line method as per the
useful lives of the assets estimated by the management, or at the rates
prescribed under schedule XIV of the Companies Act, 1956 whichever is
higher as follows:
Building 3.34%
Plant and machinery (other than Windmills) 4.75%
Windmills (included under Plant and Machinery) 10.00%
office equipment, electrical etc 4.75%
Computers 16.21%
Furniture and fttings 6.33%
Vehicles 9.50%
Assets individually costing Rs. 5,000 or less are fully depreciated in
the year of purchase.
Leasehold improvements are amortised using the straight-line method
over their estimated useful lives (5 years) or the remainder of primary
lease period, whichever is lower.
Intangible assets are amortised using the straight-line method over a
period of five years.
(e) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that refects
current market assessments of the time value of money and risks Specific
to the asset. After impairment, depreciation is provided on the revised
carrying amount of the assets over its remaining useful life.
(f) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classifed as current investments. All other
investments are classifed as long-term investments. On initial
recognition, all investments are measured at cost. The cost comprises
purchase price and directly attributable acquisition charges such as
brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of long-term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(g) Inventories
Inventories are valued as follows:
Raw-materials, stores and spares
Lower of cost and net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the fnished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress, fnished goods
Lower of cost and net realisable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of fnished goods includes excise duty. Cost
is determined on a weighted average basis.
Traded goods
Lower of cost and net realisable value. Cost includes cost of purchase
and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on a frst in frst out basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(h) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will fow to the Company and the revenue can be
reliably measured. The following Specific recognition criteria must also
be met before revenue is recognised:
Sale of goods
Revenue from sale of goods, its accessories and other
traded/manufactured goods are recognised when significant risks and
rewards of ownership are passed to the buyer, which generally coincides
with despatch of goods. Revenues under composite contracts comprising
supply, installation and commissioning are recognised on despatch as
such services are generally considered insignificant to the contract.
The Company collects sales tax and valued added taxes (VAT) on behalf
of the Government and therefore, these are not economic benefits fowing
to the Company. Hence they are excluded from revenue.
Excise duty deducted from turnover (gross) is the amount that is
included in the amount of turnover (gross) and not the entire amount of
liability arising during the year.
Sale of power
Income from sale of power
Revenue from sale of power from renewable energy sources is recognised
in accordance with the price agreed under the provisions of the power
purchase agreement entered into with Tamilnadu Generation and
Distribution Corporation Limited (TANGEDCO). Such revenue is recognised
on the basis of actual units generated and transmitted.
Income from Sale of Renewable Energy Certifcates
The revenue from sale of Renewable Energy Certifcates (REC) is
recognised on delivery thereof or sale of right therein, as the case
may be, in accordance with the terms of contract with the respective
buyer.
Income from service
Revenue from maintenance contracts are recognised pro-rata over the
period of the contract as and when services are rendered. The Company
collects service tax on behalf of the government and, therefore, it is
not an economic benefit fowing to the Company. Service tax is excluded
from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head "other income" in the statement of profit and
loss.
Dividend
Revenue is recognised when the Company''s right as a shareholder/unit
holder to receive payment is established by the reporting date.
(i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of forward
exchange contract is recognised as income or as expense for the year.
(j) Retirement and other employee benefits
i. Retirement benefit in the form of provident fund is a Defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognises
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the defcit payable to the scheme is
recognised 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
recognised as an asset to the extent of the pre-payment.
ii. Gratuity liability is a Defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.Actuarial gains / losses
are immediately taken to statement of profit and loss and are not
deferred.
iii. Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The Company presents the leave
as a current liability in the balance sheet; to the extent it does not
have an unconditional right to defer its settlement for 12 months after
the reporting date.
(k) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes refects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only to the extent
that there is a reasonable certainty that suffcient future taxable
income will be available against which such deferred tax assets can be
realised.In situations where the Company has unabsorbed depreciation or
carry forward losses, all deferred tax assets are recognised only if
there is virtual certainity supported by convincing evidence that they
can be realised against the future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that suffcient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that suffcient future taxable
income will be available against which deferred tax asset can be
realised. Any such write down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
suffcient future taxable income will be available.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognises MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to be
carried forward. In the year in which the company recognises MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the company does not have
convincing evidence that it will pay normal tax during the specified
period.
(l) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares, if any.
(m) Leases
Leases where, the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classifed as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classifed as operating
leases. Assets subject to operating leases are included in fixed assets.
Lease income on an operating lease is recognised in the statement of
profit and loss on a straight-line basis over the lease term. Costs,
including depreciation, are recognised as an expense in the statement
of profit and loss. Initial direct costs such as legal costs, brokerage
costs, etc. are recognised immediately in the statement of profit and
loss.
(n) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to refect the current best
estimates.
Provision for warranty:
Provisions for warranty related costs are recognised when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty related costs is revised
annually. A provision is recognised for expected warranty claims on
product sold, based on past experience of the levels of repairs and
returns. Assumptions used to calculate the provision for warranties are
based on the current sales levels and current information available
about returns based on the average warranty period for the product
portfolio of the Company.
(o) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non-
occurrence of one or more uncertain future events beyond the control of
the Company or a present obligation that is not recognised because it
is not probable that an outflow of resources will be required tosettle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognised because it
cannot be measured reliably. The Company does not recognise a
contingent liability but discloses its existence in the financial
statements.
(p) Cash and Cash equivalents
Cash and Cash equivalents for the purpose of cash fow statement
comprise cash at bank and on hand, including cheques on hand and
short-term investments with an original maturity of three months or
less.
(q) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expended in the period they occur. Borrowing costs consists of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
(r) Cash fow statement
Cash flows are reported using the indirect method, whereby net 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 items associated with investing or fnancing cash flows.
The cash flows from regular revenue generating, investing and fnancing
activities of the Company are segregated.
Mar 31, 2013
(a) Basis of preparation
The financial statements of the Company have been prepared to comply in
all material respects with the accounting principles generally accepted
in India, including mandatory Accounting Standards notified under the
Companies (Accounting Standard) Rules, 2006 (as amended) under the
historical cost convention and on an accrual basis. The accounting
policies, in all material respects, have been consistently applied by
the Company and are consistent with those used in the previous years.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon management''s
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to accounting estimates is
recognized prospectively in the current and future years.
(c) Tangible and intangible fixed assets
Tangible and intangible fixed assets are stated at cost, less
accumulated depreciation/amortisation and impairment losses, if any.
The cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Intangible assets comprise of goodwill and
computer software.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day- to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains and losses arising from derecognition of tangible and intangible
assets are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognized in the
statement of the profit and loss when the asset is derecognised.
(d) Depreciation and amortisation
Depreciation is provided using the Straight line method as per the
useful lives of the assets estimated by the management, or at the rates
prescribed under schedule XIV of the Companies Act, 1956 whichever is
higher as follows:
Assets individually costing Rs. 5,000 or less are fully depreciated in
the year of purchase.
Leasehold improvements are amortised using the straight-line method
over their estimated useful lives (5 years) or the remainder of primary
lease period, whichever is lower.
Lease hold land is amortised on a straight-line basis over the primary
lease period of 99 years.
Intangible assets are amortised using the straight-line method over a
period of five years.
(e) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
(f) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. On initial
recognition, all investments are measured at cost. The cost comprises
purchase price and directly attributable acquisition charges such as
brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of long term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(g) Inventories
Inventories are valued as follows:
Raw-materials, stores and spares Lower of cost and net realisable
value. However, materials and other items held for use in the
production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost is determined on a weighted average basis.
Work-in-progress, finished goods Lower of cost and net realisable
value. Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined on a weighted
average basis.
Traded goods Lower of cost and net realisable value. Cost includes cost
of purchase and other costs incurred in bringing the inventories to
their present location and condition. Cost is determined on a first in
first out basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(h) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
Revenue from sale of goods, its accessories and other
traded/manufactured goods are recognised when significant risks and
rewards of ownership are passed to the buyer, which generally coincides
with dispatch of goods. Revenues under composite contracts comprising
supply, installation and commissioning are recognised on dispatch as
such services are generally considered insignificant to the contract.
The Company collects sales taxes and valued added taxes (VAT) on behalf
of the Government and, therefore, these are not economic benefits
flowing to the Company. Hence they are excluded from revenue.
Excise duty deducted from turnover (gross) is the amount that is
included in the amount of turnover (gross) and not the entire amount of
liability arising during the year.
Sale of power
Income from sale power
Revenue from sale of power from renewable energy sources is recognised
in accordance with the price agreed under the provisions of the power
purchase agreement entered into with Tamilnadu Generation and
Distribution Corporation Limited (TANGEDCO). Such revenue is recognised
on the basis of actual units generated and transmitted.
Income from Sale of Renewable Energy Certificates
The revenue from Renewable Energy Credit (REC) is recognised on
delivery thereof or sale of right therein, as the case may be, in terms
of the contract with the respective buyer.
Income from service
Revenue from maintenance contracts are recognised pro-rata over the
period of the contract as and when and services are rendered. The
Company collects service tax on behalf of the government and,
therefore, it is not an economic benefit flowing to the Company.
Service tax is excluded from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head "other income" in the statement of profit
and loss.
Dividend
Revenue is recognised when the Company''s right as a shareholder/unit
holder to receive payment is established by the reporting date.
(i) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(j) Retirement and other employee benefits
i. Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognises
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the deficit payable to the scheme is
recognised 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
recognised as an asset to the extent of the pre-payment.
ii. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year. Actuarial gains / losses
are immediately taken to statement of profit and loss and, are not
deferred.
iii. Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The Company presents the leave
as a current liability in the balance sheet, to the extent it does not
have an unconditional right to defer its settlement for 12 months after
the reporting date.
(k) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised. In situations where the Company has unabsorbed depreciation
or carry forward losses, all deferred tax assets are recognised only if
there is virtual certainity supported by convincing evidence that they
can be realised against the future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
(l) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares, if
any.
(m) Leases
Leases where, the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognised in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the
statement of profit and loss.
(n) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Provision for warranty:
Provisions for warranty-related costs are recognised when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty-related costs is revised
annually. A provision is recognised for expected warranty claims on
product sold, based on past experience of the levels of repairs and
returns. Assumptions used to calculate the provision for warranties are
based on the current sales levels and current information available
about returns based on the average warranty period for the product
portfolio of the Company.
(o) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
financial statements.
(p) Cash and Cash equivalents
Cash and Cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand, including cheques in hand and
short-term investments with an original maturity of three months or
less.
(q) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expended in the period they occur. Borrowing costs consists of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
(r) Cash flow statement
Cash flows are reported using the indirect method, whereby net 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 items associated with investing or financing cash flows.
The cash flows from regular revenue generating, investing and financing
activities of the Company are segregated.
Mar 31, 2012
(a) Basis of preparation and presentation of financial statement
The financial statements of the Company have been prepared to comply in
all material respects with the accounting principles generally accepted
in India, including mandatory Accounting Standards notified under the
Companies (Accounting Standard) Rules, 2006 (as amended) under the
historical cost convention and on an accrual basis. The accounting
policies, in all material respects, have been consistently applied by
the Company and are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon management's
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to accounting estimates is
recognized prospectively in current and future years.
(c) Tangible and Intangible fixed assets
Tangible and intangible fixed assets are stated at cost, less
accumulated depreciation/amortisation and impairment loss if any. Cost
comprises the purchase price and any attributable cost of bringing the
asset to its working condition for its intended use.
Leasehold improvements are amortized using the straight-line method
over their estimated useful lives (5 years) or the remainder of primary
lease period, whichever is lower.
Leasehold land is amortized on a straight line basis over the primary
lease period of 99 years.
Intangible assets comprising goodwill and software are amortized using
the straight-line method over a period of five years.
(e) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
(f) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
(g) Inventories
Inventories are valued as follows:
Raw-materials, stores Lower of cost and net realizable value. However,
materials and other items held for use in the production of and spares
inventories are not written down below cost if the finished products in
which they will be incorporated are expected to be sold at or above
cost. Cost is determined on a weighted average basis.
Work-in-progress, Lower of cost and net realizable value. Cost includes
direct materials and labour and a proportion of manufacturing finished
goods and overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined traded goods on
a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(h) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Sales of UPS systems, its accessories and other traded/manufactured
goods are recognized when significant risks and rewards of ownership
are passed to the buyer, which generally coincides with dispatch of
goods. Revenues under composite contracts comprising supply,
installation and commissioning are recognized on dispatch as such
services are generally considered insignificant to the contract. Sales
are net of excise duty and sales tax.
Excise Duty deducted from turnover (gross) is the amount that is
included in the amount of turnover (gross) and not the entire amount of
liability arising during the year.
Service income
Service income is recognized pro-rata over the period of the contract
with customers.
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividend
Revenue is recognized when the company's right as a shareholder/unit
holder to receive payment is established by the balance sheet date.
(i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(j) Retirement and other employee benefits
i. Retirement benefit in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Statement
of Profit and Loss for the year when the contributions to the
respective funds are due. There are no other obligations other than the
contribution payable to the regional provident fund.
ii. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
iii. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation at the end of each financial year. The actuarial
valuation is done as per projected unit credit method.
iv. Actuarial gains / losses are immediately taken to statement of
profit and loss and, are not deferred.
(k) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised. In situations where the Company has unabsorbed depreciation
or carry forward losses, all deferred tax assets are recognised only if
there is virtual certainity supported by convincing evidence that they
can be realised against the future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
The Company claims tax holiday benefits under Section 80-IB and Section
80-IC of the Income Tax Act, 1961 with respect to certain undertakings.
Deferred tax assets or liabilities relating to such undertakings are
recognised in these financial statements for the future tax
consequences attributable to differences between taxable income and
accounting income for the year, to the extent that such differences are
not expected to reverse within the tax holiday period.
(l) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares, if
any.
(m) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of profit and loss on a straight-line basis over the
lease term.
(n) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Provision for warranty:
Provision is recognized for expected warranty claims on products sold
which are under warranty, based on past experience of level of repairs
and returns. It is expected that most of this cost would be incurred
over the next five years from the balance sheet date. Assumption used
to calculate the provision for warranties are based on current sales
level and current information available about returns based on the
warranty period for all products sold.
(o) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(p) Cash and Cash equivalents
Cash and Cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand, including cheques in hand and short-
term investments with an original maturity of three months or less.
(q) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expended in the period they occur. Borrowing costs consists of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
Mar 31, 2011
1. Nature of Operations
Numeric Power Systems Limited ('the Company') was incorporated as a
public limited company on September 12, 1994. The Company is engaged in
the manufacture, sale and trading of Uninterruptible Power Supply
('UPS') systems and accessories and has its manufacturing facilities at
Pondicherry, Chennai, Salem and Himachal Pradesh. The Company also
provides maintenance and other after sale services in respect of UPS
systems through a network of branches situated across the country.
2. Statement of Significant Accounting Policies
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements
have been prepared under the historical cost convention on accrual
basis. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon management's
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to accounting estimates is
recognized prospectively in current and future years.
(c) Fixed assets and Intangible assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment loss if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
Assets individually costing Rs.5,000 or less are fully depreciated in
the year of purchase.
Leasehold improvements are amortized using the straight-line method
over their estimated useful lives (5 years) or the remainder of primary
lease period, whichever is lower.
Intangible assets comprising goodwill and software are amortized using
the straight-line method over a period of five years.
(d) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset. After impairment, depreciation is provided
on the revised carrying amount of the assets over its remaining useful
life.
(e) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise
a decline other than temporary in the value of long term investments.
(f) Inventories
Inventories are valued as follows:
Raw materials, stores and spares
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty. Cost
is determined on a weighted average basis
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(g) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Sales of UPS systems and accessories are recognized when significant
risks and rewards of ownership are passed to the buyer, which generally
coincides with dispatch of goods. Revenues under composite contracts
comprising supply, installation and commissioning are recognized on
dispatch as such services are generally considered insignificant to the
contract. Sales are net of excise duty and sales tax. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arising during the year.
Service income
Service income is recognized pro-rata over the period of the contract
with customers.
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the Company's right as a shareholder / unit
holder to receive payment is established by the balance sheet date.
Dividend from subsidiaries is recognised even if same are declared
after the balance sheet date but pertains to period on or before the
date of balance sheet as per the requirement of schedule VI of the
Companies Act, 1956.
(h) Retirement and other employee benefits
i. Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the regional provident fund.
ii. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
iii. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation at the end of each financial year. The actuarial
valuation is done as per projected unit credit method.
iv. Actuarial gains / losses are immediately taken to profit and loss
account and are not deferred.
(i) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
The Company claims tax holiday benefits under Section 80-IB, Section
80IC and Section 10-B of the Income Tax Act, 1961 with respect to
certain undertakings. Deferred tax assets or liabilities relating to
such undertakings are recognised in these financial statements for the
future tax consequences attributable to differences between taxable
income and accounting income for the year, to the extent that such
differences are not expected to reverse within the tax holiday period.
(j) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. The
weighted average number of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares, if
any.
(k) Leases
Leases where the lesser effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
(l) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Provision is recognized for expected warranty claims on products sold
during the last two years, based on past experience of level of repairs
and returns. It is expected that most of this cost will be paid in the
next two to five years of the balance sheet date. Assumption used to
calculate the provision for warranties are based on current sales level
and current information available about returns based on the two year
warranty period for all products sold.
(m) Cash and Cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
(n) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expended in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
Mar 31, 2010
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Notified accounting standard by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on accrual basis. The accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities on the date
of the financial statements and reported amounts of income and expenses
during the year. Although these estimates are based upon managements
best knowledge of current events and actions, actual results could
differ from these estimates. Any revision to accounting estimates is
recognized prospectively in current and future years.
(c) Fixed assets and Intangible assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment loss if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
(d) Depreciation and amortisation
Depreciation is provided using the Straight Line Method as perthe
useful lives of the assets estimated by the management, or at the rates
prescribed under schedule XIV of the Companies Act, 1956 whichever is
higher as follows:
Building 3.34%
Plant and machinery (Other than Windmills) 4.75%
Windmills (included under Plant & Machinery) 10.00%
Office equipment, electrical etc 4.75%
Computers 16.21%
Furniture and fittings 6.33%
Vehicles 9.50%
Assets individually costing Rs. 5,000 or less are fully depreciated in
the year of purchase.
Leasehold improvements are amortized over their estimated useful lives
(5 years) or the remainder of primary lease period, whichever is lower.
Intangible assets comprising goodwill and software are amortized using
the straight-line method over a period of five years.
(e) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
(f) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
(g) Inventories
Inventories are valued as follows:
Raw materials, stores and spares Lower of cost and net realizable
value. However, materials and
other items held for use in the production of inventories are not
written down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress and finished Lower of cost and net realizable value.
Cost includes direct
goods materials and labour and a proportion of manufacturing
overheads based on normal operating capacity. Cost of finished goods
includes excise duty. Cost is determined on a weighted average basis
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
(h) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Sales of UPS systems and accessories are recognized when significant
risks and rewards of ownership are passed to the buyer, which generally
coincides with dispatch of goods. Revenues under composite contracts
comprising supply, installation and commissioning are recognized on
dispatch as such services are generally considered insignificant to the
contract. Excise Duty deducted from turnover (gross) is the amount that
is included in the amount of turnover (gross) and not the entire amount
of liability arised during the year.
Service income
Service income is recognized pro-rata over the period of the contract
with customers.
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the Companys right as a shareholder / unit
holder to receive payment is established by the balance sheet date.
Dividend from subsidiaries is recognised even if same are declared
after the balance sheet date but pertains to period on or before the
date of balance sheet as per the requirement of schedule VI of the
Companies Act, 1956.
(i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting companys monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(j) Retirement and other employee benefits
i. Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the regional provident fund.
ii. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
Hi. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
iv. Actuarial gains / losses are immediately taken to profit and loss
account and are not deferred.
(k) Income taxes
Provision for income tax is made for current and deferred taxes.
Provision for current income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets, other than those arising from undertakings enjoying tax
holiday benefits, are recognised and carried forward only to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The Company claims tax holiday benefits under Section 80-IB, Section
80IC and Section 10-B of the Income Tax Act, 1961 with respect to
certain undertakings. Deferred tax assets or liabilities relating to
such undertakings are recognised in these financial statements for the
future tax consequences attributable to differences between taxable
income and accounting income for the year, to the extent that such
differences are not expected to reverse within the tax holiday period.
(l) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. The
weighted average number of equity shares outstanding during the period
are adjusted for bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares, if
any.
(m) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
(n) Provision
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Provision is recognized for expected warranty claims on products sold
during the last two years, based on past experience of level of repairs
and returns. It is expected that most of this cost will be incurred in
the next two to five years of the balance sheet date. Assumption used
to calculate the
provision for warranties are based on current sales level and current
information available about returns based on the two year warranty
period for all products sold.
(o) Cash and Cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
(n) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
There is no overdue amount payable to Micro, Small and Medium
Enterprises as defined under The Micro Small and Medium enterprises
Development Act, 2006. Further, the Company has not paid any interest
to any Micro, Small and Medium Enterprises during the year.
Termination of joint venture agreement with Socomec SA, France
The Company has terminated the Joint Venture agreement with Socomec SA,
France with effect from April 10, 2008 and transferred its shares in
the Socomec - Numeric UPS Private Limited (JV Company) to Socomec SA,
France in the previous year.
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