Significant Accounting Policies forming part of Financial Statements for the year ended 31st March, 2015 1 SIGNIFICANT ACCOUNTING POLICIES a) Nature of Operations The Company is engaged in the business of real estate/ real estate development and incidental services. b) General The financial statements are brpared under the historical cost convention, on the accounting principles of a going concern. Accounting Policies not specifically referred to otherwise are consistent and in consonance with the applicable accounting standards brscribed by under section 133 of the Companies Act, 2013 ('the Act') read with Rule 7 of the Companies (Accounts) Rules, 2014 the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI) to the extent applicable. All expenses and income to the extent ascertainable with reasonable certainty are accounted for on accrual basis. The brparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively. All assets and liabilities have been classified as current and non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. c) Revenue recognition i) Revenue for real estate development/sale The Company follows completed project method of accounting. Direct/Allocable expenses incurred during the year are debited to work- in-progress account. The revenue is accounted for as and when the significant risks and rewards of ownership of the units in real estate have passed or deemed to have passed to the buyer and the Projects get completed or substantially completed, to the extent that the economic benefits will flow to the Company and the revenue can be reliably measured. ii) Rent Rental Income is recognized on a time proportion basis as per the contractual obligations agreed with the respective tenant. iii) Interest Interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. iv) Dividend Dividend Income is recognised when the shareholders' right to receive payment is established by the balance sheet date. v) Profit /Loss from Partnership Firms/LLP Share of profit / loss from firms in which the Company is a partner is accounted for in the financial period ending on (or before) the date of the balance sheet on the basis of audited accounts and as per the terms of the respective partnership deed. vi) Maintenance Services Revenue in respect of maintenance services is recognised on an accrual basis, in accordance with the terms of the respective contract. vii) Project Management Services Revenue in respect of Project Management services is recognised on an accrual basis, in accordance with the terms of the respective agreement. d) Inventories Inventories comprise of Land and development rights, Construction materials, Work-in- progress, completed unsold flats/units. These are valued at lower of the cost or net realizable value. Construction Work in Progress are valued as follows: Land and development rights Land and development rights (including development cost) are valued at lower of cost and net realizable value. Costs include land acquisition cost and initial development cost. Construction materials Construction materials are valued at cost if the completed unsold flats/units in which they will be incorporated are expected to be sold at or above cost otherwise lower of cost and net realizable value. Cost is determined on a weighted average basis. Work-in-progress (Land/ Real Estate under development) Work-in-progress is valued at cost if the completed unsold flats/units are expected to be sold at or above cost otherwise at lower of cost and net realizable value. Cost includes direct expenditure relating to construction activity (including land cost) and indirect expenditure (including borrowing costs) during the construction period to the extent the expenditure is related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is neither related to the construction activity nor is incidental thereto is charged to the Statement of profit and loss. Completed unsold flats/units Lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business; less estimated costs of completion (wherever applicable) and estimated costs necessary to make the sale. e) Fixed Assets Fixed assets are stated at cost, less accumulated debrciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Capital work in progress includes expenditure incurred till the assets are put into intended use. f) Debrciation and Amortization Debrciation of tangible fixed assets is provided as per the Straight Line Method using the useful life as brscribed under Schedule II of the Companies Act, 2013. In case of intangible fixed assets - Software, the same is amortized over a period of five years. g) Impairment of assets The carrying amounts of assets are reviewed at each balance sheet dates and 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 asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value at the weighted average cost of capital. If at the balance sheet date, there is an indication that a brviously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to extent of the carrying value of the asset that would have been determined (net of amortization / debrciation), had no impairment loss been recognized. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. h) Investments Investments that are readily realizable and intended to be held for not more than one year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost or fair value determined on individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary decline in the value of the investments. i) Employee benefits Defined Contribution Plan Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Statement of profit and loss of the period when the contributions to the fund are due. There are no other obligations other than the contribution payable to the government funds. Defined Benefit Plan Company's liabilities towards gratuity liability are provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each balance sheet date. Actuarial gains/losses are immediately taken to Statement of profit and loss and are not deferred. Compensated absences i. Short term Liability in respect of compensated absences becoming due or expected to be availed within one year from the balance sheet date is recognized on the basis of undiscounted value of estimated amount required to be paid or estimated value of the benefit expected to be availed by the employees. ii. Long Term Liability in respect of compensated absences becoming due or expected to be availed more than one year after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method. Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to statement of profit and loss in the year in which such gains or losses are determined. Employee Share-Based Payments The stock options granted under Employee Stock Option Scheme - 2013 to employees of the Company are accounted for in accordance with the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 ("ESOP Guidelines") issued by Securities and Exchange Board of India ("SEBI") and the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India, whereby the intrinsic value of options is recognised as deferred employee compensation. The deferred employee compensation is charged to the Statement of Profit and Loss on the straight-line basis over the vesting period of the option. j) Borrowing Costs Borrowing costs relating to acquisition and/or construction of qualifying assets are capitalized to the extent that the funds are borrowed and used for purpose of constructing a qualifying asset until the time all substantial activities necessary to brpare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs which are not related to acquisition and/or construction activities nor are incidental thereto are charged to the Statement of profit and loss. k) Taxation Tax expense comprises of current income tax and deferred income tax. 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 is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date, the Company re-assesses unrecognised deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. Minimum Alternative Tax (MAT) credit is recognised as an asset and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period. l) Foreign Currency Transactions Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transactions. Foreign Currency assets and liabilities (monetary items) are translated at the exchange rate brvalent at the date of the Balance Sheet. Non - Monetary item such as investments are carried at historical cost using the exchange rate on the date of transaction. Any income or expenses on account of exchange difference either on settlement or on translation is recognized in the Statement of Profit and Loss. m) Earnings Per Share Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the 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. n) Provisions, Contingent Liabilities and Contingent Assets A provision is recognized when an enterprise has a brsent 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 brsent 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. Possible future obligations or brsent obligations that may but will probably not require outflow of resources or where the same cannot be reliably estimated, is disclosed as contingent liabilities in the notes to accounts of financial statements. Contingent Assets are neither recognized nor disclosed in the financial statements. 0) Share Issue Expenses Share issue expenses are adjusted against Securities Premium Account. p) Leases 1) Where Company is the lessee Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating lease. Operating lease payments are recognised as an expense in the Statement of profit and loss on Straight Line basis over the lease term, unless there is another systematic basis which is more rebrsentative of the time pattern of the Lease. ii) Where Company is the lessor Assets rebrsenting Lease arrangements given under operating leases are included in Investments. Lease income is recognized in the Statement of profit and loss on Straight Line basis over the lease term, unless there is another systematic basis which is more rebrsentative of the time pattern of the Lease. q) Cash Flow Statement Cash flow statement has been brpared under the 'Indirect Method'. Cash and cash equivalents, in the cash flow statement comprise of unencumbered cash and bank balances. r) The Company operates in single segment i.e. real estate/real estate development and incidental services and therefore, Segment Reporting as per AS-17 'Segment Reporting' is not applicable. 2Pursuant to enachment of Companies Act, 2013 ( the Act), the Company has, effective 1st April, 2014, reviewed andrevised the useful life of certain tangible fixed assets, in accordance with Schedule II of the Act. Accordingly, the Company has given impact of Rs.455,862 on account of assets whise useful life already exhausted on 1st April,2014 to Retained Earnings.Further, in case of assets acquired prior to 1st April,2014, the carrying value of assets is debrciated over the remaining useful life determined by the Schedule II of the Act. Consequently, debrciaion expenses for the year are higher by Rs.2,878,224/-. 3 As the company is primarily engaged in only one business segment Viz. " Real Estate/ Real Estate Development and related activities" and substantial activities are carried out in India, there are no separate reportable segments as per Accounting Standard -17 " Segment Reporting". 4 The Company's normal operating cycle in respect of operations relating to under construction real estate projects may vary from project to project depending upon the size of the project, type of development, project complexities and related approvals. Operating cycle for all completed projects and other business is based on 12 months period. Assets and liabilities have been classified into current and non-current based on the operating cycle of respective businesses. 5 a. In the opinion of the management, all the assets other than fixed assets and non- current investments have a value on realisation in the ordinary course of business at least equal to the amount at which these are stated. b. The accounts of certain trade receivables, trade payables, loans and advances and banks are, however, subject to formal confirmations or reconciliations and consequent adjustments, if any. However there is no indication of dispute on these accounts, other than those mentioned in the financial statements. The management does not expect any material difference affecting the current year's financial statements on such reconciliation/adjustments. 6 Undistributed accumulated profits amounting to Rs. 14,217,692 (included in current account balance in LLP) rebrsents accumulated profit of the investee company, namely Starlight Systems (I) Private Limited which was converted into LLP on 22nd March,2013. the said accumulated profit can be distributed by the LLP after the end of 3 years for the date of conversion. 7 "Pursuant to the approval to the Scheme of Amalgamation/Arrangement (the 'Scheme') by the Hon'ble Bombay High Court vide its Order dated 19th December, 2014, all assets and liabilities of erstwhile Sanchit Derivatives Private Limited, (referred to as the "Transferor company" hereinafter), were transferred to and vested in the Company (referred to as the "Transferee company" hereinafter) from 15th January, 2014, the appointed date. The Scheme became effective on 14th February, 2015 upon filing of court order with the Registrar of Companies, Maharashtra. Accordingly, the effect of the Scheme has been given in this financial statements. The amalgamation has been accounted for under the Purchase method as specified by the Accounting Standard AS - 14 "Accounting for Amalgamations" brscribed under section 133 of the Companies Act, 2013 ('the Act') read with Rule 7 of the Companies (Accounts) Rules, 2014. As on the appointed date, the Transferor company was holding 8,863,845 equity shares of face value of Rs. 2 each of the Transferee company as Investment, which has been cancelled pursuant to the scheme. 8,863,845 equity shares of face value of Rs. 2 each of the Transferee company has been issued to shareholders of Transferor company towards purchase consideration. The difference between excess of the net assets value of the Transferor Company transferred & recorded by the Transferee Company at their respective book values after cancellation of investments, over purchase consideration has been recorded as Capital reserve. " 8 Figures pertaining to Previous Year have been regrouped / reclassified wherever found necessary to conform to Current Year brsentation. For and on behalf of the Board of Directors of Sunteck Realty Limited As per our attached report of even date For Lodha & Co. Chartered Accountants A. M. Hariharan Partner For and on behalf of the Board of Directors of Sunteck Realty Limited Kamal Khetan Chairman & Managing Director (DIN:00017527) Sanjay Dutt Director (DIN: 05251670) Jignesh Sanghavi Executive Director (DIN:02232988) M. Kalahasthi Director (DIN: 01246519) Rachana Hingrajia Company Secretary Ramakant Nayak Director (DIN: 00129854) Sumesh Mishra Chief Operating Officer Place : Mumbai Date : 26th May, 2015 |