1. COMPANY BACKGROUND: DB Realty Limited (the "Company") is public company domiciled in India. The company was initially incorporated in 2007 as a Private Limited Company and thereafter listed with National Stock Exchange and Bombay Stock Exchange on February 24, 2010. The Company is a Real Estate Development Company that is focused on residential, commercial, retail and other projects, such as mass housing and cluster redevelopment. The Company is jointly promoted by Mr. Vinod K. Goenka and Mr. Shahid Balwa. 2. SIGNIFICANT ACCOUNTING POLICIES: i. BASIS OF brPARATION OF FINANCIAL STATEMENTS These financial statements have been brpared in accordance with the Generally Accepted Accounting Principles in India ('Indian GAAP') to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared under the historical cost convention on accrual basis, except for certain financial instruments which are measured at fair value. ii. USE OF ESTIMATES The brparation of the financial statements is in conformity with the generally accepted accounting principles requiring management to make estimates and assumptions that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known/materialize. iii. FIXED ASSETS A. Tangible Assets: Fixed Assets are recorded at their cost of acquisition, net of modvat/cenvat, less accumulated debrciation and impairment losses, if any. The cost of an item of fixed asset comprises its purchase price, including import duties and other non refundable taxes or levies and any directly attributable cost for bringing the asset to its working condition for its intended use. B. Intangible Assets: Intangible Assets are recorded at their cost of acquisition, net of modvat/cenvat, less accumulated amortization/depletion. iv. DEbrCIATION/AMORTISATION Tangible Assets: The Company has revised its policy of providing debrciation on tangible fixed assets with effect from April 1, 2014. Debrciation is now provided on a straight line basis for all assets as against the policy of providing on written down value basis for assets. Further, the management of the Company has reviewed / determined tangible fixed assets remaining useful lives. Accordingly, the debrciation on tangible fixed assets is provided in accordance with the provisions of Schedule II of the Companies Act, 2013. Intangible Assets: Intangible Assets are being debrciated on straight line basis over useful life in accordance with 'Accounting Standard 26 Intangible Assets'. v. IMPAIRMENT OF ASSETS An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. Recoverable value is the higher of an asset's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from the sale of an asset in an arm's length transaction between knowledgeable, willing parties, less the cost of disposal. An impairment loss is charged for when an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount. vi. INVENTORIES Inventories are valued at lower of cost and net realizable value. Project work in progress cost includes costs incurred, as applicable, up to the completion of the project viz. cost of land/ development rights, materials, services, debrciation on assets used for project purposes and other expenses (including borrowing costs) attributable to the projects. Project and construction related work in progress includes any adjustment arising due to foreseeable losses. vii. REVENUE RECOGNITION (i) Revenue from sale of properties under construction is recognized on the basis of percentage of completion method subject to transfer of significant risk and rewards to the buyer, outcome of the real estate project can be estimated reliably and stage of completion of the project reaches at reasonable level of development i.e. at least 25% of total project cost should be incurred at reporting date. When the outcome of a real estate project can be estimated reliably and the conditions stipulated below are satisfied, project revenue and project costs associated with the real estate project should be recognised as revenue and expenses by reference to the stage of completion of the project activity at each reporting date. Stage of completion is arrived with reference to the entire project cost incurred versus total estimated project cost. Further, with regard to total estimated cost of each project is based upon the judgment of management and certified by Company's technical personnel. The following specific recognition criteria must also be met before revenue is recognized: • All critical approvals necessary for commencement of the project have been obtained. • At least 25% of construction & development cost (excluding cost incurred in acquisition of land and its development rights and borrowing cost) is incurred. • At least 25% of the saleable project area is secured by contracts or agreements with buyers. • And at least 10 % of the total revenue as per the agreements of sale or any other legally enforceable documents are realized at the reporting date in respect of each of the contracts and it is reasonable to expect that the parties to such contracts will comply with the payment terms as defined in the contracts. The estimates of saleable area and costs as revised periodically by the management are considered as change in estimate and accordingly, the effect of such changes to estimates is recognized in the period such changes are determined. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. viii. INVESTMENTS Investments are classified as non-current or current, based on management's intention at the time of purchase. 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 non-current investments. Trade investments are the investments made for or to enhance the Company's business interest. Current investments are stated at lower of cost and fair value determined on an individual investment basis. Non-current investments are stated at cost and provision for diminution in their value, other than temporary, is made in the financial statements. Profit/loss on sale of investments is computed with reference to the average cost of the investments. ix. EMPLOYEE BENEFITS a) Defined Contribution Plan: The Company's Contribution paid / payable for the year to a Defined Contribution Retirement Benefit plan is charged to statement of Profit and Loss. b) Defined Benefit Plan and other long term benefit: The Company's liabilities towards Defined Benefit Schemes viz. Gratuity Benefits and Other Long Term Benefit viz. compensated absences are determined using the Projected Unit Credit Method. Actuarial valuations under the Projected Unit Credit Method are carried out at the Balance Sheet date. Actuarial gains and losses are recognised in the statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognised immediately to the extent of benefits are vested, otherwise it is amortised on straight-line basis over the remaining average period until the benefits become vested. c) Short term employee benefits: Short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised undiscounted during the period employee renders services. x. OPERATING LEASE: Assets acquired on lease where significant portions of the risks and rewards incidental to ownership are retained by the lessor are classified as operating lease. Lease rentals are charged to statement of profit and loss on accrual basis. xi. FOREIGN CURRENCY TRANSACTIONS Transactions denominated in foreign currencies are recognised at the brvailing exchange rates on the transaction date. The exchange differences between the rates brvailing on the date of transaction and on the date of settlement as also on translation of monetary items as at the end of the year is recognized in the statement of profit and loss as income or expense, as the case may be. xii. BORROWING COST Borrowing costs that are attributable to the acquisition or construction of qualifying assets are considered as a part of cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for the intended use. All other borrowing costs are charged to revenue. xiii. TAXES ON INCOME Tax expense comprises both current and deferred tax. Current tax is measured at the amount expected to be paid to/ recovered from the tax authorities, using the applicable effective tax rates. Deferred tax assets and liabilities are recognised for future tax consequences attributable to timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using relevant enacted or substantively enacted effective tax rates as on the balance sheet date, to the extent the timing differences are expected to crystallise. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each balance sheet date. The company reassesses recognized deferred tax assets and liabilities and recognises unrecognised deferred tax assets, to the extent they become reasonably certain or virtually certain of realisation, as the case may be. Minimum Alternate Tax (MAT) paid in a year is charged to the statement of Profit & Loss as Current Tax. The company recognizes MAT credit available as an Asset only to the extent 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 recognizes MAT credit as an Asset in accordance with the Guidance note on Accounting for credit available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said Asset is created by way of credit to the statement of Profit & loss & shown as "MAT Credit Entitlement". The company reviews the "MAT Credit Entitlement" asset at each reporting date & writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the sufficient period. xiv. PROVISIONS AND CONTINGENT LIABILITY Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. A Contingent Liability is, a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of enterprise or a brsent obligation that arises from past events. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements. xv. CASH FLOW STATEMENT Cash Flow Statement is brpared under the 'Indirect Method' brscribed under 'Accounting Standard - 3 Cash Flow Statement' brscribed. xvi. EARNING PER SHARE Basic Earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for events including a bonus issue, bonus element in right 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 period attributable to equity shareholders and the weighted average number of equity shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The period during which, number of dilutive potential equity shares change frequently, weighted average number of shares are computed based on a mean date in the quarter, as impact is immaterial on earning per share. xvii. CASH AND CASH EQUIVALENTS Cash and cash equivalent 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. 1. Figures of the brvious year have been regrouped/ reclassified wherever necessary to conform to the brsentation of the current year. For Haribhakti & Co. LLP ICAI Firm's Registration No. 103523W Chartered Accountants For and on behalf of the Board Vinod Goenka Chairman & Managing Director Shahid Balwa Vice Chairman & Managing Director Chetan Desai Partner Membership No. 017000 Mahesh Gandhi Director N.M. Gattu Chief Financial Officer S A K Narayanan Company Secretary Place : Mumbai, Dated 30th May, 2015 |