2. Significant accounting policies
(a) Basis of brparation
These financial statements have been brpared and brsented on the accrual basis of accounting and comply with the Accounting Standards brscribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, the relevant provisions of the Companies Act, 1956 and other accounting principles generally accepted in India, to the extent applicable. The financial statements are brsented in Indian rupees rounded off to the nearest lacs.
(b) Use of estimates
The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognized prospectively in current and future periods.
(c) Current–non-current classification
"All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within 12 months after the reporting date; or
(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within 12 months after the reporting date; or
Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current."
Operating cycle
Operating cycle is the average time from start of the project to their realization in cash or cash equivalents.
(d) Fixed assets and debrciation
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.
Assets under installation or under construction as at the Balance Sheet date are shown as capital work in progress.
Debrciation on Fixed Assets is provided pro-rata from the date of addition using the Written Down Value Method except for certain plant and machinery which are debrciated using the Straight Line Method, at the rates based upon useful life of the assets estimated by the management, which are equal to the corresponding rates brscribed under Schedule XIV of the Companies Act, 1956
Assets costing less than Rs. 5,000 are debrciated fully in the year of purchase. Additions and deletions to fixed assets during the year are debrciated, pro-rata, over the period they have been put to use during the year.
(e) Intangible assets
Computer software
Costs relating to Computer Software are capitalized and amortized as per the debrciation rate brscribed under schedule XIV of Companies Act, 1956.
Carriageways
Carriageways rebrsents commercial rights to collect toll fee in relation to toll roads which has been accounted at the cost incurred on the project activity towards construction, reconstruction, strengthening, widening, rehabilitation of the toll roads on Build, Operate and Transfer basis. It includes all direct material, labour and sub- contracting costs, inward freight, duties, taxes, if any, and any directly attributable expenditure on making the Commercial Right ready for its intended use. Costs of Carriageways are capitalized and amortized over the period of eight years, being the Concession period.
(f) Impairment
(i) Intangible assets which are amortized over a period as defined above are tested for impairment annually. Other fixed assets (tangible and intangible) are reviewed at each reporting date to determine if there is any indication of impairment. For assets in respect of which any such indication exists and for intangible assets mandatorily tested annually for impairment, the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset exceeds its recoverable amount.
(ii) For the purpose of impairment testing, assets are grouped together into the smallest group of assets (cash generating unit or CGU) that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.
(iii) The recoverable amount of an asset or CGU is the greater of its value in use and its net selling price. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
(iv) Impairment losses are recognized in profit or loss.
(v) If at the balance sheet date there is an indication that a brviously assessed impairment loss no longer exists or has decreased, the assets or CGU’s recoverable amount is estimated. The impairment loss is reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of debrciation or amortization, if no impairment loss had been recognized. Such a reversal is recognized in the profit or loss.
(g) Inventories
Inventories are valued as follows:
Raw materials and civil construction materials
Lower of cost and net realizable value. However, materials and other items held for use in civil construction work and / or 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 first in first out (FIFO) basis.
Finished goods (manufactured)
Finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity and excise duty. Cost is determined on FIFO basis. Land and building held as stock in trade
Land and building held as stock in trade is valued at cost or net realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
(h) Project work in progress
Project work in progress rebrsents uncertified inventory valued at contract rate pending final certification.
(i) Foreign currency transactions
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 brvailing at the date of transaction.
Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated into Indian rupees at the closing exchange rates on that date. The resultant differences are recognized in the statement of profit and loss.
(j) 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.
Sale of goods
Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. It includes discounts but excludes excise duty /value added tax / sales tax and is net of returns.
Construction contracts
Contract revenue is recognized as revenue in the statement of profit and loss in the accounting periods in which the work is performed. Contract costs are recognized as an expense in the statement of profit and loss in the accounting periods in which the work to which they relate is performed. In the case of contracts with defined milestones and assigned price for each milestone, the Company recognizes revenue on transfer of significant risks and rewards which coincides with achievement of milestone and its acceptance by its customer. The Company recognizes bonus/ incentive revenue on early completion of the project based on the confirmation received from the customers.
Joint ventures
Revenue from construction/project related activity and contracts executed in joint ventures under work-sharing arrangement [being jointly controlled entities, in terms of Accounting Standard (AS) 27 "Financial reporting of Interests in Joint ventures"] is recognized in the statement of profit and loss to the extent of the share of profit receivable from the jointly controlled entity for the reporting period, if the right to receive payment is established at the balance sheet date.
Toll receipts
Toll revenue from operation is recognized on receipt basis.
Interest and dividend
Interest is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend income is recognized if the right to receive payment is established at the balance sheet date.
(k) Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss account on a straight-line basis over the lease term.
(l) Investments Investments that are readily realizable 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. Long-term investments are carried at cost less provision made to recognize any decline, other than temporary, in the value of such investments. Current investments are valued at cost or fair value whichever is lower.
Investment in the capital of a partnership firm is shown by reference to the capital of the firm at the balance sheet date. In case the financial statements of the firm are not made up to the same date as the date of the company’s financial statements and if it is not practicable to draw up the financial statements of the firm up to such date, adjustments are made for the effects of significant transactions or other events that occur between those dates. However, the difference in reporting dates can not exceed six months. The Company’s share of profit or loss in a partnership firm is recognized in the statement of profit and loss as and when it accrues i.e. when it is computed and credited or debited to the capital/current/any other account of the company in the books of the partnership firm.
(m) Employee benefits
"Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognized as an expense as the related service is rendered by employees."
Post employment benefits
Defined benefit plans
"The Company’s gratuity benefit scheme and post-retirement medical benefit scheme are defined benefit plans. The Company’s net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its brsent value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The calculation of the Company’s obligation under each of the two plans is performed annually by a qualified actuary using the projected unit credit method.
The Company recognizes all actuarial gains and losses arising from defined benefit plans immediately in the Statement of Profit and Loss. All expenses related to defined benefit plans are recognized in employee benefits expense in the Statement of Profit and Loss. When the benefits of a plan are improved, the portion of the increased benefit related to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. The Company recognizes gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs."
Compensated absences
The employees can carry-forward a portion of the unutilized accrued compensated absences and utilize it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.
(n) Borrowing costs
Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expense in the year in which they are incurred.
(o) Taxes on income
Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income-tax expense is recognized in profit or loss except that tax expense related to items recognized directly in reserves is also recognized in those reserves.
Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws. Deferred tax is recognized in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed debrciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realized.
(p) Provisions A provision is recognized if, as a result of a past event, the Company has a brsent obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the brsent obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
"Onerous contracts
A contract is considered as onerous when the expected economic benefits to be derived by the company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision for an onerous contract is measured at the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract."
"Contingencies
Provision in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably."
(q) Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a brsent obligation that may, but probably will not, require an outflow of resources, or a brsent obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.