(i) The financial statements are prepared under the historical cost
convention, on the accounting principles of a going concern.
(ii) Accounting Policies not specifically referred to otherwise are
consistent and in consonance with the applicable accounting standards
prescribed by the Companies (Accounting Standards) Rules, 2006 to the
(iii) All expenses and income to the extent ascertainable with
reasonable certainty are accounted for on accrual basis.
(iv) The preparation 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
(v) 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 revised Schedule VI to the Companies Act, 1956.
(b) Revenue Recognition
Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
i. Revenue from sale of power is recognised when substantial risks and
rewards of ownership is transferred to the buyer under the terms of the
contract. Power supplied under banking arrangements is accounted as per
terms of agreements. Quantity of power banked is recorded as a loan
transaction valued at cost or net realizable value whichever is lower
and recognised as revenue when the same is returned and sold to an
ii. Revenue from construction / project related activity:
Revenue from construction contract is recognised by reference to the
overall estimated profitability of the contract under the percentage of
completion method. Foreseeable losses in any contract are provided
irrespective of the stage of completion of the contract activity. The
stage of completion of the contract is determined considering the
nature of the contract, technical evaluation of work completed /
measurement of physical progress and proportion of the cost incurred to
the estimated total cost.
Contract cost comprises of all costs that relate directly to the
specified contract, incidental costs attributable to the contract
including allocated overheads and warranty costs.
iii. Operator fees and other income are accounted on accrual basis as
and when the right to receive arises.
(c) Fixed Assets
(i) Tangible Assets:
Fixed assets are stated at cost which includes all direct and indirect
expenses up to the date of acquisition, installation and / or
commencement of commercial generation of power.
Expenditure incurred during construction period:
Apart from costs related directly to the construction of an asset,
indirect expenses incurred up to the date of commencement of commercial
production which are incidental and related to construction are
capitalised as part of construction cost. Income, if any, earned during
the construction period is deducted from the indirect costs.
(ii) Intangible Assets:
The Company capitalizes software where it is reasonably estimated that
the software has an enduring useful life. Software is depreciated over
an estimated useful life of 3 years.
(d) Capital Work-in-Progress (CWIP):
Capital Work-in-Progress comprises of the cost of assets that are not
yet ready for their intended use at the reporting date. Cost of
material consumed, erection charges thereon along with other related
expenses incurred for the projects are shown as CWIP for
Expenditure attributable to construction of fixed assets are identified
and allocated on a systematic basis to the cost of the related asset.
Interest during construction and expenditure (net) allocated to
construction are apportioned to CWIP on the basis of the closing
balance of Specific asset or part of asset being capitalized. The
balance, if any, left after such capitalization is kept as a separate
item under the CWIP Schedule.
Claims for price variation/exchange rate variation in case of contracts
are accounted for on acceptance/receipt of claims.
Any other expenditure which is not directly or indirectly attributable
to the construction of the Project / construction of the Fixed Asset,
is charged off to profit and loss statement in the period in which they
(e) Depreciation /Amortisation
Depreciation is provided on Straight Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956 or as
notified by Central Electricity Regulatory Commission (CERC), whichever
In the following categories of Assets, the higher depreciation rates
(f) Impairment of assets
In accordance with AS-28 ''Impairment of assets'' prescribed by the
Companies (Accounting Standards) Rules, 2006, where there is an
indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the profit and loss statement whenever the carrying
amounts of such assets exceed its recoverable amount.
Depreciation on impaired assets related to a cash generating unit is
provided by adjusting the depreciation charge in the remaining periods
so as to allocate the revised carrying amount of the asset over its
remaining useful life.
(g) Borrowing Costs
(i) Borrowing Costs (including exchange differences) directly
attributable to the acquisition or construction of qualifying assets,
are capitalized as part of the cost of such assets up to the date when
the asset is ready for its intended use. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. The borrowing cost eligible for capitalization is netted
off against any income arising on temporary investment of those
borrowings. The capitalization of the borrowing costs shall cease when
substantially all activities necessary to prepare the qualifying asset
for its intended use are complete.
(ii) Expenses incurred in connection with the arrangement of borrowings
are written off over the period of the borrowing.
(iii) Other borrowing costs are charged to revenue.
Long term Investments are stated at cost. In case, there is a decline
other than temporary in the value of any Investments, a provision for
the same is made. Current Investments are valued at lower of cost or
Inventories are valued at lower of cost and net realisable value. Cost
is determined on the weighted average basis for valuation. Net
realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and the estimated
costs necessary to make the sale. Obsolete, defective and
unserviceable stocks are duly provided for.
(j) Foreign Exchange Transactions
Foreign Currency transactions are recorded at the exchange rates
prevailing on the date of the transaction. Foreign Currency assets and
liabilities (monetary items) are reported at the exchange rate
prevailing on the balance sheet date.
Pursuant to the notification of the Companies (Accounting Standards)
Amendment Rules, 2006 on 31st March, 2009, which amended Accounting
Standard 11 on The Effects of Changes in Foreign Exchange Rates,
exchange differences relating to long term monetary items are dealt
with in the following manner:
i. Exchange differences relating to long-term monetary
items, arising during the year, in so far as they relate to the
acquisition of a depreciable capital asset are added to / deducted from
the cost of the asset and depreciated over the balance life of the
ii. In other cases such differences are accumulated in Foreign
Currency Monetary Item Translation Difference Account and amortized to
the profit and loss statement over the balance life of the long-term
monetary item, but not beyond 31st March 2020.
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction.
Forward contracts other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or of highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly. Exchange differences arising on such contracts
are recognized in the period in which they arise and the premium paid
is accounted as expense over the period of the contract.
All other exchange differences are dealt with in the profit & loss
(k) Employee benefits
Retirement benefits in the form of Provident Fund and Family pension
Scheme are defined contribution schemes and the contributions are
charged to the profit and loss statement of the year when the
contributions to the respective funds are due. There are no other
obligations other than the contribution payable to the respective
Stock Based Compensation - The compensation cost of stock options
granted to employees is calculated using the intrinsic value method of
the stock options. The compensation expense is amortised uniformly over
the vesting period of the option.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation and is provided for on the basis of the actuarial
valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
Actuarial gains/ losses are immediately taken to profit and loss
statement and are not deferred.
Income tax expenses comprise current tax (i.e. amount of tax for the
period determined in accordance with the income tax law) and deferred
tax charges or credit (reflecting the tax effects of timing differences
between accounting income and taxable income of the year).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed 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 realised.
Tax credit is recognised in respect of Minimum Alternate Tax (MAT) paid
in terms of the Income Tax Act, 1961 based on convincing evidence that
the Company will pay normal income tax within the statutory time frame
and the same is reviewed at each balance sheet date.
(m) Provisions and Contingent Liabilities
Provisions are recognised based on the best estimate of the expenditure
required to settle the present obligation at the balance sheet date
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation
c) the amount of the obligation can be reliably estimated
Where some or all the expenditure required to settle a provision is
expected to be reimbursed by another party, such reimbursement is
recognised to the extent of provision or contingent liability as the
case may be, only when it is virtually certain that the reimbursement
will be received.