1. Basis of accounting
The Company maintains its accounts on accrual basis following the
historical cost convention, except for the revaluation of certain fixed
assets, in accordance with generally accepted accounting principles
[GAAP] in compliance with the provisions of the Companies Act, 2013
and the Accounting Standards as specified in the Companies (Accounting
Standards) Rules, 2006 read with Rule 7(1) of the Companies (Accounts)
Rules, 2014 issued by the Ministry of Corporate Affairs in respect of
section 133 of the Companies Act, 2013. Further, the guidance
notes/announcements issued by the Institute of Chartered Accountants of
India (ICAI) are also considered, wherever applicable except to the
extent where compliance with other statutory promulgations override the
same requiring a different treatment.
The preparation of financial statements in conformity with GAAP
requires that the management of the Company makes estimates and
assumptions that affect the reported amounts of income and expenses of
the period, the reported balances of assets and liabilities and the
disclosures relating to contingent liabilities as of the date of the
financial statements. Examples of such estimates include the useful
lives of tangible and intangible fixed assets, allowance for doubtful
debts/advances, future obligations in respect of retirement benefit
plans, etc. difference, if any, between the actual results and
estimates is recognised in the period in which the results are known.
2. Presentation of financial statements
The Balance Sheet and the Statement of Profit and Loss are prepared and
presented in the format prescribed in the Schedule III to the Companies
Act, 2013 (the Act). The Cash Flow Statement has been prepared and
presented as per the requirements of Accounting Standard (AS) 3 Cash
Flow Statements. The disclosure requirements with respect to items in
the Balance Sheet and Statement of Profit and Loss, as prescribed in
the Schedule III to the Act, are presented by way of notes forming part
of accounts along with the other notes required to be disclosed under
the notified Accounting Standards and the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
Amounts in the financial statements are presented in Indian Rupees in
crore [1 crore = 10 million] rounded off to two decimal places in line
with the requirements of Schedule III. Per share data are presented in
Indian Rupees to two decimals places.
3. Revenue recognition
Revenue is recognised based on nature of activity when consideration
can be reasonably measured and there exists reasonable certainty of its
A. Revenue from operations
a. Sales & Service
i. Sales and service include excise duty and adjustments made towards
liquidated damages and price variation, wherever applicable. Escalation
and other claims, which are not ascertainable/acknowledged by
customers, are not taken into account.
ii. Revenue from sale of manufactured and traded goods is recognised
when the substantial risks and rewards of ownership are transferred to
the buyer under the terms of the contract.
iii. Revenue from property development activity which are in substance
similar to delivery of goods is recognised when all significant risks
and rewards of ownership in the land and/or building are transferred to
the customer and a reasonable expectation of collection of the sale
consideration from the customer exists.
Revenue from those property development activities which have the same
economic substance as that of a construction contract is recognised
based on the ''Percentage of completion method'' (POC) when the outcome
of a real estate project can be estimated reliably upon fulfillment of
all the following conditions:
a. All critical approvals necessary for commencement of the project
have been obtained;
b. When the stage of completion of the project reaches a reasonable
level of development i.e., contract costs for work performed bears a
reasonable proportion to the estimated total contract costs. For this
purpose, a reasonable level of development is treated as achieved only
if the cost incurred (excluding cost of land/ developmental rights and
borrowing cost) is atleast 25% of the total of such cost;
c. Atleast 25% of the saleable project area is secured by contracts or
agreements with buyers;
d. Atleast 10% of the total revenue as per the agreements of sale or
any other legally enforceable documents are realised 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 costs incurred on property development activities are carried as
Inventories till such time the outcome of the project cannot be
estimated reliably and all the aforesaid conditions are fulfilled. When
the outcome of the project can be ascertained reliably and all the
aforesaid conditions are fulfilled, revenue from property development
activity is recognised at cost incurred plus proportionate margin,
using percentage of completion method. Percentage of completion is
determined based on the proportion of actual cost incurred to the total
estimated cost of the project. For this purpose, actual cost includes
cost of land and developmental rights but excludes borrowing cost.
Expected loss, if any, on the project is recognised as an expense in
the period in which it is foreseen, irrespective of the stage of
completion of the contract.
iv. Revenue from construction/project related activity and contracts
for supply/commissioning of complex plant & equipment is recognised as
a. Cost plus contracts: Contract revenue is determined by adding the
aggregate cost plus proportionate margin as agreed with the customer.
b. Fixed price contracts: Contract revenue is recognised only to the
extent of cost incurred till such time the outcome of the job cannot be
ascertained reliably. When the outcome of the contract is ascertained
reliably, contract revenue is recognised at cost of work performed on
the contract plus proportionate margin, using the percentage of
completion method. Percentage of completion is the proportion of cost
of work performed to-date, to the total estimated contract costs.
Government grants in the nature of subsidy related to customer
contracts are recognised as revenue from operations in the Statement of
Profit and Loss, on a prudent basis, in proportion to work completed
when there is reasonable assurance that the conditions for the grant of
subsidy will be fulfilled.
Expected loss, if any, on the construction/project related activity is
recognised as an expense in the period in which it is foreseen,
irrespective of the stage of completion of the contract. While
determining the amount of foreseeable loss, all elements of costs and
related incidental income not included in contract revenue are taken
v. Revenue from contracts for the rendering of engineering design
services and other services which are directly related to the
construction of an asset is recognised on similar basis as stated in
vi. Revenues from construction/project related activity and contracts
executed in joint ventures under work-sharing arrangement [being
jointly controlled operations, in terms of Accounting Standard (AS) 27
Financial Reporting of Interests in Joint Ventures], is recognised on
the same basis as similar contracts independently executed by the
vii. Revenue from service related activities is recognised using the
proportionate completion method.
viii. Commission income is recognised as and when the terms of the
contract are fulfilled.
ix. Revenue from engineering and service fees is recognised as per the
terms of the contract.
x. Profit/loss on contracts executed by Integrated Joint Ventures
under profit-sharing arrangement [being Jointly Controlled Entities, in
terms of Accounting Standard (AS) 27 Financial Reporting of Interests
in Joint Ventures] is accounted as and when the same is determined by
the joint venture. Revenue from services rendered to such joint
ventures is accounted on accrual basis.
b. Other operational revenue
Other operational revenue represents income earned from the activities
incidental to the business and is recognised when the right to receive
the income is established as per the terms of the contract.
B. Other Income
a. Interest income is accrued at applicable interest rate.
b. Dividend income is accounted in the period in which the right to
receive the same is established.
c. Other Government grants, which are revenue in nature and are
towards compensation for the related costs, are recognised as income in
the Statement of Profit and Loss in the period in which the matching
costs are incurred.
d. Other items of income are accounted as and when the right to
4. Extraordinary and exceptional Items
Income or expenses that arise from events or transactions that are
clearly distinct from the ordinary activities of the Company are
classified as extraordinary items. Specific disclosure of such
events/transactions is made in the financial statements. Similarly, any
external event beyond the control of the Company, significantly
impacting income or expense, is also treated as extraordinary item and
disclosed as such.
On 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 an understanding of the performance
of the Company. Such income or expense is classified as an exceptional
item and accordingly disclosed in the notes to accounts.
5. Research and development
a. Revenue expenditure on research is expensed under respective heads
of account in the period in which it is incurred.
b. Development expenditure on new products is capitalised as
intangible asset, if all of the following can be demonstrated:
i. The technical feasibility of completing the intangible asset so
that it will be available for use or sale
ii. The Company has intention to complete the intangible asset and use
or sell it
iii. The Company has ability to use or sell the intangible asset
iv. The manner in which the probable future economic benefits will be
generated including the existence of a market for output of the
intangible asset or intangible asset itself or if it is to be used
internally, the usefulness of intangible assets
v. The availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible
vi. The Company has ability to measure the expenditure attributable to
the intangible asset during its development reliably.
The development expenditure capitalised as intangible asset is
amortised over its useful life.
Other development costs that do not meet above criteria are expensed in
the period in which they are incurred.
6. Employee benefits
a. Short term employee benefits:
All employee benefits falling due wholly within twelve months of
rendering the service are classified as short term employee benefits.
The benefits like salaries, wages, short term compensated absences etc.
and the expected cost of bonus, ex-gratia are recognised in the period
in which the employee renders the related service.
b. Post-employment benefits:
i. Defined contribution plans: The Company''s superannuation scheme,
state governed provident fund scheme, employee state insurance scheme
and employee pension scheme are defined contribution plans. The
contribution paid/payable under the schemes is recognised during the
period in which the employee renders the related service.
ii. Defined benefit plans: The employees'' gratuity fund schemes,
post-retirement medical care scheme, pension scheme and provident fund
scheme managed by trust are the Company''s defined benefit plans. The
present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
The obligation is measured at the present value of the estimated future
cash flows. The discount rate used for determining the present value of
the obligation under defined benefit plans, is based on the market
yield on government securities of a maturity period equivalent to the
weighted average maturity profile of the related obligations at the
Balance Sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss.
The interest element in the actuarial valuation of defined benefit
plans, which comprises the implicit interest cost and the impact of
changes in discount rate, is classified under finance cost. The balance
charge is recognised as employee benefit expenses in the Statement of
Profit and Loss.
In case of funded plans, the fair value of the plan assets is reduced
from the gross obligation under the defined benefit plans to recognise
the obligation on a net basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs. Past
service cost is recognised as expense on a straight-line basis over the
average period until the benefits become vested.
c. Long term employee benefits:
The obligation for long term employee benefits such as long term
compensated absences, long service award etc. is recognised in the
similar manner as in the case of defined benefit plans as mentioned in
d. Termination benefits:
Termination benefits such as compensation under Voluntary Retirement
cum Pension Scheme are recognised as expense in the period in which
they are incurred.
7. Tangible fixed assets
Tangible fixed assets are stated at original cost net of tax/duty
credits availed, if any, less accumulated depreciation and cumulative
impairment and those which were revalued as on October 1,1984 are
stated at the values determined by the valuers less accumulated
depreciation and cumulative impairment. Assets acquired on hire
purchase basis are stated at their cash values. Specific know-how fees
paid, if any, relating to plant & equipment is treated as part of cost
Administrative and other general overhead expenses that are
specifically attributable to construction or acquisition of fixed
assets or bringing the fixed assets to working condition are allocated
and capitalised as a part of the cost of the fixed assets.
Own manufactured assets are capitalised at cost including an
appropriate share of overheads.
Tangible assets not ready for the intended use on the date of the
Balance Sheet are disclosed as capital work-in-progress. (Also refer
to policy on leases, borrowing costs, impairment of assets and foreign
currency transactions infra.)
The determination of whether an agreement is, or contains, a lease is
based on the substance of the agreement at the date of inception.
a. Lease transactions entered into prior to April 1, 2001:
Assets leased out are stated at original cost. Lease equalisation
adjustment is the difference between capital recovery included in the
lease rentals and depreciation provided in the books.
Lease rentals in respect of assets acquired under leases are charged to
Statement of Profit and Loss.
b. Lease transactions entered into on or after April 1, 2001:
i. Assets acquired under leases where the Company has substantially
all the risks and rewards of ownership are classified as finance
leases. Such assets are capitalised at the inception of the lease at
the lower of the fair value or the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
ii. Assets given under a finance lease are recognised as a receivable
at an amount equal to the net investment in the lease. Lease income is
recognised over the period of the lease so as to yield a constant rate
of return on the net investment in the lease.
iii. Initial direct costs relating to assets given on finance leases
are charged to Statement of Profit and Loss.
i. Assets acquired on leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the Statement of Profit
and Loss on accrual basis.
ii. Assets leased out under operating leases are capitalised. Rental
income is recognised on accrual basis over the lease term.
(Also refer to policy on depreciation, infra)
a. Owned assets:
i. Revalued assets:
Depreciation on assets carried at revalued amount i.e., values
determined by valuers is provided on straight line method on the basis
of useful life as specified in Schedule II to the Companies Act, 2013
except in respect of certain assets where the useful life was
determined by technical evaluation.
With effect from April 1, 2015 the difference between depreciation
provided on revalued amount and on historical cost is transferred from
revaluation reserve to general reserve.
ii. Assets carried at historical cost:
Depreciation on assets carried at historical costs is provided on
straight line method on the basis of useful life as specified in
Schedule II to the Companies Act, 2013 except in respect of certain
assets where the useful life was determined by technical evaluation.
The carrying amount of the assets as on April 1, 2014 is depreciated
over the remaining useful life. Where the useful life of the asset has
expired, the carrying amount as on April 1, 2014 has been charged to
the retained earnings as on April 1, 2014.
Where cost of a part of the asset (asset component) is significant to
total cost of the asset and useful life of that part is different from
the useful life of the remaining asset, useful life of that significant
part is determined separately and such asset component is depreciated
over its separate useful life. In respect of asset components, whose
useful life has expired as on April 1, 2015, the carrying amount as on
April 1, 2015 has been charged to the retained earnings as on April 1,
iii. Depreciation for additions to/deductions from, owned assets is
calculated pro rata. Extra shift depreciation is provided on a location
iv. Depreciation charge for impaired assets is adjusted in future
periods in such a manner that the revised carrying amount of the asset
is allocated over its remaining useful life.
b. Leased assets:
i. Lease transactions entered into prior to April 1, 2001:
Lease charge comprising statutory depreciation and lease equalisation
charge is provided for assets given on lease over the primary period of
the lease equal to recovery of net investment in the lease.
Accordingly, while the statutory depreciation on such assets is
provided for on straight line method as per Schedule II to the
Companies Act, 2013, the difference is adjusted through lease
equalisation and lease adjustment account.
ii. Lease transactions entered into on or after April 1, 2001:
Assets acquired under finance leases are depreciated on a straight line
basis over the lease term. Where there is reasonable certainty that the
Company shall obtain ownership of the assets at the end of the lease
term, such assets are depreciated based on the useful life prescribed
under Schedule II to the Companies Act, 2013 or based on the useful
life adopted by the Company for similar assets.
iii. Leasehold land
Land acquired under long term lease is classified under tangible
assets and is depreciated over the period of lease.
10. Intangible assets and amortisation
Intangible assets are stated at original cost net of tax/duty credits
availed, if any, less accumulated amortisation and cumulative
impairment. Intangible assets are recognised when it is probable that
the future economic benefits that are attributable to the asset will
flow to the enterprise and the cost of the asset can be measured
reliably. Intangible assets are amortised over their useful life as
a. Specialised software: over a period of six years.
b. Technical know-how: over a period of six years in case of foreign
technology and three years in the case of indigenous technology.
c. Development costs for new products: over a period of five years.
Administrative and other general overhead expenses that are
specifically attributable to acquisition of intangible assets are
allocated and capitalised as a part of the cost of the intangible
Intangible assets not ready for the intended use on the date of the
Balance Sheet are disclosed as intangible assets under development.
Amortisation on impaired assets is provided by adjusting the
amortisation charges in the remaining periods so as to allocate the
asset''s revised carrying amount over its remaining useful life.
11. Impairment of assets
As at each Balance Sheet date, the carrying amount of assets is tested
for impairment so as to determine:
a. the provision for impairment loss, if any; and
b. the reversal of impairment loss recognised in previous periods, if
Impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount. Recoverable amount is determined:
a. in the case of an individual asset, at the higher of the net
selling price and the value in use;
b. in the case of a cash generating unit (a group of assets that
generates identified, independent cash flows), at the higher of the
cash generating unit''s net selling price and the value in use.
(Value in use is determined as the present value of estimated future
cash flows from the continuing use of an asset and from its disposal at
the end of its useful life).
Trade investments comprise investments in subsidiary companies, joint
ventures, associate companies and in the entities in which the Company
has strategic business interest.
Investments, which are readily realisable and are intended to be held
for not more than one year from the date of acquisition, are classified
as current investments. All other investments are classified as long
Long term investments including trade investments are carried at cost,
after providing for any diminution in value, if such diminution is
other than temporary in nature. Investments in integrated joint
ventures are carried at cost net of adjustments for Company''s share in
profits or losses as recognised.
Current investments are carried at lower of cost and fair value. The
determination of carrying amount of such investments is done on the
basis of weighted average cost of each individual investment.
Purchase and sale of investments are recognised based on the trade date
Inventories are valued after providing for obsolescence, as under:
a. Raw materials, components, construction materials, stores, spares
and loose tools at lower of weighted average cost or net realisable
value. However, these items are considered to be realisable at cost if
the finished products in which they will be used, are expected to be
sold at or above cost.
b. Manufacturing work-in-progress at lower of weighted average cost
including related overheads or net realisable value. In some cases,
manufacturing work-in-progress are valued at lower of specifically
identifiable cost or net realisable value. In the case of qualifying
assets, cost also includes applicable borrowing costs vide policy
relating to borrowing costs.
c. Finished goods and stock-in-trade (in respect of goods acquired for
trading) at lower of weighted average cost or net realisable value.
Cost includes related overheads and excise duty paid/ payable on such
d. Completed property/work-in-progress (including land) in respect of
property development activity at lower of specifically identifiable
cost or net realisable value.
14. Cash and bank balances
Cash and bank balances also include fixed deposits, margin money
deposits, earmarked balances with banks and other bank balances which
have restrictions on repatriation. Short term and liquid investments
being not free from more than insignificant risk of change in value,
are not included as part of cash and cash equivalents.
15. Securities premium account
a. Securities premium includes:
i. The difference between the market value and the consideration
received in respect of shares issued pursuant to Stock Appreciation
ii. The discount allowed, if any, in respect of shares allotted
pursuant to Stock Options Scheme
b. The following expenses are written off against securities premium
i. Expenses incurred on issue of shares
ii. Expenses (net of tax) incurred on issue of debentures/bonds
iii. Premium (net of tax) on redemption of debentures/bonds
16. Borrowing Costs
Borrowing costs include interest, commitment charges, amortisation of
ancillary costs, amortisation of discounts/premium related to
borrowings, finance charges in respect of assets acquired on finance
lease and exchange differences arising from foreign currency
borrowings, to the extent they are regarded as an adjustment to
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised/inventorised as
part of cost of such asset till such time the asset is ready for its
intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use
or sale. All other borrowing costs are recognised as an expense in the
period in which they are incurred.
17. Employee stock ownership schemes
In respect of stock options granted pursuant to the Company''s Stock
Options Scheme, the intrinsic value of the options (excess of market
price of the share over the exercise price of the option) is treated as
discount and accounted as employee compensation cost over the vesting
period. The amount recognised as expense each year is arrived at based
on the number of grants expected to vest. If a grant lapses after the
vesting period, the cumulative discount recognised as expense in
respect of such grant is transferred to the general reserve.
18. Foreign currency transactions, foreign operations, forward
contracts and derivatives
a. The reporting currency of the Company is Indian rupee.
b. Foreign currency transactions are recorded on initial recognition
in the reporting currency, using the exchange rate at the date of the
transaction. At each Balance Sheet date, foreign currency monetary
items are reported using the closing rate.
Non-monetary items, carried at historical cost denominated in a foreign
currency, are reported using the exchange rate at the date of the
Exchange differences that arise on settlement of monetary items or on
reporting of monetary items at each Balance Sheet date at the closing
i. adjusted in the cost of fixed assets specifically financed by the
borrowings contracted up to March 31, 2004 to which the exchange
ii. adjusted in the cost of fixed assets specifically financed by
borrowings contracted between the period April 1, 2004 to March 31,
2007 and to which the exchange differences relate, provided the assets
are acquired from outside India
iii. recognised as income or expense in the period in which they
arise, in cases other than (i) and (ii) supra.
c. Financial statements of foreign operations comprising jobs
contracted prior to April 1, 2004, are translated as follows:
i. Closing inventories at rates prevailing at the end of the year.
ii. Fixed assets as at April 1, 1991 at rates prevailing at the end of
the year in which the additions were made. Subsequent additions are at
rates prevailing on the dates of the additions. Depreciation is
accounted at the same rate at which the assets are translated.
iii. Other assets and liabilities at rates prevailing at the end of
iv. Net revenues at the average rate for the year.
d. Financial statements of foreign operations comprising jobs
contracted on or after April 1, 2004, are treated as integral
operations and translated as in the same manner as foreign currency
transactions, as described above. Exchange differences arising on such
translation are recognised as income or expense of the period in which
e. Forward contracts, other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or highly probable
forecast transactions, are treated as foreign currency transactions and
accounted accordingly as per Accounting Standard (AS) 11 The Effects
of Changes in Foreign Exchange Rates. Exchange differences arising on
such contracts are recognised in the period in which they arise.
Gains and losses arising on account of roll over/cancellation of such
forward contracts are recognised as income /expense of the period in
which such roll over/cancellation takes place.
f. All the other derivative contracts, including forward contracts
entered into to hedge foreign currency risks on unexecuted firm
commitments and highly probable forecast transactions, are recognised
in the financial statements at fair value as on the Balance Sheet date,
in pursuance of the announcement of the Institute of Chartered
Accountants of India (ICAI) dated March 29, 2008 on accounting of
derivatives. In addition, the derivative arrangements embedded in the
contracts entered in the course of business are accounted separately if
the economic characteristics and risks of the embedded derivatives are
not closely related to economic characteristics and risks of the host
The Company has adopted Accounting Standard (AS) 30 Financial
Instruments: Recognition and Measurement for accounting of such
derivative contracts, not covered under Accounting Standard (AS) 11
The Effects of Changes in Foreign Exchange Rates, as mandated by the
ICAI in the aforesaid announcement.
Accordingly, the resultant gains or losses on fair valuation/settlement
of the derivative contracts (including embedded derivatives) covered
under Accounting Standard (AS) 30 Financial Instruments: Recognition
and Measurement are recognised in the Statement of Profit and Loss or
Balance Sheet as the case may be after applying the test of hedge
effectiveness. Where the hedge in respect of off-balance sheet items is
effective, the gains or losses are recognised in the hedging reserve
which forms part of reserves and surplus in the Balance Sheet. The
amount recognised in the hedging reserve is transferred to the
Statement of Profit and Loss in the period in which the underlying
hedged item affects the Statement of Profit and Loss. Gains or losses
in respect of ineffective hedges are recognised in the Statement of
Profit and Loss in the period in which such gains or losses are
g. The premium paid/received on a foreign currency forward contract is
accounted as expense/income over the life of the contract.
19. Segment accounting
a. Segment accounting policies
Segment accounting policies are in line with the accounting policies of
the Company. In addition, the following specific accounting policies
have been followed for segment reporting:
i. Segment revenue includes sales and other operational revenue
directly identifiable with/allocable to the segment including inter
ii. Expenses that are directly identifiable with/allocable to segments
are considered for determining the segment result. Expenses which
relate to the Company as a whole and not allocable to segments are
included under unallocable corporate expenditure.
iii. Income which relates to the Company as a whole and not allocable
to segments is included in unallocable corporate income.
iv. Segment result includes margins on inter-segment capital jobs,
which are reduced in arriving at the profit before tax of the Company.
v. Segment assets and liabilities include those directly identifiable
with the respective segments. Unallocable corporate assets and
liabilities represent the assets and liabilities that relate to the
Company as a whole and not allocable to any segment.
vi. Segment non-cash expenses forming part of segment expenses
includes the intrinsic value of the employee stock options which is
accounted as employee compensation cost [see Note R(17)] and is
allocated to the segment.
b. Inter-segment transfer pricing
Segment revenue resulting from transactions with other business
segments is accounted on the basis of transfer price agreed between the
segments. Such transfer prices are either determined to yield a desired
margin or agreed on a negotiated basis.
20. Taxes on Income
Tax on income for the current period is determined on the basis of
taxable income and tax credits computed in accordance with the
provisions of the Income Tax Act 1961, and based on the expected
outcome of assessments/appeals.
Deferred tax is recognised on timing differences between the income
accounted in financial statements and the taxable income for the year,
and quantified using the tax rates and laws enacted or substantively
enacted as on the Balance Sheet date.
Deferred tax assets relating to unabsorbed depreciation/business
losses/losses under the head capital gains are recognised and carried
forward to the extent there is virtual certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
Other deferred tax assets are recognised and carried forward 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.
22. Provisions, contingent liabilities and contingent assets
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
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
c. the amount of the obligation can be reliably estimated.
Reimbursement expected in respect of expenditure required to settle a
provision is recognised only when it is virtually certain that the
reimbursement will be received.
Contingent liability is disclosed in case of
a. a present obligation arising from past events, when it is not
probable that an outflow of resources will be required to settle the
b. a present obligation arising from past events, when no reliable
estimate is possible
c. a possible obligation arising from past events where the
probability of outflow of resources is not remote. Contingent assets
are neither recognised, nor disclosed.
Provisions, contingent liabilities and contingent assets are reviewed
at each Balance Sheet date.
Commitments are future liabilities for contractual expenditure.
Commitments are classified and disclosed as follows:
a. Estimated amount of contracts remaining to be executed on capital
account and not provided for,
b. Uncalled liability on shares and other investments partly paid,
c. Funding related commitment to subsidiary, associate and joint
venture companies and,
d. Other non-cancellable commitments, if any, to the extent they are
considered material and relevant in the opinion of management.
Other commitments related to sales/procurements made in the normal
course of business are not disclosed to avoid excessive details.
24. Operating cycle for current and non-current classification
Operating cycle for the business activities of the Company covers the
duration of the specific project/contract/product line/service
including the defect liability period, wherever applicable and extends
up to the realisation of receivables (including retention monies)
within the agreed credit period normally applicable to the respective
lines of business.
25. Cash Flow Statement
Cash flow statement is prepared segregating the cash flows from
operating, investing and financing activities. Cash flow from operating
activities is reported using indirect method. Under the indirect
method, the net profit is adjusted for the effects of:
i. transactions of a non-cash nature,
ii. any deferrals or accruals of past or future operating cash
receipts or payments and,
iii. items of income or expense associated with investing or financing
Cash and cash equivalents (including bank balances) are reflected as
such in the Cash Flow Statement. Those cash and cash equivalents which
are not available for general use as on the date of Balance Sheet are
also included under this category with a specific disclosure.