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Moneycontrol.com India | Accounting Policy > Construction & Contracting - Real Estate > Accounting Policy followed by Simplex Realty - BSE: 503229, NSE: N.A
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Simplex Realty

BSE: 503229|ISIN: INE167H01014|SECTOR: Construction & Contracting - Real Estate
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VOLUME 24
Simplex Realty is not listed on NSE
Mar 15
Accounting Policy Year : Mar '17

CORPORATE INFORMATION

Simplex Realty Limited (the Company) is into real estate development. The Company develops residential as well as commercial properties in and around Mumbai. The Company is a public limited Company and is listed on BSE Limited.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(i) Basis of preparation:

These financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) on the historical cost convention on the accrual basis. The GAAP comprises mandatory Accounting Standards notified by the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. The accounting policies have been consistently applied.

(ii) Revenue Recognition:

The Company is following Percentage of Completion Method and revenue is recognized accordingly.

The Guidance Note on Accounting for Real Estate Transactions (Revised 2012) has been followed in respect of the Company''s on-going project for which revenue is recognized for the first time.

The Company recognizes revenue in respect of sales in proportion to the actual cost incurred as against the total estimated project cost subject to achieving the threshold levels.

Determination of stage of completion is arrived based on the project cost incurred against the estimated cost. Determination of revenue under percentage of completion method necessarily involves making estimates, some of which are of technical nature, concerning where relevant, the percentage of completion, cost to completion, the expected revenue from the activity and the foreseeable losses to completion. Estimates of project income, as well as project cost, are reviewed periodically. The effect of changes, if any, to estimates is recognized in the financial statements for the period in which such changes are determined. Losses, if any, are fully provided for immediately. The Company recognizes revenue (i.e. its share in revenue) as per the terms of the agreements entered into with Developer or Land Owner following percentage of completion method.

All other income is recognized on accrual basis.

Dividend income is accounted when right to receive is established.

(iii) Tangible Fixed Assets:

All fixed assets are carried at cost less accumulated depreciation and impairment, if any. The cost of fixed assets includes expenses incidental to acquisition and installation. Interest on specific borrowings, obtained for the purposes of acquiring fixed assets is capitalized up to the date of commissioning of the assets.

(iv) Capital work-in-progress:

Capital work-in-progress is carried at cost. Cost comprises direct costs, related incidental expenses and interest on borrowings.

(v) Investments:

Investments are either classified as current or long term based on Management''s intention at the time of purchase. Long term investments are carried at cost less provision recorded to recognize any decline, other than of a temporary nature, in the carrying value of each investment. Current investments are valued at cost or fair value whichever is lower and the resultant decline, if any, are charged to Statement of Profit and Loss.

(vi) Inventories:

Construction work-in-progress are valued at cost which includes cost of land, premium for development rights, construction cost, allocated interest and expenses incidental to the project undertaken by the Company. Inventory of completed flats is valued at lower of cost or net realizable value.

(vii) Borrowing Costs:

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are considered as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. Interest and finance charges incurred in connection with borrowing of funds, which are incurred for the development of long term projects are transferred to construction work-in- progress. All other borrowing costs are recognized as expense in the period in which these are incurred.

(viii)Depreciation:

Depreciation is provided on all fixed assets (excluding furniture and office equipments) on straight-line method and on furniture and office equipments on the written down value method based on the useful life of the assets as prescribed in the Schedule II to the Companies Act, 2013 and for the assets acquired prior to 1st April, 2014 the carrying amount as on 1st April, 2014 is depreciated over the remaining useful life based on the useful life of the assets as prescribed in the Schedule II to the Companies Act, 2013.

(ix) Retirement Benefits:

Liabilities on account of gratuity and leave encashment benefit are determined by actuarial valuation at each balance sheet date using the Projected Unit Credit Method. Actuarial gain and losses are recognized immediately in the Statement of Profit and Loss for the period in which they occur. The Company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.

The Company''s contributions to provident fund, family pension fund and superannuation fund are recognized as expenses in the Statement of Profit and Loss in the period in which they are incurred.

(x) Taxation:

Current income tax is determined as the amount of tax payable in respect of taxable income for the period based on applicable tax rate and laws. Deferred tax is recognized on timing difference, being difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax effect is calculated using the tax rates and the tax laws enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only to the extent there is a reasonable certainty of realization, except in case of unabsorbed depreciation and business losses in respect of which, deferred tax asset is recognized only if the Company is virtually certain of having sufficient future taxable income against which the losses/depreciation can be set off. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realization.

(xi) Impairment of Assets:

Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. Recoverable amount is higher of an asset''s net selling price and its value in use. Value in use is the present 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. Assessment is also done at each Balance Sheet date as to whether there is any indication that any impairment loss recognized for an asset in prior years may no longer exist or may have decreased.

(xii) Provisions & Contingent Liabilities:

The Company recognizes a provision when there is a present obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company.

(xiii)Cash and Cash Equivalents:

Cash and cash equivalents include cash on hand, cheques on hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

(xiv)Use of Estimates:

The preparation of financial statements in accordance with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities as at the date of financial statements and the reported amount of income and expenses during the year. Actual results could differ from these estimates. Any revision to such accounting estimates is recognized in the accounting period in which such revision takes place.

Source : Dion Global Solutions Limited
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