1.9 Provisions, Contingent liabilities and Capital commitments
a) Provision is recognised when there is a present
obligation as a result of a past event and it is
probable that an outflow of resources will be
required to settle the obligation in respect of which
a reliable estimate can be made. Provision amount
are discounted to their present value where the
impact of time value of money is expected to be
material.
b) Contingent liabilities are disclosed in respect of
possible obligations that arise from past events
but their existence is confirmed by the occurrence
of one or more uncertain future events not wholly
within the control of the Company.
c) Contingent liabilities pertaining to various
government authorities are considered only on
conversion of show cause notices issued by them
into demand.
1.10Intangible assets
a) Expenditure incurred for acquiring intangible assets
like software costing ?500,000 and above and
license to use software per item of ?25,000 and
above, from which economic benefits will flow over
a period of time, is amortised over the estimated
useful life of the asset or five years, whichever is
earlier, from the time the intangible asset starts
providing the economic benefit.
b) Brand value arising on acquisition are recognised
as an asset and are amortised on a straight line
basis over 10 years.
c) Goodwill on acquisition is not amortised but tested
for impairment annually.
d) In other cases, the expenditure is charged to
revenue in the year in which the expenditure is
incurred.
1.11 Accounting for Research & Development
a) Revenue Expenditure is shown under Primary
Head of Accounts with the total of such expenditure
being disclosed in the Notes.
b) Capital expenditure relating to research &
development is treated in the same way as
other fixed assets.
1.12Treatment of Grant / Subsidy
a) Revenue grant/subsidy in respect of research
& development expenditure is set off
against respective expenditure.
b) Capital grant/subsidy against specific fixed assets
is set off against the cost of those fixed assets.
c) When grant/subsidy is received as compensation
for extra cost associated with the establishment of
manufacturing units or cannot be related otherwise
to any particular fixed assets the grant/subsidy so
received is credited to capital reserve. On expiry
of the stipulated period set out in the scheme of
grant/subsidy the same is transferred from capital
reserve to general reserve.
d) Revenue grant in respect of organisation of certain
events is shown under Sundry Income and the
related expenses there against under normal heads
of expenditure.
1.13 Impairment of assets
An assessment is made at each Balance Sheet
date to determine whether there is an indication
of impairment of the carrying amount of the fixed
assets. If any indication exists, an asset's recoverable
amount is estimated. An impairment loss is recognised
whenever the carrying amount of the asset exceeds
the recoverable amount.
The recoverable amount of an asset or a cash¬
generating unit is the higher of its fair value less costs
to sell and its value in use.
Value in use is the present value of the future cash
flows expected to be derived from an asset or cash¬
generating unit using an appropriate discount factor.
1.14 Income taxes
Tax expense recognized in profit or loss comprises the
sum of deferred tax and current tax not recognized in
other comprehensive income or directly in equity.
Current tax is payable on taxable profit, which
differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax
laws that have been enacted or substantively enacted
by the end of the reporting period.
Deferred income taxes are calculated using the
liability method on temporary differences between the
carrying amounts of assets and liabilities and their
tax bases. However, deferred tax is not provided on
the initial recognition of an asset or liability unless
the related transaction is a business combination or
affects tax or accounting profit. Deferred tax assets
and liabilities are calculated, without discounting, at
tax rates that are expected to apply to their respective
period of realization, provided those rates are enacted
or substantively enacted by the end of the reporting
period.
Deferred tax asset ('DTA') is recognized for all
deductible temporary differences, carry forward of
unused tax credit and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which deductible temporary difference, and
the carry forward of unused tax credits and unused
tax losses can be utilized or to the extent of taxable
temporary differences except:
- Where the DTA relating to the deductible
temporary difference arises from the initial
recognition of an asset or liability in a transaction
that is not a business combination; and at the time
of the transaction, affects neither accounting profit
nor taxable profit or loss.
- in respect of deductible temporary differences
arising from investments in subsidiaries,
branches and associates, and interests in joint
arrangements, to the extent that, and only to
the extent that, it is probable that the temporary
difference will reverse in the foreseeable future;
and taxable profit will be available against which
the temporary difference can be utilized.
This is assessed based on the Company's forecast of
future operating results, adjusted for significant non¬
taxable income and expenses and specific limits on the
use of any unused tax loss or credit.
Changes in deferred tax assets or liabilities are
recognised as a component of tax income or expense
in profit or loss, except where they relate to items that
are recognized in other comprehensive income or
directly in equity, in which case the related deferred tax
is also recognized in other comprehensive income or
equity, respectively.
Deferred tax liabilities are not recognised for temporary
differences between the carrying amount and tax
bases of investments in subsidiaries, branches and
associates and interest in joint arrangements where the
Company is able to control the timing of the reversal of
the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
1.15 Leases
The Company as a lessee
The Company considers whether a contract is, or
contains a lease. A lease is defined as 'a contract,
or part of a contract, that conveys the right to use
an asset (the underlying asset) for a period of
time in exchange for consideration'. To apply this
definition, the Company assesses whether the
contract meets three key evaluations of whether:
a) The contract contains an identified asset, which
is either explicitly identified in the contract or
implicitly specified by being identified at the time
the asset is made available to the Company.
b) The Company has the right to obtain substantially
all of the economic benefits from use of the
identified asset throughout the period of use,
considering its rights within the defined scope of
the contract.
c) The Company has the right to direct the use of the
identified asset throughout the period of use.
Measurement and recognition of leases
At lease commencement date, the Company
recognises a right-of-use asset and a lease liability. The
right-of-use asset is measured at cost, which includes
the initial measurement of the lease liability, any initial
direct costs incurred by the Company, an estimate of
any costs to dismantle and remove the asset at the end
of the lease, and any lease payments made in advance
of the lease commencement date (net of any incentives
received).
The Company depreciates the right-of-use asset on a
straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-of-
use asset or the end of the lease term. The Company
also assesses the right-of-use asset for impairment
when any indicators exist.
At lease commencement date, the Company
measures the lease liability at the present value of
the lease payments unpaid at that date, discounted
using the interest rate implicit in the lease if that rate
is readily available or the Company's incremental
borrowing rate. Lease payments included in the
measurement of the lease liability are made up of fixed
payments, variable payments based on an index or
rate, amounts expected to be payable under a residual
value guarantee and payments arising from options
reasonably certain to be exercised.
Subsequent to the initial measurement, the liability
will be reduced for payments made and increased for
interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in fixed
payments. When the lease liability is remeasured, the
corresponding adjustment is reflected in the right-of-
use asset, or profit and loss if the right-of-use asset is
already reduced to zero.
The Company has elected to account for short-term
leases i.e. for leases for period less than 12 months
and leases of low-value i.e. value of leased asset which
is less than ?3,50,000 using the practical expedients.
Instead of recognising a right-of-use asset and lease
liability, the payments in relation to these are recognised
as an expense in profit or loss on a straight-line basis
over the lease term. In the Balance Sheet, right-of-
use assets have been disclosed under non-current
assets and lease liabilities have been disclosed under
financial liabilities.
The Company as a lessor
The Company classifies leases as either operating or
finance leases. A lease is classified as a finance lease
if the Company transfers substantially all the risks and
rewards incidental to ownership of the underlying asset
to the lessee, and classifies it as an operating lease if
otherwise.
1.16 Revenue recognition
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation.
Sale of goods
When the control over goods is transferred to the buyer
and no significant uncertainty exists regarding the
amount of consideration that is derived from the sale
of goods.
Services rendered
a) When control over the service rendered in full or
part is recognized by the buyer and no significant
uncertainty exists regarding the amount of
consideration that is derived from rendering the
services.
b) In case of project activities: As per the percentage
of completion method after progress of work
to a reasonable extent for which control can be
transferred to the buyer.
c) In cases where the Company collects consideration
on account of another party, it recognises revenue
as the net amount retained on its own account.
Other income
a) Interest on a time proportion basis using the
effective Interest rate method.
b) Dividend from investments in shares on
establishment of the Company's right to receive.
c) Royalties are recognised on accrual basis in
accordance with the substance of the relevant
agreement
d) Export incentives are recognised as income only
at the time when there is no significant uncertainty
as to its measurability and ultimate realisation.
For determining the transaction price, the Company
measures the revenue in respect of each performance
obligation of a contract at its relative standalone selling
price.
The Company accounts for volume discounts and
pricing incentives to a buyer as a reduction of revenue
based on the ratable allocation of the discounts/
incentives to each of the underlying performance
obligation that corresponds to the progress by the
buyer towards earning the discount/ incentive.
Term of returns, refunds etc. are agreed with the
buyers on a case to case basis upon mutually
accepted terms and conditions. The impact of returns
and refunds is negligible on the turnover of the
Company.
As a practical expedient, as given in Ind AS 115,
the Company has not disclosed the remaining
performance obligation related disclosures for
contracts where the revenue recognized from the
satisfaction of the performance obligation corresponds
directly with the value to the customer of the entity's
performance completed to date especially in relation
to those contracts where invoicing is on time and
material basis.
Significant payment terms:
Payment is generally received either in cash or based
on credit terms. Credit terms are agreed to with the
buyers and is generally in line with the respective
industry standards.
1.17 Borrowing Costs
General and specific borrowing costs that are directly
attributable to the acquisition, construction or production
of a qualifying asset are capitalised during the period
of time that is required to complete and prepare the
asset for its intended use or sale. Qualifying assets
are assets that necessarily take a substantial period of
time to get ready for their intended use or sale. Other
Borrowing Costs are recognised as expense in the
period in which they are incurred.
1.18 Cash Flow Statement
Cash Flow Statement, as per Ind AS - 7, is prepared
using the indirect method, whereby profit for the
period is adjusted for the effects of transactions of a
non-cash nature, any deferrals or accruals of past or
future operating cash receipts or payments and items
of income or expenses associated with investing or
financing cash flows. The cash flows from operating,
investing and financing activities of the Company are
segregated.
1.19 Employee Benefits
(i) Short term obligations
Liabilities for wages and salaries including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the period
in which the employees render the related service
are recognised at the amounts expected to be paid
when the liabilities are settled. The liabilities are
presented as current employee benefit obligation
in balance sheet
(ii) Post-employment obligations
Defined Contribution Plans
Provident Fund: the Company transfers provident
fund contributions to the trust registered for
maintenance of the fund and has no further
obligations on this account. These are recognised
as and when they are due.
Superannuation Fund (SAF): the Company
contributes for eligible employees, a sum
equivalent to 9% and 8% for Executives and
Officers, respectively of salary, to the fund
administered by the trustees and managed by Life
Insurance Corporation of India (LIC) (for eligible
optees for LIC managed scheme) or to the fund
administered and managed by the NPS Trust
(for balance eligible optees for NPS managed
scheme). The Company has no further obligations
on this account. These are recognised as and
when they are due.
Defined Benefit Plans
Gratuity and Post Retirement Benefit plans - The
defined benefit obligation is calculated annually
by actuary using the projected unit credit method.
Re-measurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in
which they occur, directly in other comprehensive
income. They are included in retained earnings
in the statement of changes in equity. Changes
in present value of the defined benefit obligation
resulting from plan amendments or curtailments
are recognised immediately in profit or loss as
past service cost.
(iii) Other long term employee benefit obligations
The liabilities for leave encashment and long
service awards are not expected to be settled
wholly within 12 months after the end of the period
in which the employees render the related service.
They are measured annually by actuary using the
projected unit credit method. Re-measurement as
a result of experience adjustments and changes
in actuarial assumptions are recognised in the
period in which they occur in profit or loss.
1.20 Prior period Items
Material prior period items which arise in the current
period as a result of error or omission in the preparation
of prior period's financial statement are corrected
retrospectively in the first set of financial statements
approved for issue after their discovery by:
a) restating the comparative amounts for the prior
period(s) presented in which the error occurred; or
b) If the error occurred before the earliest prior
period presented, restating the opening balances
of assets, liabilities and equity for the earliest prior
period presented.
c) Any items exceeding rupees twenty five lacs (?25
Lacs) shall be considered as material prior period
item.
d) Retrospective restatement shall be done except
to the extent that it is impracticable to determine
either the period specific effects or the cumulative
effect of the error. When it is impracticable to
determine the period specific effects of an error
on comparative information for one or more prior
periods presented, the Company shall restate the
opening balances of assets, liabilities and equity
for the earliest prior period for which retrospective
restatement is practicable (which may be the
current period).
1.21 Earnings per share
Basic earnings per share are calculated by dividing
the net profit or loss (excluding other comprehensive
income) for the year attributable to equity shareholders
by the weighted average number of equity shares
outstanding during the year. The weighted average
number of equity shares outstanding during the year is
adjusted for events such as bonus issue, share splits or
consolidation that have changed the number of equity
shares outstanding without a change in corresponding
change in resources. For the purpose of calculating
diluted earnings per share, the net profit or loss
(excluding other comprehensive income) for the year
attributable to equity shareholders and the weighted
average number of equity shares outstanding during
the year are adjusted for the effects of dilutive potential
equity shares.
For and on behalf of the Board of Directors
For B. K. Shroff & Co. Adika Ratna Sekhar Adhip Nath Palchaudhuri R. M. Utthayaraja Saurav Dutta
Chartered Accountants Chairman and Director Director Director (Finance) &
Firm Registration No. 302166E Managing Director (Service Businesses) (Manufacturing Businesses) Chief Financial Officer
DIN 08053637 DIN 08695322 DIN 09678056 DIN 10042140
CA. P. K. Shroff Abhijit Ghosh Vandana Minda Heda Kavita Bhavsar
Partner Director Independent Director Company Secretary
Membership No. 059542 (Human Resource & DIN 09402294
Place: Kolkata Corporate Affairs)
Date: 25th May, 2023 DIN 10042785
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