MV Electrosystems Ltd. కంపెనీ అకౌంటింగ్ విధానాలు

2. Material Accounting Policies Informationa. Basis of preparation

The financial statements of the Company have been
prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time)
The financial statements of the company have been
prepared on a historical cost basis, except for the following
assets and liabilities:

(i) Investments are measured at fair value.

(ii) Defined benefit plan- plan assets measured atfair value.
The financial statements are presented in INR millions

b. Use of Estimates

The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of income and expenses of
the period, reported balances of assets and liabilities
and disclosure of contingent liabilities at the date of
the financial statements and the results of operations
during the reporting period. Although these estimates are
based upon management''s best knowledge of current
events and actions, actual results could differ from these
estimates. Difference between actual result and estimates
are recognised in the period in which the results are
known/materialise.

c. Current vs Non-Current Classification

The Company presents assets and liabilities in the balance
sheet based on current/ non-current classification.

An asset is treated as current when it is:

- Expected to be realised or intended to be sold or
consumed in normal operating cycle

- Held primarily for the purpose of trading

- Expected to be realised within twelve months after
the reporting period, or

- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least
twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in normal operating cycle

- It is held primarily for the purpose of trading

- It is due to be settled within twelve months after the
reporting period, or

- There is no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.

The operating cycle is the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents. The Company has identified twelve months as
its operating cycle.

d. Foreign currencies

The Company''s financial statements are presented
in Indian Rupees (INR), which is also the Company''s
functional currency.

Transaction and balances

Transactions in foreign currencies are initially recorded
by the Company at their respective functional currency
spot rates at the date the transaction first qualifies for
recognition. However, for practical reasons, the Company
uses an average rate if the average approximates the
actual rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency closing
rate of exchange at the end of the reporting period.

Exchange differences arising on settlement or translation
of monetary items are recognised in statement of
profit and loss.

e. Revenue recognition

Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the Company and the
revenue can be reliably measured, regardless of when the
payment is being made. Revenue is measured at the fair
value of the consideration received or receivable, taking
into account contractually defined terms of payment
and excluding taxes or duties collected on behalf of the
government. The Company has concluded that it is the
principal in all of its revenue arrangements since it is the
primary obligor in all the revenue arrangements.

Based on the Educational Material on Ind AS 18 issued
by the ICAI, sales tax/ value added tax (VAT) / Goods and
Service Tax (GST) is not received by the Company on its
own account. Rather, it is tax collected on value added to
the commodity by the seller on behalf of the government.
Accordingly, it is excluded from revenue.

The specific recognition criteria described below must also
be met before revenue is recognised.

Sale of Goods

Revenue from the sale of goods is recognised when the
significant risks and rewards of ownership of the goods
have passed to the buyer, usually on delivery of the goods.
Revenue from the sale of goods is measured at the fair value
of the consideration received or receivable, net of returns
and allowances, trade discounts and volume rebates.

Rendering of Services

Revenue from erection and services and revenue from job
work is recognised as per the contractual terms and as and
when services are rendered.

Interest Income

Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the
applicable interest rate. Interest income is included under
the head "other income” in the statement of profit and loss.

Rental Income

Rental income arising from operating leases on investment
properties is accounted for on an actual basis and is
included under the head "other income” in the statement of
profit and loss

f. Contract balances
Contract assets

A contract asset is the right to consideration in exchange
for goods or services transferred to the customer. If the
Company performs by transferring goods or services to
a customer before the customer pays consideration or
before payment is due, a contract asset is recognised for
the earned consideration that is conditional.

Trade receivables

A receivable represents the Company’s right to an amount
of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is
due). Refer to accounting policies of financial assets in
section (q) Financial instruments - initial recognition and
subsequent measurement.

Contract liabilities

A contract liability is the obligation to transfer goods or
services to a customer for which the Company has received

consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before the
Company transfers goods or services to the customer, a
contract liability is recognised when the payment is made
or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when the Company
performs under the contract

g. Taxation

Current income tax

Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted, at the reporting date.

Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Current
tax items are recognised in correlation to the underlying
transaction either in OCI or directly in equity. Management
periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions
where appropriate.

Deferred tax

Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable
temporary differences, except when the deferred tax
liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.

Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets
are recognised to the extent that it is probable that taxable
profit will be available against which the deductible
temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised, except when
the deferred tax asset 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 the
accounting profit nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be

utilised. Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the extent that
it has become probable that future taxable profits will allow
the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted
at the reporting date.

Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss in other
comprehensive income .Deferred tax items are recognised
in correlation to the underlying transaction in OCI.

h. Property, Plant and Equipment

Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.

All the property, plant and equipment is stated at cost, net
of accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing
part of the plant and equipment and borrowing costs for
long-term construction projects if the recognition criteria
are met. When significant parts of plant and equipment
are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful
lives. Likewise, when a major inspection is performed,
its cost is recognised in the carrying amount of the plant
and equipment as a replacement if the recognition criteria
are satisfied. All other repair and maintenance costs are
recognised in profit or loss as incurred.

In case of other assets, depreciation has been provided
on written down value method on the economic useful
life prescribed by Schedule II to the Companies Act''2013.
Depreciation on addition to or on disposal of Fixed Asset is
calculated on pro rata basis.

An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or
when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is
included in the statement of profit and loss when the asset
is derecognised.

The residual values, useful lives and methods of
depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively,
if appropriate.

i. Intangible Assets

Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,

intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses, if any.

Amortisation of the finite intangible assets is allocated
on systematic basis over the best estimate of their useful
life and accordingly softwares are amortised on straight
line basis over the period of six years or license period
whichever is lower.

Gains or losses arising from de-recognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognised in the statement of profit or loss when
the asset is derecognised. The Company has no intangible
assets with an indefinite life.

j. Investment Property

Investment property is property held either to earn rental
income or for capital appreciation or for both, but not for
sale in the ordinary course of business, use in the production
or supply of goods or services or for administrative
purposes. Upon initial recognition, an investment property
is measured at cost, including related transaction costs.
Subsequent to initial recognition, investment property
is measured at cost less accumulated depreciation and
accumulated impairment losses, if any.

The Investment Property consists of Land and Building and
as land in a non-depreciable asset so Based on technical
evaluation and consequent advice, the management
believe that only building will be depreciated over a period
of 30 years on written down value basis.

Though the Company measures investment property using
cost based measurement, the fair value of investment
property is disclosed in the notes. Fair values are
determined based on an annual evaluation performed by
an accredited external independent valuer.

Investment property is derecognised either when it has
been disposed of or when it is permanently withdrawn
from use and no future economic benefit is expected from
its disposal. Any gain or loss on disposal of investment
property (calculated as the difference between the net
proceeds from disposal and the carrying amount of the
item) is recognised in profit or loss.

Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the
expenditure will flow to the Group and the cost of the item
can be measured reliably.

k. Borrowing Cost

Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of
the asset. All other borrowing costs are expensed in the

period in which they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection
with the borrowing of funds. Borrowing cost also includes
exchange differences to the extent regarded as an
adjustment to the borrowing costs.

l. Leases

The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.

a. Company as a lessee

The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.

The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement
date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over
the shorter of the lease term and the estimated useful
lives of the assets, as follows:

If ownership of the leased asset transfers to the
Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation
is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.

b. Lease Liabilities

In calculating the present value of lease payments,
the Company uses its incremental borrowing rate at
the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change in
the lease term, a change in the lease payments or a
change in the assessment of an option to purchase
the underlying asset.

c. Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition
exemption to its short-term leases of land, building,
machinery and equipment (i.e., those leases that
have a lease term of 12 months or less from the
commencement date and do not contain a purchase
option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment
that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the lease term.

d. Company as a lessor

Leases in which the Company does not transfer
substantially all the risks and rewards of ownership
of an asset are classified as operating leases.
Rental income from operating lease is recognised
on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying
amount of the leased asset and recognised over
the lease term on the same basis as rental income.
Contingent rents are recognised as revenue in the
period in which they are earned.

Leases are classified as finance leases when
substantially all of the risks and rewards of ownership
transfer from the Company to the lessee. Amounts
due from lessees under finance leases are recorded
as receivables at the Company’s net investment in
the leases. Finance lease income is allocated to
accounting periods so as to reflect a constant periodic
rate of return on the net investment outstanding in
respect of the lease.

m. Inventories

Inventories are valued as follows:-

Raw materials, Stores, Spares, Other Materials and Traded
Goods including packing material:-

Lower of cost and net realizable value. However, materials
and other supplies held for use in the 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 FIFO basis.

Cost includes cost of purchase and other costs
incurred in bringing the inventories to their present
location and condition.

Finished goods:-

Lower of cost and net realizable value. Cost includes cost of
direct materials and labour and a proportion of manufacturing
overheads based on the normal operating capacity, but
excluding borrowing costs. Cost is determined on FIFO basis.

Work in Progress

Work in Progress is valued at the lower of actual cost
incurred or net realizable value. Cost includes direct
materials, labour and proportionate overheads.

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.

n. Impairment of non-financial assets

The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash-generating unit’s (CGU) fair
value less costs of disposal and its value in use. Recoverable
amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely
independent of those from other assets or Company''s
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal,
recent market transactions are taken into account. If
no such transactions can be identified, an appropriate
valuation model is used.