Smartworks Coworking Spaces Ltd. కంపెనీ అకౌంటింగ్ విధానాలు

Mar 31, 2025

12. SUMMARY OF MATERIAL ACCOUNTING
POLICIES

2.1. Basis of preparation and presentation

These Standalone Financial Statements ("Financial
Statements") have been prepared to comply in
all material respects with the Indian Accounting
Standards (''Ind AS'') as notified by the Ministry of
Corporate Affairs (''MCA'') under section 133 of the
Companies Act, 2013 (''Act''), read together with Rule
3 of the Companies (Indian Accounting Standards)
Rules, 2015 (as amended from time to time) and
other accounting principles generally accepted in
India.

The Standalone Financial Statements are based on
the classification provisions contained in Ind AS 1,
''Presentation of Financial Statements'' and Division
II of Schedule III (as amended) to the Act to the
extent applicable. Further, for the purpose of clarity,
various items are aggregated in the Standalone
Balance Sheet ,Standalone Statement of Profit
and Loss , Standalone Statement of Cash Flows
and Standalone Statement of Changes in Equity
. Nonetheless, these items are disaggregated
separately in the notes to the Standalone Financial
Statements, where applicable or required.

All the amounts included in the Standalone Financial
Statements are reported in millions of Indian Rupee
(''Rupee'' or T) and are rounded off to the nearest
million, except per share data and unless stated
otherwise. Further, due to rounding off, certain
amounts are appearing as ''0''.

The accounting policies, as set out in the following
paragraphs of this note, have been consistently

applied, by the Company, to all the periods
presented in the said Standalone Financial
Statements, except in case of adoption of any new
standards and amendments during the year.

To provide more reliable and relevant information
about the effect of certain items in the Standalone
Balance Sheet and Standalone Statement of
Profit and Loss, the Company has changed the
classification of certain items.

The Standalone Financial Statements have been
prepared on the accrual and going concern basis,
and the historical cost convention except where the
Ind AS requires a different accounting treatment.

Current versus non-current classification

The Company presents assets and liabilities based
on current/ non-current classification.

Assets:

An asset is treated as current when it is:

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

ii) Held primarily for the purpose of trading

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

iv) 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.
Liabilities:

A liability is current when:

(i) It is expected to be settled in normal operating
cycle

(ii) It is held primarily for the purpose of trading

(iii) I t is due to be settled within twelve months
after the reporting period, or

(iv) 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, and all other
assets and liabilities which are not current (as
discussed in the above paragraphs) are classified
as non-current assets and liabilities.

Operating cycle:

All assets and liabilities have been classified as
current or non-current as per the Company''s
operating cycle and other criteria set out in the
Schedule III to the Companies Act, 2013. Based on
the nature of services and the time between the
rendering of service and their realization in cash and
cash equivalents, the Company has ascertained its
operating cycle as twelve months for the purpose
of current and non-current classification of assets
and liabilities.

Fair value measurement

Fair value is the price at the measurement date,
at which an asset can be sold or a liability can
be transferred, in an orderly transaction between
market participants. The Company''s accounting
policies require, measurement of certain financial
instruments at fair values (either on a recurring or
non-recurring basis).

The Company is required to classify the fair valuation
method of the financial assets and liabilities, either
measured or disclosed at fair value in the Financial
Information, using a three level fair-value-hierarchy
(which reflects the significance of inputs used
in the measurement). Accordingly, the Company
uses valuation techniques that are appropriate in
the circumstances and for which sufficient data is
available to measure fair value, maximising the use
of relevant observable inputs and minimising the
use of unobservable inputs.

2.2. Amendments to Ind AS

Ministry of Corporate Affairs ("MCA") notifies new
standards or amendments to the existing standards
under Companies (Indian Accounting Standards)
Rules as issued from time to time. During the
year ended March 31, 2025, MCA has notified
amendment to Ind AS - 116 Leases applicable to the
Company w.e.f. September 9, 2024. The Company
has reviewed the amendment and based on its
evaluation has determined that it does not have
any significant impact on its Standalone Financial
Statements.

2.3. Functional and presentation currency

The Standalone Financial Statements are presented
in Indian rupees, which is the functional currency
of the Company and the currency of the primary
economic environment in which the Company
operates.

2.4. Use of estimates and judgement

The preparation of Standalone Financial Statements
in conformity with Ind AS requires the management
to make judgments, estimates and assumptions
that affect the application of accounting policies
and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ
from these estimates. (refer note 3)

Estimates and underlying assumptions are reviewed
on a periodic basis. Revisions to accounting
estimates are recognized in the period in which
the estimates are revised and in any future periods
affected.

2.5 Revenue recognition

2.5.1. Operating revenue

Revenue from operations includes rental
income for the use of co-working space,
along with related ancillary services, software
fees and income from rendering of designing
services (design and fitout service).

Rental income

Revenue from leased out co-working spaces
under an operating leases is recognized on
a straight line basis over lease term, except
where there is an uncertainty of ultimate
collection.

The Company assesses the lease term based
on the customer portfolio to determine
whether it is reasonably certain that any
options to extend or terminate the contract will
be exercised. The Company has determined
the lease term as the non-cancellable term
or contract term based on the customer
portfolio.

After the lease term, rental revenue is
recognized as and when services are rendered
on a monthly basis as per the contractual
terms prescribed under agreement entered
with customers. Initial direct costs, such as

commissions, incurred by the Company in
negotiating and arranging a lease are deferred
and allocated to income over the lease term
for revenue, which has been presented as
''Prepayments'' in Standalone Balance Sheet. "

Design and fitout service

Design and fitout service where the
Company is acting as a contractor, revenue
is recognized in accordance with the terms
of the construction agreements. Under such
contracts, assets created does not have
an alternative use and the Company has an
enforceable right to payment.

The Company uses cost based input method
for measuring progress for performance
obligation satisfied over time. Under this
method, the Company recognizes revenue in
proportion to the actual project cost incurred
as against the total estimated project cost.
The management reviews and revises its
measure of progress periodically and are
considered as change in estimates and
accordingly, the effect of such changes in
estimates is recognised prospectively in the
period in which such changes are determined.
However, when the total project cost is
estimated to exceed total revenues from the
project, the loss is recognized immediately.

As the outcome of the contracts cannot be
measured reliably during the early stages of
the project, contract revenue is recognized
only to the extent of costs incurred in the
Standalone Statement of Profit and Loss.

Ancillary services

Revenue from contracts with customers for
ancillary services (such as meeting room
charges, one-time setup costs, parking
charges, internet fees, electricity charges,
facility management services etc.) is
recognized when control of the goods or
services are transferred to the customer at
an amount that reflects the consideration to
which the Company expects to be entitled in
exchange for those goods or services."

Revenues in excess of invoicing are classified
as unbilled revenue while invoicing and

collection in excess of revenue are classified
as deferred revenue. The Company presents
service revenue net of indirect taxes in its
Standalone Statement of Profit and Loss.

2.5.2. Other income

Interest income from a financial asset is
recognized when it is probable that the
economic benefits will flow to the Company
and the amount of income can be measured
reliably. Interest income is accrued on a
time basis, by reference to the principal
outstanding and at the effective interest
rate applicable, which is the rate that exactly
discounts estimated future cash receipts
through the expected life of the financial
asset to that asset''s net carrying amount on
initial recognition.

On disposal of an investment, the difference
between the carrying amount and the disposal
proceeds, net of expenses, is recognized in
the Standalone Statement of Profit and Loss.

2.6 Leases

2.6.1 Company as a lessee

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

At the date of commencement of the lease,
the Company recognizes a right-of-use asset
("ROU") and a corresponding lease liability for
all lease arrangements in which it is a lessee,
except for leases with a term of twelve
months or less (short-term leases) and low
value leases. For these short-term and low
value leases, the Company recognizes the
lease payments as an operating expense over
the term of the lease.

The right-of-use assets are initially
recognized at cost, which comprises the
initial amount of the lease liability adjusted for
any lease payments made at or prior to the
commencement date of the lease plus any
initial direct costs less any lease incentives.
They are subsequently measured at cost less

accumulated depreciation and impairment
losses. Depreciation is computed using the
straight-line method from the commencement
date to the end of the useful life of the
underlying asset or the end of the lease term,
whichever is shorter. 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 lease liability is initially measured at
amortized cost at the present value of the
future lease payments. The lease payments
are discounted using the interest rate implicit
in the lease or, if not readily determinable,
using the Incremental borrowing rates that
commensurate with the lease term (refer
note 3.1.1). Subsequently, lease liabilities
are measured at amortized cost using the
effective interest method and remeasured to
reflect any reassessment of options or lease
modifications, or to reflect changes in lease
payments, with a corresponding adjustment
to the ROU asset or Statement of Profit and
Loss if the ROU asset has been reduced to
zero.

Asset retirement obligation is determined
at the present value of expected costs to
settle the obligation using estimated cash
flows and are recognized as part of the cost
of the particular right-of-use asset on initial
recognition.

2.6.2Company as a lessor

Leases in which the Company transfers
substantially all the risks and benefits of
ownership of the asset are classified as
finance leases. Assets given under finance
lease are recognized as a receivable at an
amount equal to the net investment in the
lease. After initial recognition, the Company
apportions lease rentals between the
principal repayment and interest income so as
to achieve a constant periodic rate of return
on the net investment outstanding in respect
of the finance lease. The interest income is
recognized in the Standalone Statement of
Profit and Loss.

Leases in which the Company does not
transfer substantially all the risks and benefits
of ownership of the asset are classified
as operating leases. Assets subject to
operating leases are included in property,
plant and equipment and right of use assets.
Management recognised lease income on
an operating lease is recognized in the
Standalone Statement of Profit and Loss on
a straight-line basis over the lease term on
reasonable basis.

2.7 Foreign currency transactions and balances

Transactions in currencies other than the
Company''s functional currency (foreign currencies)
are recognized at the rates of exchange prevailing
at the dates of the transactions. At the end of each
reporting period, monetary items denominated
in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items that
are measured in terms of historical cost in a foreign
currency are not retranslated.

Exchange differences on monetary items are
recognized in Standalone Statement of Profit and
Loss in the period in which they arise.

2.8 Employee benefits

The Company''s employee benefit mainly includes
salaries, bonuses, defined contribution absences
and defined benefit plans. The employee benefits
are recognised in the period in which the associated
services are rendered by the Company employees.
Short term employee benefits are recognised
in Standalone Statement of Profit and Loss at
undiscounted amounts during the period in which
the related services are rendered.

2.8.1 Short-term benefits

Liabilities for salaries, including non-monetary
benefits (such as compensated absences)
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
recognized in respect of employees'' services
up to the end of the reporting period and are
measured at the amounts expected to be paid
when the liabilities are settled. The liabilities
are presented as current employee benefit
obligations in the Standalone Balance Sheet.

2.8.2 Long term benefits
Compensated absences

Compensated absences benefits comprises
of encashment and availment of leave
balances that were earned by the employees
over the period of past employment. The
Company provides for the liability towards
the said benefits on the basis of actuarial
valuation carried out as at the reporting date,
by an independent qualified actuary using the
projected-unit-credit method. The related
re-measurements are recognised in the
Standalone Statement of Profit and Loss in
the period in which they arise.

2.8.3 Post-employment obligations
Defined benefit plans

The Company has defined benefit plan namely
gratuity. The said plan requires a lump-sum
payment to eligible employees (meeting
the required vesting service condition) at
retirement or termination of employment,
based on a pre-defined formula. The cost of
providing benefits is determined using the
projected unit credit method, with actuarial
valuations being carried out at the end of
each annual reporting period. Defined benefit
costs are categorised as follows:

• service cost (including current service
cost, past service cost, as well as
gains and losses on curtailments and
settlements);

• net interest expense or income; and

• remeasurement

The Company presents the first two
components of defined benefit costs in
Standalone Statement of Profit and Loss.
Curtailment gains and losses are accounted
for as past service costs. Past service cost
is recognized in Statement of Profit and
Loss in the period of a plan amendment.
Net interest is calculated by applying the
discount rate at the beginning of the period
to the net defined benefit liability or asset.
Re-measurement gains and losses arising
from experience adjustments and changes in

actuarial assumptions are recognized in the
period in which they occur, directly in other
comprehensive income. They are included in
retained earnings in the Standalone Statement
of Changes in Equity and in the Standalone
Balance Sheet.

Defined contribution plans

The Company has defined contribution plans
for post-employment benefit namely the
provident fund and employee state insurance
scheme. The Company''s contribution thereto
is charged to the Standalone Statement of
Profit and Loss. The Company has no further
obligations under these plans beyond its
periodic contributions.

2.8.4 Share based payments

Employees of the Company receives
remuneration in the form of share-based
payments, whereby employees render
services as consideration for equity
instruments.

The cost of equity-settled transactions is
determined by the fair value at the date
when the grant is made using Black Scholes
valuation model. The grant date fair value of
options granted to employees is recognised
as employee benefit expense with a
corresponding increase in employee stock
options reserve, over the period in which
the eligibility conditions are fulfilled and the
employees unconditionally become entitled
to the awards. The cumulative expense
recognised for equity settled transactions
at each reporting date until the vesting date
reflects the extent to which the vesting period
has expired and the Company''s best estimate
of the number of equity instruments that will
ultimately vest.

The Standalone Statement of Profit and
Loss for a year represents the movement
in cumulative expense recognised as at
the beginning and end of that period and is
recognised in employee benefits expense.
The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.

2.9 Finance costs

Borrowing costs that are directly attributable
to the acquisition or construction of qualifying
assets are capitalised as part of the cost of such
assets. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its
intended use.

Interest income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.

All other borrowing costs are charged to the
Standalone Statement of Profit and Loss for the
period for which they are incurred.

2.10 Taxation

Income tax expense represents the sum of the
current tax and deferred tax.

2.10.1 Current tax

The current tax is based on taxable profit for
the year. Taxable profit differs from ''Profit
Before Tax'' as reported in the Standalone
Statement of Profit and Loss because of
items of income or expense that are taxable
or deductible in other years and items that are
never taxable or deductible. The Company''s
current tax is calculated using tax rates
applicable for the respective year.

2.10.2 Deferred tax

Deferred tax is recognized on temporary
differences between the carrying amounts
of assets and liabilities in the Standalone
Financial Statements and their tax bases.
Deferred tax liabilities are recognized for
all taxable temporary differences. Deferred
tax assets are recognized for all deductible
temporary differences and incurred tax
losses to the extent that it is probable that
taxable profits will be available against which
those deductible temporary differences can
be utilised. Such deferred tax assets and
liabilities are not recognized if the temporary
difference arises from the initial recognition
of assets and liabilities in a transaction that
affects neither the taxable profit nor the
accounting profit.

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

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

The measurement of deferred tax liabilities
and assets reflects the tax consequences
that would follow from the manner in which
the Company expects, at the end of the
reporting period, to recover or settle the
carrying amount of its assets and liabilities.

2.10.3 Current and deferred tax

Current and deferred tax are recognized in
the Standalone Statement of Profit and Loss,
except when they relate to items that are
recognized in other comprehensive income or
directly in equity, in which case, the current
and deferred tax are also recognized in other
comprehensive income or directly in equity
respectively.

2.11 Property, plant and equipment (''PPE'')

Property, plant and equipment is stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any.

Cost comprises of the purchase price including
freight and non-refundable taxes, and directly
attributable expenses incurred to bring the asset
to the location and condition necessary for it to be
capable of being operated in the manner intended
by management.

Borrowing costs that are directly attributable
to the acquisition or construction of qualifying
assets are capitalised as part of the cost of such
assets. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its
intended use.

Cost incurred for expected fit-out period is
capitalised as part of leasehold improvement,
as this cost is attributable to bring the asset in
necessary condition for its intended use. (refer
note 3.1.2)

Subsequent costs are included in the asset''s
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably.

The carrying amount of any component accounted
for as a separate asset is derecognized when
replaced. The other repairs and maintenance are
charged to Standalone Statement of Profit and
Loss during the reporting period in which they are
incurred.

2.11.1 Depreciation method, estimated useful
lives and residual value

Depreciable amount for assets is the cost of
an asset, or other amount substituted for cost,
less its estimated residual value. Residual
value is estimated to be five percent of total
cost of asset, except for certain leasehold
improvement and electrical equipment classes
of assets where it is estimated to be nil.

Depreciation on property, plant and
equipment is computed using the straight¬
line method over the estimated useful lives.
The management basis its past experience
and technical assessment has estimated the
useful lives, which is at variance with the life
prescribed in Part C of Schedule II to the Act
and has accordingly, depreciated the assets
over such useful lives. The Company has
established the estimated range of useful
lives for different categories of property, plant
and equipment as follows :

The useful lives, residual values and depreciation
method of PPE are reviewed, and adjusted
appropriately, at least as at each financial year
end so as to ensure that the method and period
of depreciation are consistent with the expected
pattern of economic benefits from these assets.
The effect of any change in the estimated useful
lives, residual values and / or depreciation method
are accounted prospectively, and accordingly the
depreciation is calculated over the PPE''s remaining
revised useful life.

2.11.2 Derecognition

An item of property, plant and equipment
is derecognised upon disposal or when no
future economic benefits are expected to
arise from the continued use of the asset.

Any gain or loss arising on the disposal or
retirement of an item of plant and equipment
is determined as the difference between the
sales proceeds and the carrying amount of
the asset and is recognised in the Standalone
Statement of Profit and Loss.

Gains and losses on disposal are determined
by comparing proceeds with carrying amount.
These are included in the Standalone
Statement of Profit and Loss within other
gains / (losses).

2.11.3 Capital work in progress

Capital work in progress is stated at cost
less impairment losses. Such expenditure
includes the cost of materials and goods
purchased or acquired with the intention of
creating any capital asset and the project site
and cost incurred for expected fit-out period
which is attributed to the property, plant and
equipment.

12 Intangible assets

2.12.1 Initial measurement

Software (both purchased and internally
generated) which is not an integral part of

related hardware, is treated as intangible
asset and stated at cost on initial recognition
and subsequently measured at cost less
accumulated amortization and accumulated
impairment loss, if any.

2.12.2 Internally-generated intangible assets

Expenditure on research activities for
internally generated intangible assets is
recognised as an expense in the period in
which it is incurred.

An internally-generated intangible asset
arising from development (or from the
development phase of an internal project) is
recognised if, and only if, all of the following
conditions have been demonstrated:

• the technical feasibility of completing
the intangible asset so that it will be
available for use or sale;

• the intention to complete the intangible
asset and use or sell it;

• t he ability to use or sell the intangible
asset;

• how the intangible asset will generate
probable future economic benefits;

• the availability of adequate technical,
financial and other resources to
complete the development and to use
or sell the intangible asset; and

• the ability to measure reliably the
expenditure attributable to the intangible
asset during its development.

The amount initially recognised for internally-
generated intangible assets is the sum of the
expenditure on direct salary incurred from the
date when the intangible asset first meets
the recognition criteria listed above. Where
no internally-generated intangible asset can
be recognised, development expenditure
is recognised in the Standalone Statement
of Profit and Loss in the period in which it is
incurred.

2.12.3 Subsequent measurement

Subsequent costs are included in the asset''s
carrying amount, only when it is probable that
future economic benefits associated with the
cost incurred will flow to the Company and
the cost of the item can be measured reliably.
All other expenditure is recognized in the
Standalone Statement of Profit and Loss.

2.12.4 Derecognition policy

An intangible asset is derecognised on
disposal, or when no future economic
benefits are expected from use or disposal.
Gains or losses arising from derecognition
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 Standalone
Statement of Profit and Loss when the asset
is derecognised.

2.12.5 Amortisation method and periods

I ntangible assets i.e. software are amortised
on a straight line basis over its estimated
useful life i.e. 3 years. The estimated useful
life and amortisation method are reviewed at
the end of each reporting year, with the effect
of any changes in estimate being accounted
for on a prospective basis.

2.13 Impairment of non-financial assets

At the end of each reporting year, the Company
reviews the carrying amounts of its impairment of
non-financial assets to determine whether there
is any indication that those assets have suffered
an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated
in order to determine the extent of the impairment
loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset,
the Company estimates the recoverable amount
of the cash generating unit to which the asset
belongs. When a reasonable and consistent basis
of allocation can be identified, corporate assets are
also allocated to individual cash-generating units,
or otherwise they are allocated to the smallest
cash-generating units for which a reasonable and
consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less
costs of disposal and value in use. 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 for which the estimates
of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash¬
generating unit) is estimated to be less than
its carrying amount, the carrying amount of
the asset (or cash-generating unit) is reduced
to its recoverable amount. An impairment loss
is recognised immediately in the Standalone
Statement of Profit and Loss.

When an impairment loss subsequently reverses,
the carrying amount of the asset (or a cash¬
generating unit) is increased to the revised estimate
of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying
amount that would have been determined had no
impairment loss been recognised for the asset (or
cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in the
Standalone Statement of Profit and Loss.