NOTES FORMING PART OF THE AUDITED FINANCIAL STATEMENTS 1 Corporate information Arihant Superstructures Ltd. is registerd under companies act, 1956 as public limited company. The company's registered office is located at 302, Persipolis Building Plot No. 74, Sector 17, Vashi, Navi Mumbai - 400703 and its registered office is situated in the state of Maharashtra, i.e. within the jurisdiction of the Registrar of Companies, Maharashtra, at Mumbai. The operation of the company span in all aspect of real estate development, from the identification and acquisition of land, planning, execution, construction and marketing of projects. 2 Significant accounting policies (Illustrative) 2.1 Basis of accounting and brparation of financial statements The financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprise mandatory accounting standards as brscribed under section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistantly applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. 2.2 Use of estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. 2.3 Cash flow statement Cash flows are reported using the indirect method as per AS-3, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 2.4 Inventories i) Construction materials and consumables : The construction materials and consumables purchased are treated as consumables and added in work-in-progress. ii) Incomplete Project / Construction Work-In-Progress : The Incomplete Project / construction work-in-progress is valued lower at cost or net realisable value. (a) For projects where revenue is recognised : "Cost includes cost of land, development rights, rates and taxes, construction cost, borrowing cost, other direct expenditure, allocated overheads and other incidential expenses as per the Guidance Note on Accounting for real estate transactions (Revised 20l2) issued by The Institute of Chartered Accountants of India". (b) For projects where revenue is not recognised : "Cost includes direct expenses, construction cost, rates and taxes, borrowing cost, other direct expenditure, allocated overheads and other incidential expenses except land & development rights which is treated as other assets". iii) Finished Stock of Completed Projects : Finished sock of completed projects and stock in trade of units is valued at lower of cost or market value. 2.5 Debrciation and amortisation Debrciation is provided on straight line basis method over the useful life of asset as brscribed under Part C of Schedule II of the Companies Act, 2013. Debrciation for assets purchased / sold during a period is proportionately charged. Intangible assets are amortized over their respective individual estimated useful lives on a straight line basis, commencing from the date the asset is available to the company for its use. Debrciation and amortization methods, useful lives and residual values are reviewed periodically, including at each financial year end. 2.6 Investments Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties. 2.7 Revenue recognition "Pursuant to issuance of revised Guidance Note on Accounting for Real Estate Transactions (Revised 20l2), by The Institute of Chartered Accountants of India (ICAI), the Company revised its Accounting Policy of revenue recognition for all projects commencing on or after April l, 20l2 or project where the revenue is recognised for the first time on or after the above date. For project Arihant Aarohi revenue is recognized during the year due to the fulfilment of conditions of recognizing of revenue as per revised Guidance Note. Whereas projects Arihant Ayati, Remaining Phases of Arihant Adita and Arihant Agrima which came under the purview of the revised guidance note but as at March 3l, 20l5, the conditions for recognizing revenue for these projects were not met." Further for projects comenced before April 1, 2012 Arihant Adita Phase I, during the year the company has followed the "Percentage Completion Method". The revenue / income from real estate sales is recognized as revenue when there is no significant uncertainty exists regarding the realization and it is not unreasonable to expect ultimate collection. Revenue under this method is recognised in proportion to the actual project cost incurred as against the total estimated cost of the project under construction, subject to completion of construction work to a certain reasonable level depending on the type of the project. 2.8 Other 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. Share of Profit/Loss from Partnership Firm / Limited Liability Partnership Firm / Association of Person is accounted in respect of the financial year of the firm / LLP / AOP, ending on or before the Balance Sheet date, on the basis of their Audited / Unaudited Accounts, as the case may be. 2.9 Tangible fixed assets "Fixed assets, are carried at cost less accumulated debrciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and debrciated over the useful life of the principal item of the relevant assets. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Fixed assets acquired and put to use for project purpose are capitalised and debrciation thereon is included in the project cost till commissioning of the project." 2.10 Intangible fixed assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. 2.11 Borrowing costs Borrowing costs as per AS-16 include interest, amortisation of ancillary costs incurred. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. 2.12 Foreign currency transactions and translations Treatment of exchange differences Exchange differences arising on settlement of short-term foreign currency monetary assets and liabilities of the Company and its integral foreign operations are recognised as income or expense in the Statement of Profit and Loss. 2.13 Taxes on income Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability. Deferred tax as per AS-22 is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed debrciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realisability. 2.14 Earning Per Share Basic earnings per share as per AS-20 are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. 2.15 Provisions A provision is recognized when the company has a brsent obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their brsent value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. 2.16 Contingent Liabilities The Income-Tax Assessments of the company have been completed upto Assessment Year 2012-13. The assessed tax liability exceeds the provisions made, by Rs. 32,24,840/- as on 31 March 2015. Based on the decisions of the Appellate authorities and the Interbrtations of other relevant provisions, the Company has been legally advised that the additional demand raised is likely to be either deleted or substantially reduced and accordingly no provision is considered necessary. In terms of our report attached. For and on behalf of the Board of Directors M/S KAILASH CHAND JAIN & CO. CHARTERED ACCOUNTANTS Firm Reg. No.: II23I8W Ashok Chhajer Chairman & MD Nimish Shah Whole Time Director Sd/- Dipesh Mehta Partner Puja Agrawal Aman Verma M.No.: I34607 Place : Mumbai Date : 28/05/20I5
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