2.2 SigniFicant accounting judgments, estimates and assumptions
The preparation of financial statements in conformity with the recognition and measurement principles of Ind AS requires management to make judgments, estimates and assumptions that affect the reported balances of revenues, expenses, assets and liabilities and the accompanying disclosures, and
the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In the process of applying the Company''''s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:
Classification of property
The Company determines whether a property is classified as investment property or inventory as below.
Investment property comprises land and buildings (principally office and retail properties) that are not occupied substantially for use by, or in the operations of, the Company, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. These buildings are substantially rented to tenants and not intended to be sold in the ordinary course of business.
Inventory comprises property that is held for sale in the ordinary course of business. Principally, this is residential and commercial property that the Company develops and intends to sell before or during the course of construction or upon completion of construction.
(b) Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Revenue recognition and valuation of unbilled revenue The Company uses the percentage-of-completion method for recognition of revenue, accounting for unbilled revenue and contract cost thereon for its real estate and contractual projects. The percentage of completion is measured by reference to the stage of the projects and contracts determined based on the proportion of contract costs incurred for work performed to date bear to the estimated total contract costs. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Significant assumptions are required in determining the stage of completion, the extent of the contract cost incurred, the estimated total contract revenue and contract cost and the recoverability of the contracts. These estimates are based on events existing at the end of each reporting date.
Accounting for revenue and land cost for projects executed through joint development arrangements CJDA)
For projects executed through joint development arrangements, the revenue from the development and transfer of constructed area/revenue sharing arrangement and the corresponding land/ development rights received under JDA is measured at the fair value of the estimated construction service rendered to the land owner and the same is accounted on launch of the project. The fair value is estimated with reference to the terms of the JDA (whether revenue share or area share) and the related cost that is allocated to discharge the obligation of the Company under the JDA. Fair value of the construction is considered to be the representative fair value of the revenue transaction and land so obtained. Such assessment is carried out at the launch of the real estate project and is not reassessed at each reporting period. The Management is of the view that the fair value method and estimates are reflective of the current market condition.
Estimation of net realizable value for inventory [including land advance)
Inventory is stated at the lower of cost and net realizable value [NRV].
NRV for completed inventory property is assessed by reference to market conditions and prices existing at the reporting date and is determined by the Company, based on comparable transactions identified by the Company for properties in the same geographical market serving the same real estate segment.
NRV in respect of inventory property under construction is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and an estimate of the time value of money to the date of completion.
With respect to Land advance given, the net recoverable value is based on the present value of future cash flows, which depends on the estimate of, among other things, the likelihood that a project will be completed, the expected date of completion, the discount rate used and the estimation of sale prices and construction costs.
Impairment of non-financial assets Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm''''s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset''''s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to disclosure of fair value of investment property recorded by the Company.
Defined benefit plans - Gratuity The cost of the defined benefit gratuity plan and other post-employment medical benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases are based on expected future inflation rates and expected salary increase thereon.
Fair value measurement of financial instruments When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and market risk. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Measurement of financial instruments at amortized cost Financial instrument are subsequently measured at amortized cost using the effective interest (''''EIR'''') method. The computation of amortized cost is sensitive to the inputs to EIR including effective rate of interest, contractual cash flows and the expected life of the financial instrument. Changes in assumptions about these inputs could affect the reported value of financial instruments.
The management has determined that the investment properties consist of two classes of assets - office and retail - based on the nature, characteristics and risks of each property.
Asa tMarch31,2017,March31,2016and April 01,2015, the fair values of the propertiesare REs,231,627lakhs,REs, 178,177lakhsand REs, 164,350 lakhs respectively. These valuations are based on valuations performed by an accredited independent valuer.
The Company has no restrictions on the reliability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements, except as disclosed in note 32(b)
The fair value of investment properties is based on discounted cash flows and classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs. There has been no change in valuation techniques used since prior years.
Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset''''s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real estate property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset.
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behavior that is a characteristic of the class of real estate property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
* During the year ended March 31, 2016, the Company has made an equity investment of REs, 8,170 lakhs in PHVL by way of conversion of loans given to PHVL.
** BCV Developers Private Limited (''''BDPL''''), a subsidiary company, along with two joint venture companies BCV Estates Private Limited (''''BEPL'''') and CV Properties (Bangalore) Private Limited (''''CPPL''''), had filed a scheme of amalgamation, with the appointed date for such scheme being October 01, 2013. The scheme was sanctioned by the High Court of Karnataka on April 29, 2015 and the companies had filed the order with the Registrar of Companies on May 25, 2015. Upon such filing, BEPL and CPPL were amalgamated into BDPL and the equity shareholders of BEPL and CPPL were issued equivalent equity shares in BDPL. Consequently, in accordance with the scheme as approved by the High Court, the investments in BEPL and CPPL were merged into the investments in BDPL and accordingly disclosed above.
Operating lease commitments - Company as less or
The Company has entered into operating leases (cancellable and non-cancellable) on its investment property portfolio consisting of certain office and retail buildings with varying lease terms of up to eighteen years and with escalation and renewal clauses. All leases include a clause to enable upward revision of the lease rental on periodical basis and includes variable rent determined based on percentage of sales of lessee in certain cases. The Company is also required to maintain the property over the lease term. ''''
(a) income from certain commercial properties, which are held as inventory and leased out during the interim period until such properties are sold.
(b) income based on percentage of sales is REs, 578 lakhs (March 31, 2016: REs, 1,958 lakhs).
b. Other Commitments
(i) As at March 31, 2017, the estimated amount of contracts (net of capital advance) remaining to be executed on capital account not provided for was Rs, 15,932 lakhs (March 31, 2016: Rs, 7,356 lakhs, April 01, 2015: Rs, 16,266 lakhs)
(ii) As at March 31, 2017, the Company has given Rs, 25,851 lakhs (March 31, 2016: Rs, 28,226 lakhs, April 01, 2015: Rs, 23,970 lakhs) as advances/deposits for purchase of land/ joint development. Under the agreements executed with the land owners, the Company is required to make further payments and/or give share in area/ revenue from such development in exchange of undivided share in land based on the agreed terms/ milestones..
(iii) In connection with Company''''s investments in certain subsidiaries, the Company has entered into shareholders agreement with other shareholders wherein it has certain commitments including further investment in accordance with the terms of the agreement.
(iv) The Company has entered into a power purchase agreement with a party wherein the Company has committed minimum purchase of power.
(v) The Company is committed to provide financial support to some of its subsidiaries to ensure that these entities operate on going concern basis and are able to meet their debts and liabilities as they fall due.
The Company is also subject to certain legal proceedings and claims, which have arisen in the ordinary course of business, including certain litigation for commercial development or land parcels held for construction purposes, either through joint development arrangements or through outright purchases, the impact of which is not quantifiable. These cases are pending with various courts and are scheduled for hearings. After considering the circumstances and legal evaluation thereon, the management believes that these cases will not have an adverse effect on the financial statements.
Note: The Company does not expect any reimbursement in respect of the above contingent liabilities and it is not practicable to estimate the timing of the cash outflows, if any, in respect of aforesaid matters and it is not probable that an outflow of resources will be required to settle the above obligations/claims.
d. Other transactions:
1 The Company has invested Rs, Nil (March 31, 2016: Rs, 29,706 lakhs) in Series A optionally convertible debentures of Rs, 100/each fully paid up in PREPL. Also refer note 6
2 The Company had invested Rs, Nil (March 31, 2016: Rs, 294 lakhs) in equity shares of Rs, 10/- each fully paid up in PREPL. Also refer note 6.
3 The Company has invested Rs, 75 lakhs (March 31, 2016: Rs, 125 lakhs) in Equity shares Rs, 10/- each fully paid up in BGPPL. Also refer note 6.
4 The Company has invested Rs, 5 lakhs (March 31, 2016: Nil) in Equity shares Rs, 10/- each fully paid up in ACPL. Also refer note 6.
5 The Company has contributed Rs, 499 lakhs (March 31, 2016: Rs, Nil) as Capital Contribution in BILLP. Also refer note 6.
6 The Company has invested Rs, 400 lakhs (March 31, 2016: Rs, Nil) in Equity shares Rs, 10/- each fully paid up in MPPL. Also refer note 6.
7 The Company has invested Rs, 100 lakhs (March 31, 2016: Rs, Nil) in Equity Shares of Rs, 10/- each fully paid up in BHVL. Also refer note 6.
8 The Company has invested Rs, 50 lakhs (March 31, 2016: Rs, Nil) in Equity Shares of Rs, 10/- each fully paid up in OMMCL. Also refer note 6.
9 The Company has invested Rs, 8,100 lakhs (March 31, 2016: Rs, Nil) in 0.01% A series Compulsory Convertible Preference Shares of Rs, 100/- each fully paid up in MPPL. Also refer note 6.
10 The Company has invested Rs, 3,300 lakhs (March 31, 2016: Rs, Nil) in 0.01% A series Compulsory Convertible Preference Shares of Rs, 100/- each fully paid up in BGPPL. Also refer note 6.
11 The Company has invested Rs, 3,800 lakhs (March 31, 2016: Rs, Nil) in 0.01% A series Compulsory Convertible Preference Shares of Rs, 100/- each fully paid up in BEPPL. Also refer note 6.
12 The Company has invested Rs, 2,150 lakhs (March 31, 2016: Rs, Nil) in 12% Fully convertible debentures of Rs, 100/- each fully paid up in PHVL. Also refer note 6.
13 The Company has given Rs, 1,085 lakhs (March 31, 2016: Rs, 2,126 lakhs) to PHVL as Share Application money and the same has been refunded to the Company by PHVL.
14 The Company has purchased Rs, Nil (March 31, 2016: Rs, 560 lakhs) and Rs, Nil (March 31, 2016: Rs, 3,358 lakhs) of Series A Optionally Convertible debentures of Rs, 100/- each fully paid up and Series B Optionally Convertible debentures of Rs, 100/- each fully paid up respectively in BPPL from Reco Begonia Pte Ltd and subsequently redeemed by BPPL. Also refer note 6.
15 The Company has invested Rs, 500 lakhs in (March 31, 2016: Nil) 11% Fully Convertible Debentures (FCD) Rs, 100/- each of Perungudi Real Estates Private Limited.
16 The Company has converted 59.41 lakhs no. (March 31, 2016: Nil) of A series Optionally Convertible Debentures (OCDs) of Rs, 100 each into 594.12 lakhs no. of Class B Equity shares of Rs, 10 each fully paid up in PREPL.
17 The Company has converted 7.33 lakhs no. (March 31, 2016: Nil) of A series Optionally Convertible Debentures (OCDs) of Rs, 100 each into 73.28 lakhs no. of Class C Equity shares of Rs, 10 each fully paid up in BPPL.
18 The Company has converted 10.74 lakhs no. (March 31, 2016: Nil) of B series Optionally Convertible Debentures (OCDs) of Rs, 100 each into 107.41 lakhs no. of Class C Equity shares of Rs, 10 each fully paid up in BPPL.
19 The Company has converted 21.09 lakhs no. (March 31, 2016: Nil) of B series Optionally Convertible Debentures (OCDs) of Rs, 100 each into 210.89 lakhs no. of Redeemable preference shares of Rs, 10 each fully paid up in BPPL.
20 The Company has converted 95.90 lakhs no. (March 31, 2016: Nil) of Optionally Convertible Preference Shares (OCPs) of Rs, 10 each into 95.90 lakhs no. of Redeemable preference shares of Rs, 10 each fully paid up in BPPL.
21 BPPL has redeemed Rs, Nil (March 31, 2016: 17.18 lakhs) Series A optionally convertible debentures of Rs, 100/- each fully paid up invested by the Company.
22 BPPL has redeemed Rs, Nil (March 31, 2016: 15.19 lakhs) Series B optionally convertible debentures of Rs, 100/- each fully paid up invested by the Company.
23 The Company has made equity investment of Rs, Nil (March 31, 2016: Rs, 8,170 lakhs) in PHVL by way of conversion of loans given to PHVL.
24 The Company has made donation to IMET of Rs, 50 lakhs (March 31, 2016: Rs, 180 lakhs) and BFT of Rs, 430 lakhs (March 31, 2016: Rs, Nil lakhs).
25 The Company has provided corporate guarantee of Rs, Nil (March 31, 2016: Rs, 2,000 lakhs) for the loan taken by BFT for the working capital requirements of BFT.
26 Refer note 15 for guarantees received from directors and subsidiary companies in respect of loans availed by the Company.
27 Also refer note 6 as regards to investments held as at year-end.
e. Other inFormation:
Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables, other than those disclosed above. The Company has not recorded any provision/ write-off of receivables relating to amounts owed by related parties.
Note: In respect of the transactions with the related parties, the Company has complied with the provisions of Section 177 and 188 of the Companies Act, 2013 where applicable, and the details have been disclosed above, as required by the applicable accounting standards.
28 DEFINED BENEFIT PLAN - GRATUITY
The Company operates defined gratuity plan for its employees. Under the plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service.
The scheme is funded with an insurance company in the form of qualifying insurance policy.
The following tables summarise the components of net benefit expenses recognized in the statement of profit and loss and the funded status and amount recognized in the balance sheet.
Changes in the defined benefit obligation and fair value of plan assets - Year ended March 31, 2017
29 Share based payment
The Company provides share-based payment schemes to its employees. During the year ended March 31, 2017, an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.
The Company instituted an Employees Stock Option Scheme (''''ESOP 2011'''') pursuant to the Board of Directors and Shareholders'''' resolution dated May 4, 2011 and August 11, 2011, respectively. As per ESOP 2011, the Company granted 2,424,300 (till March 31, 2016: 2,424,300) options comprising equal number of equity shares in one or more tranches to the eligible employees of the Company and its subsidiaries. The options under this grant would vest to the employees equally as 25% of the total grant every year at the end of first, second, third and fourth year from the date of the grant respectively, with an exercise period of five years from the date of respective vesting. The contractual life (comprising the vesting period and the exercise period) of options granted is 9 years from date of such grant. The other relevant terms of the grant are as below:
The fair value of the share options is estimated at the grant date using Black Scholes Model taking into account the terms and conditions upon which the share options are granted and there are no cash settled alternatives for employees.
Other income (including finance income) and finance costs and fair value gains and losses on financial assets pertaining to individual segments are allocated to respective segments.
Current taxes, deferred taxes and certain financial assets and liabilities are considered as unallocated as they are also managed on a Company basis.
The Company is domiciled in India. The Company''''s revenue from operations from external customers primarily relate to operations in India and all the non-current assets of the Company are located in India.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. There have been no transfers between levels during the period.
The management assessed that the carrying values of cash and cash equivalents, trade receivables, investments, loans, trade payables, borrowings and other financial assets and liabilities approximate their fair values largely due to the short-term maturities.
The following methods and assumptions were used to estimate the fair values:
The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''''s estimate of fair value for these unquoted equity investments..
30 CAPITAL MANAGEMENT
The Company''''s objectives of capital management is to maximize the shareholder value. In order to maintain or adjust the capital structure, the Company may adjust the return to shareholders, issue/ buyback shares or sell assets to reduce debt. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants.
The Company monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt as below.
- Equity includes equity share capital and all other equity components attributable to the equity holders
- Net debt includes borrowings (non-current and current), trade payables and other financial liabilities, less cash and cash equivalents (including bank balances other than cash and cash equivalents and margin money deposits with banks) ''''
In order to achieve the objective of maximize shareholders value, the Company''''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing borrowings that define capital structure requirements. Any significant breach in meeting the financial covenants would allow the bank to call borrowings. There have been no breaches in the financial covenants of above-mentioned interest-bearing borrowing.
No changes were made in the objectives, policies or processes for managing capital during the current and previous years.
31 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''''s principal financial liabilities, other than derivatives, comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''''s operations. The Company''''s principal financial assets include loans, trade, other receivables and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''''s management oversees the management of these risks and ensures that the Company''''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision and are used exclusively for hedging purposes and not as trading or speculative instruments.
i. Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and other price risk, such as equity price risk and commodity/ real-estate risk.
The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016. The sensitivity analysis has been prepared on the basis that the amount of net debt and the ratio of fixed to floating interest rates of the debt. The analysis excludes the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations/provisions.
The below assumption has been made in calculating the sensitivity analysis:
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016.
Interest rate risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in Interest rate. The entity''''s exposure to the risk of changes in Interest rates relates primarily to the entity''''s operating activities (when receivables or payables are subject to different interest rates) and the entity''''s net receivables or payables.
The Company is affected by the price volatility of certain commodities/ real estate. Its operating activities require the ongoing development of real estate. The Company''''s management has developed and enacted a risk management strategy regarding commodity/ real estate price risk and its mitigation. The Company is subject to the price risk variables, which are expected to vary in line with the prevailing market conditions.
ii. Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments if a counterparty default on its obligations. The Company''''s exposure to credit risk arises majorly from trade receivables/ unbilled revenue and other financial assets.
Other financial assets like security deposits, loans and bank deposits are mostly with employees, government bodies and banks and hence, the Company does not expect any credit risk with respect to these financial assets.
With respect to trade receivables/ unbilled revenue, the Company has constituted teams to review the receivables on periodic basis and to take necessary mitigations, wherever required. The Company creates allowance for all unsecured receivables based on lifetime expected credit loss.
iii. Liquidity risk
The Company''''s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company believes that the cash and cash equivalents is sufficient to meet its current requirements. Accordingly no liquidity risk is perceived.
32 STANDARDS ISSUED BUT NOT YET EFFECTIVE
The amendment to standard issued up to the date of issuance of the Company''''s financial statements, but not yet effective as of the date of the Company''''s financial statements is disclosed below. The Company intends to adopt the amendment to standard when it becomes effective.
Amendments to Ind AS 102 Classification and Measurement of Share-based Payment Transaction
The amendments to Ind AS 102 applies prospectively for annual periods beginning on or after April 01, 2017. As per the amendments, in estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled share-based payments. Further, where tax law or regulation requires an entity to withhold a specified number of equity instruments and the share-based payment arrangement has a ''''net settlement feature'''', such an arrangement should be classified as equity-settled in its entirety. The Company does not anticipate that the application of the amendments in the future will have a significant impact on the Company''''s financial statements as the Company does not have any cash-settled share-based payment arrangements or any withholding tax arrangements with tax authorities in relation to such share-based payments.
Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 was issued in February 2016 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This standard will come into force from accounting period commencing on or after April 01, 2018. The Company will adopt the new standard on the required effective date. The directors of the Company anticipate that the application of the standard will be applicable only to certain streams of revenue and will not have a material impact on the financial statements.
Amendments to Ind AS 7 Disclosure Initiative
The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments apply prospectively for annual periods beginning on or after April 01, 2017. The Company does not anticipate that the application of these amendments will have a material impact on the Company''''s financial statements.
33 FIRST TIME ADOPTION
These standalone financial statements, for the year ended March 31, 2017, are the first time the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (''''Previous GAAP'''' or ''''IGAAP'''').
Accordingly, the Company has prepared the standalone financial statements which comply with Ind AS applicable for year ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''''s opening balance sheet was prepared as at April 01, 2015, the Company''''s date of transition to Ind AS.
i. Exemptions availed:
(a) Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the Previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their Previous GAAP carrying value.
(b) Ind AS 27 requires investments in subsidiaries, associates and joint ventures to be recorded at cost or in accordance with Ind AS 109 in its separate financial statements. However, Ind AS 101 provides an option to measure that investment at one of the following amounts in case the Company decides to measure such investment at cost:
i. Cost as per Ind AS 27 or
ii. Deemed cost, which is:
a. Fair value at the entity''''s date of transition to Ind AS
b. Previous GAAP carrying amount at that date
The Company has elected to measure its investments in subsidiaries, associates and joint ventures using deemed cost at the Previous GAAP carrying amount at the date of transition to Ind AS.
(c) Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. The Company has elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Use of this exemption means that business combinations occurring prior to the transition date have not been restated and the IGAAP carrying amounts of assets and liabilities, that are required to be recognized under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with respective Ind AS.
(d) Ind AS 101 provides an option to not apply Ind AS 102 to liabilities arising from share-based payment transactions that were settled before the date of transition to Ind AS. The Company has elected to avail this exemption and apply the requirements of Ind AS 102 to all such grants under the ESOP plan, which are not settled as at the date of transition to Ind AS.
ii. Exceptions applied
(a) Ind AS 101 requires an entity''''s estimates in accordance with Ind AS at the date of transition to Ind AS to be consistent with estimates made for the same date in accordance with Previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. The Company''''s estimates as at April 01, 2015 are consistent with the estimates as at the same date made in conformity with Previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under Previous GAAP:
- Investment carried at FVPL or FVOCI; and
- Impairment of financial assets based on expected credit loss model.
(b) Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.
The Company has applied the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
(c) Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
The Company has applied the requirement of classification and measurement of financial assets (investment in debt instruments) as above.
Footnotes to the reconciliation of equity as at April 01, 2015 and March 31, 2016 and profit or loss and cash flows for the year ended March 31, 2016:
1 Share-based payments
Under Ind-AS, employee share-based payments should be accounted for using the fair value method. In contrast, existing IGAAP permits an option of using either the intrinsic value method or the fair value method. As regards the ESOPs granted to subsidiaries, the company is cross charging the amount as expense to subsidiaries.
2 Defined benefit liabilities
Under Previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of net defined benefit liability/asset which is recognized in other comprehensive income in the respective periods.
3 Deferred tax
IGAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under IGAAP. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity.
4 JDA Accounting
Company has entered into certain joint development arrangements. In such a situation, revenue is recognized on gross basis. Since the goods exchanged under joint development arrangement i.e. land with flats are in dissimilar in nature, as per para 12 of Ind AS 18, the exchange is regarded as a transaction which generates revenue. The Company has measured revenue at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. Since , fair value of the goods or services received cannot be measured reliably, revenue is measured in relation to transfer of constructed property to land owners on the basis of fair value of services provided to the landlord. Further, Company has recognized land with corresponding credit to "land cost payable” to account for land received under joint development arrangement.
5 Dividend and tax on dividend
Under Previous GAAP, dividend payable was recorded as a liability in the period to which it relates. Under Ind AS, dividend to holders of equity instruments is recognized as a liability in the period in which the obligation to pay is established.
6 Financial assets and liabilities at amortized cost
Under IGAAP, there are certain assets and liabilities which are carried at nominal value. Ind AS requires to measure these assets and liabilities at fair value at inception and subsequently these assets and liabilities are measured at amortized cost. At inception date, the Company recognizes difference between fair value and nominal value as expense/income and the differential expense/ income on straight line basis over the life of the asset/liability.
7 Compound financial instruments
Under IGAAP, compound financial instruments, are classified on the basis of their legal form under investments. As per Ind AS, compound financial instruments are split between liability and equity components and accordingly classified in the financial statements.
8 Other comprehensive income
Under IGAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled IGAAP profit/loss to profit/loss as per Ind AS. Further, IGAAP profit/loss is reconciled to total comprehensive income as per Ind AS.
9 The transition from Previous GAAP to Ind AS has not had a material impact on the statement of cash flows.
10 The figures of the previous periods have been regrouped/reclassified, where necessary, to conform with the current year''''s classification.
34 On April 28, 2017, the Company launched the offering of its equity shares through a qualified institutions placement ("QIP”) in accordance with the provisions of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the "SEBI ICDR Regulations”). Pursuant to QIP, the Company has received an amount of Rs.49,999 lakhs as on May 03, 2017 against the issue of 21,978,021 equity shares of face value of Rs.10 each to qualified institutional buyers and the same were listed and admitted for trading on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited from May 05,2017.
35 The Board of Directors of the Company have approved the scheme of arrangement between the Company and its wholly owned subsidiaries
- Brigade Hotel Ventures Limited, Brigade Hospitality Services Limited and Augusta Club Private Limited and their respective shareholders and creditors (hereinafter referred to as "the Scheme”) in terms of the provisions of Sections 230 to 233 of the Companies Act, 2013 to transfer the hotels business, integrated clubs and convention centre business and ''''Augusta Club'''' business, to its wholly owned subsidiaries. The Company is in the process of obtaining the necessary approvals. Pending such approvals, the Scheme has not been accounted for in the accompanying standalone Ind AS financial statements for the year ended March 31, 2017.
36 As per the transfer pricing rules prescribed under the Income-tax Act, 1961, the Company is examining the domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustment with regard to the transactions involved.
37 The comparatives given in the standalone Ind AS financial statements have been compiled after making necessary Ind AS adjustments to the respective audited standalone financial statements under Previous GAAP to give a true and fair view in accordance with Ind AS.