Accounting Policies of Clean Max Enviro Energy Solutions Ltd. Company

Mar 31, 2024

1.3 Summary of Material Accounting Policies

(a) Basis of preparation and presentation

The financial statements have been prepared on historical cost basis, except for
certain financial instruments that are measured at fair values, as explained in the
accounting policies below. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of
whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the
measurement date.

In addition, for financial reporting purposes, fair value measurements are
categorised into Level 1,2, or 3 based on the degree to which the inputs to the fair
value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

(b) Critical accounting judgments and key sources of estimation uncertainty

The preparation of these financial statements in conformity with the recognition
and measurement principles of Ind AS requires the management of the Company
to make estimates and judgements that affect the reported balances of assets and
liabilities, disclosures relating to contingent assets and liabilities and the reported
amounts of income and expense for the periods presented .

Estimates and the underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the periods in which the
estimates are revised and in future periods affected.

The preparation of the financial statements in conformity with the recognition and
measurement principles of Ind AS requires management to make judgements,

estimates and assumptions, that affect the reported
amounts of assets and liabilities, disclosures of
contingent liabilities at the date of the financial
statements and the reported amounts of revenue and
expenses for the years presented. Actual results may
differ from these estimates.

Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are
revised and in any future periods affected.

In particular, information about significant areas of
estimation, uncertainty and critical judgments in applying
accounting policies that have the most significant effect
on the amounts recognised in the financial statements
pertain to:

(i) Useful lives of property, plant and equipment and
intangible assets:

The Company reviews the useful life of property, plant and
equipment and intangible assets at the end of each
reporting period. This reassessment may result in change
in depreciation and amortisation expense in future
periods.

(ii) Impairment of non-financial assets:

The Company estimates the value in use of the cash
generating unit (CGU) based on future cash flows after
considering current economic conditions and trends,
estimated future operating results and growth rate and
anticipated future economic and regulatory conditions.
The estimated cash flows are developed using internal
forecasts. The cash flows are discounted using a suitable
discount rate in order to calculate the present value.

(iii) Impairment of investments:

The Company reviews its carrying value of investments
annually, or more frequently when there is indication for
impairment. If the recoverable amount is less than its
carrying amount, the impairment loss is accounted for.

(iv) Defined benefit plans:

The cost of the defined benefit plans and the present value
of the defined benefit obligation are based on actuarial
valuation using the projected unit credit method. 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 Balance Sheet date.

(v) Costs to complete for Construction contracts:

The Company''s management estimates the costs to
complete for each project for the purpose of revenue
recognition and recognition of anticipated losses on

projects, if any. In the process of calculating the cost to
complete, management conducts regular and systematic
reviews of actual results and future projections with
comparison against budget. This process requires
monitoring controls including financial and operational
controls and identifying major risks facing the Company and
developing and implementing initiatives to manage those
risks. The Company''s management is confident that the
costs to complete the project are fairly estimated.

(vi) Impairment of financial assets:

The impairment provision for financial assets (other than
trade receivables) are based on assumptions of risk of
default and expected loss rates. The Company makes
judgements about these assumptions for selecting the
inputs to the impairment calculation, based on the
Company''s past history, existing market conditions as well as
forward looking estimates at the end of each reporting
period. Trade receivables are stated at their nominal values
as reduced by appropriate allowances for estimated
irrecoverable amounts which are based on the aging of the
receivable balances and historical experiences. Individual
trade receivables are written off when management deems
them not be collectible.

(c )Revenue recognition

Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and revenue can
be reliably measured. Revenue towards satisfaction of a
performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated to
that performance obligation. Revenue is net off trade
discounts, rebates and other similar allowances. Revenue
excludes indirect taxes which are collected on behalf of
Government.

i. Revenue from sale of power:

Revenue from sale of power is recognised when the units of
electricity is delivered at the price agreed with the customer
in the power purchase agreement which coincides with the
transfer of control and the Company has a present right to
receive the payment.

ii. Revenue from construction contracts:

Contract revenues are recognised over a period of time,
based on the stage of completion of the contract activity.
Revenue is measured based on the proportion of contract
costs incurred for satisfying the performance obligation to
the total estimated contract costs, there being a direct
relationship between the input and the productivity. Claims
are accounted for as income when accepted by the customer.

Expected loss, if any, on a contracts is recognised as expense
in the period in which it is foreseen, irrespective of the stage
of completion of the contract.

Contract modifications are accounted for, when additions,

deletions or changes are approved either to the contract
scope or contract price. Accounting for modifications of
contracts involves assessing whether the services added to
an existing contract are distinct and whether the pricing is a
standalone selling price. Services added that are not distinct
are accounted for on a cumulative catch up basis, while
those that are distinct are accounted for prospectively, either
as a separate contract, if the additional services are priced at
the standalone selling price, or as a termination of the
existing contract and creation of a new contract if not priced
at the standalone selling price.

iii. Revenue from sale of services:

Revenue from services rendered over a period of time, such
as operation and maintenance contracts, are recognised on
straight line basis over the period of the performance
obligation.

iv. Interest income:

Interest income is recognised using the effective interest
method.

v. Dividend income:

Dividend income is recognized when the right to receive
payment is established.

(d) Government Subsidy

Government grants in the nature of subsidy related to
customer contracts are recognised as revenue from
operations in the Statement of Profit and Loss, on a prudent
basis, on commissioning of the solar power plant when there
is reasonable assurance that the conditions for the grant of
subsidy will be fulfilled and grant will be realised. When the
grant relates to an asset, the subsidy amount is deducted
from the carrying amount of the asset.

(e ) Share of profit or loss in Limited Liability Partnership
(''LLP''):

Share of profit or loss in LLP accrues when the same is
computed and credited or debited to the Capital/Current/any
other account of the Company in the books of the LLP.
Accordingly, share of profit or loss in LLPs is accounted
when such share of profit or loss is credited or debited to
Partner''s Capital / Current Account as per the terms of the
LLP agreement.

(f) Goods and Service tax input credit:

Goods and Service tax input credit is accounted for in the
books in the period in which the underlying goods and
service received is accounted and when there is reasonable
certainty in availing / utilising the credits.

(g) Employee benefits

Salaries, wages, and other short term benefits, accruing to
employees are recognised at undiscounted amounts in the
period in which the employee renders the related service.

Retirement benefits
Defined contribution plan:

The Company offers its employees defined contribution
plans in the form of provident fund and family pension fund.
Provident fund and family pension funds cover substantially
all regular employees. Contributions are paid during the year
into separate funds under certain fiduciary-type
arrangements. Both the employees and the Company pay
predetermined contributions into provident fund and family
pension fund. The contributions are normally based on a
certain proportion of the employee''s salary. The contributions
made are charged as an expense based on the amount of
contribution required to be made and when services are
rendered by the employees.

Defined benefit plan:

For defined benefit plans in the form of gratuity, the cost of
providing benefits is determined using the Projected Unit
Credit method, with actuarial valuations being carried out at
each balance sheet date. Actuarial gains and losses are
recognized in Other Comprehensive Income in the period in
which they occur. Past service cost is recognised
immediately to the extent that the benefits are already vested
and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested. The
retirement benefit obligation recognised in the Balance Sheet
represents the present value of the defined benefit obligation
as adjusted for unrecognised past service cost, as reduced
by the fair value of scheme assets. Any asset resulting from
this calculation is limited to past service cost, plus the
present value of available refunds and reductions in future
contributions to the schemes.

(h) Share-based payments:

Equity-settled share-based payments to employees of the
Company are measured at the fair value of the equity
instruments at the grant date. Details regarding the
determination of the fair value of equity-settled share-based
transactions are set out in Note 38. The fair value determined
at the grant date of the equity-settled share-based payments
to employees of the Company is expensed on a straight-line
basis over the vesting period, based on the Company''s
estimate of equity instruments that will eventually vest, with a
corresponding increase in equity at the end of year . At the
end of each year, the Company revisits its estimate of the
number of equity instruments expected to vest and
recognizes any impact in profit or loss, such that the
cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee
benefits reserve.

(i) Foreign currencies:

The functional currency of the Company is the Indian rupee (Rs.).

Income and expenses in foreign currencies are recorded at
exchange rates prevailing on the date of the transaction.
Foreign currency denominated monetary assets and
liabilities are translated at the exchange rate prevailing on the
balance sheet date and exchange gains and losses arising on
settlement and restatement are recognised in profit or loss.

Foreign currency denominated non - monetary assets and
liabilities that are measured at historical cost are not
retranslated.

(j) Taxes:

Income tax expense comprises current tax expense and the
net change during the year, in the deferred tax asset or
liability. Current and deferred taxes are recognised in profit or
loss, except when they relate to items that are recognised in
other comprehensive income or in equity, in which case the
related current and deferred tax are also recognised in other
comprehensive income or in equity, respectively.

Current and Deferred Taxes 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.

Tax assets and tax liabilities are offset when there is a legally
enforceable right to set off the recognised amounts.

i. Current income tax:

Provision for current income tax is made for the tax liability
payable on taxable income after considering tax allowances,
deductions and exemptions determined in accordance with
the applicable tax rates and the prevailing tax laws.

ii. Deferred tax:

Deferred income tax assets and liabilities are recognised for
deductible and taxable temporary differences arising
between the tax base of assets and liabilities and their
carrying amount.

Deferred income tax assets are recognised to the extent that
it is reasonable 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.

The carrying amount of deferred income 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 income tax
asset to be utilised.

(k) Exceptional items:

Exceptional items refer to items of income or expense within
the income statement from ordinary activities which are

non-recurring and are of such size, nature or incidence that
their separate disclosure is considered necessary to explain
the performance of the Company and to assist users of
financial statements in making projections of future financial
performance.

(l) Property, plant and equipment and Capital work in
progress:

Property, plant and equipment are stated at cost of
acquisition or construction including any cost attributable in
bringing the asset to its working condition for its intended
use, net of subsidy (if any) less accumulated depreciation.

Interest on borrowed money allocated to and utilised for
qualifying assets pertaining to the period up to the date of
capitalisation is added to the cost of the assets.

Depreciation on property, plant and equipment has been
provided on the Straight line method as per the useful life
prescribed in Schedule II to the Companies Act, 2013 except
in respect Power Generating Plant where the life is
considered as 25 years taking into account the nature of the
asset, the estimated usage of the asset, the operating
conditions of the asset, manufacturers warranties and
maintenance support, etc.

Salary cost and cost of travelling directly attributable to the
construction of property, plant and equipment has been
capitalised to the cost of property, plant and equipment.

Freehold land is not depreciated.

Any gain or loss arising on derecognition / disposal of an
asset is included in profit or loss.

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

Expenditure related to and incurred during implementation
(net of incidental income) of capital projects to get the assets
ready for intended use is included under "Capital Work in
Progress (including related inventories)". The same is
allocated to the respective items of property plant and
equipment on completion of construction / erection of the
capital project / property, plant and equipment. Capital work
in progress is stated at cost, net of accumulated impairment
loss, if any.

(m) Intangible assets:

Intangible assets acquired are measured on initial
recognition at cost. Subsequent to initial recognition,
intangible assets are carried at cost less any accumulated
amortisation. Intangible assets of the Company have finite
lives and are amortised over the estimated useful economic
life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired.

(n) Impairment of assets

Property, plant and equipment and intangible assets with
finite lives are evaluated for recoverability whenever there is
any indication that their carrying amounts may not be
recoverable. If any such indication exists, the recoverable
amount (i.e. higher of the fair value less cost to sell and the
value-in-use) is determined for the individual asset, unless
the asset does not generate cash flows that are largely
independent of those from other assets. In such cases, the
recoverable amount is determined for the cash generating
unit (CGU) to which the asset belongs.

If the recoverable amount of an asset (or CGU) is estimated
to be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount and
an impairment loss is recognised in profit or loss

(o) Financial instruments
Recognition and initial measurement

A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. Financial assets and financial
liabilities are recognized by the Company when it becomes a
party to the contractual provisions of the financial
instrument.

Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of a financial
instrument are adjusted to fair value, except where the
financial instrument is measured at Fair Value through profit
or loss, in which case the transaction costs are immediately
recognized in profit or loss.

Financial assets

Cash and cash equivalents

The Company considers all highly liquid financial
instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant risk of
change in value and having original maturities of three
months or less from the date of purchase, to be cash
equivalents. Cash and cash equivalents consist of balances
with banks which are unrestricted for withdrawal and usage.

For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term deposits,
as defined above.

Financial assets at amortised cost

Financial assets are subsequently measured at amortised
cost if these financial assets are held within a business
whose objective is to hold these assets to collect
contractual cash flows and the contractual terms of the
financial assets give rise on specified dates to cash flows
that are solely payments of principal and interest on the
principal amount outstanding.

Financial assets at fair value through profit or loss

Financial assets are measured at fair value through profit or
loss unless they are measured at amortised cost or at fair
value through other comprehensive income on initial
recognition. The transaction costs directly attributable to the
acquisition of financial assets and liabilities at fair value
through profit or loss are immediately recognised in profit or
loss.

Financial assets at fair value through other comprehensive
income (FVTOCI)

On initial recognition, the LLP can make an irrevocable
election (on an instrument-by-instrument basis) to present
the subsequent changes in fair value in other comprehensive
income pertaining to investments in equity instruments. This
election is not permitted if the equity investment is held for
trading. These elected investments are initially measured at
fair value plus transaction costs. Subsequently, they are
measured at fair value with gains and losses arising from
changes in fair value recognised in other comprehensive
income and accumulated in the ''Reserve for equity
instruments through other comprehensive income''. The
cumulative gain or loss is not to be reclassified to the
statement of profit and loss on disposal of the investments.

Dividends on these investments in equity instruments are
recognised in the statement of profit and loss when the
Company''s right to receive the dividends is established, it is
probable that the economic benefits associated with the
dividend will flow to the entity, the dividend does not
represent a recovery of part of cost of the investment and the
amount of dividend can be measured reliably. Dividends
recognised in the statement of profit and loss are included in
the ''Other income'' line item.

Investment in subsidiaries and joint ventures

The Company accounts for its investments in subsidiaries
and joint ventures at cost.

Financial liabilities and equity instruments
Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include
financial liabilities designated upon initial recognition as at
fair value through profit or loss.

(Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated as such at the
initial date of recognition, and only if the criteria in Ind AS 109
are satisfied.)

Other financial liabilities

Other financial liabilities (including borrowings, trade and
other payables) are subsequent to initial recognition,
measured at amortised cost using the effective interest rate
(EIR) method.

Equity instruments

An equity instrument is a contract that evidences residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments recognised by the Company are
recognised at the proceeds received net off direct issue cost.

Derivative financial instruments

The Company enters into derivative contracts to hedge
foreign currency transactions. Such derivative financial
instruments are measured at fair value at the end of each
reporting period. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when
the fair value is negative.

Any gains or losses arising from changes in the fair value of
derivatives are taken directly to profit or loss immediately

Derecognition of financial instruments

The Company derecognises a financial asset when the
contractual rights to the cash flows from the financial asset
expires or it transfers the financial asset and the transfer
qualifies for derecognition under Ind AS 109. A financial
liability (or a part of a financial liability) is derecognised from
the Company''s Balance Sheet when the obligation specified
in the contract is discharged or cancelled or expires.

Fair value measurement

When the fair values of financial assets or financial liabilities
recorded or disclosed in the financial statements cannot be
measured based on quoted prices in active markets, their fair
value is measured using valuation techniques including the
Discounted Cash Flow (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
consideration of inputs such as liquidity risk, credit risk and
volatility.

(p) Inventories

Inventories are valued at cost or net realisable value,
whichever is lower, cost being worked out on weighted
average basis. Cost includes all charges for bringing the
goods to their present location and condition.

Net realizable value represents the estimated selling price for
inventories less all estimated costs of completion and costs
necessary to make the sale.

(q) Leases

The Company evaluates each contract or arrangement,
whether it qualifies as lease as defined under Ind AS 116.

The Company as a lessee

The Company assesses, whether the contract is, or contains,
a lease. A contract is, or contains, a lease if the contract

involves:

(a) the use of an identified asset,

(b) the right to obtain substantially all the economic benefits
from use of the identified asset, and

(c) the right to direct the use of the identified asset.

The Company at the inception of the lease contract
recognizes a Right-of-Use (RoU) asset at cost and
corresponding lease liability, except for leases with term of
less than twelve months (short term) and low-value assets.

The cost of the right-of-use assets comprises the amount of
the initial measurement of the lease liability, any lease
payments made at or before the inception date of the lease
plus any initial direct costs, less any lease incentives
received. Subsequently, the right of-use assets is measured
at cost less any accumulated depreciation and accumulated
impairment losses, if any. The right-of-use assets is
depreciated using the straight-line method from the
commencement date over the shorter of lease term or useful
life of right-of-use assets.

The Company applies Ind AS 36 to determine whether a
Right-of-Use asset is impaired and accounts for any identified
impairment loss in the Statement of Profit and Loss as
described in the Note 1.3.(n) above.

For lease liabilities at inception, the Company measures the
lease liability at the present value of the lease payments that
are not paid at that date. The lease payments are discounted
using the interest rate implicit in the lease, if that rate is
readily determined, if that rate is not readily determined, the
lease payments are discounted using the incremental
borrowing rate.

The Company recognizes the amount of the re-measurement
of lease liability as an adjustment to the right-of-use assets.
Where the carrying amount of the right-of-use assets is
reduced to zero and there is a further reduction in the
measurement of the lease liability, the Company recognizes
any remaining amount of the re-measurement in the
Statement of Profit and Loss.

For short-term, low value leases and for variable lease
payments, the Company recognizes the lease payments for
such items as an operating expense on a straight-line basis
over the lease term and are recognised in profit or loss in the
period in which the condition that triggers those payments
occurs.

Lease payments (other than short term, low value leases and
variable lease payments that are dependent on sales) have
been classified as cash used in Financing activities in the
Statement of Cash Flows.

The Company has no assets given on lease to others.