BEL(Bharat Electronics Ltd)

Revenue Recognition:-

Revenue from Contract with Customers :-

1.Revenue is recognized when (or as) the company

satisfies a performance obligation by transferring a
promised good or services (i.e., an Asset) to a Customer.

2.Satisfaction of performance obligation over time

a. Revenue is recognised overtime where the transfer of

control of goods or services take places over time by
measuring the progress towards complete satisfaction of
that performance obligation, if one of the following
criteria is met:

• the company’s performance entitles the customer to

receive and consume the benefits simultaneously as the
company performs
• the company’s performance creates or enhances an
asset that the customer controls as the asset is created
or enhanced

• the company’s performance does not create an asset

with an alternative use to the company and the company
has an enforceable right to payment for erformance
completed to date.

b. Progress made towards satisfying a performance

obligation is assessed based on the ratio of actual costs
incurred on the contract up to the reporting date to the
estimated total costs expected to complete the contract.
If the outcome of the performance obligation cannot be
estimated reliably and where it is probable that the costs
will be recovered, revenue is recognized to the extent of
costs incurred.

c. In case of AMC contracts, where passage of time is the

criteria for satisfaction of performance obligation,
revenue is recognized using the output method.

3. Satisfaction of performance obligation at a point

in time
a. In respect of cases where the transfer of control does
not take place over time, the company recognizes the
revenue at a point in time when it satisfies the
performance obligations.
b. The performance obligation is satisfied when the
customer obtains control of the asset. The indicators for
transfer of control include the following:

• the company has transferred physical possession of the

asset
• the customer has legal title to the asset
• the customer has accepted the asset
• when the company has a present right to payment for
the asset
• the customer has the significant risks and rewards of
ownership of the asset. The transfer of significant risks
and rewards ownership is assessed based on the
Incoterms of the contracts.

Ex-Works contract – In case of Ex-works contract,

revenue is recognized when the specified goods are
unconditionally appropriated to the contract after prior
Inspection and acceptance, if required. FOR Contracts –
In the case of FOR contracts, revenue is recognized when
the goods are handed over to the carrier for transmission
to the buyer after prior inspection and acceptance, if
stipulated, and in the case of FOR destination contracts,
if there is a reasonable expectation of the goods reaching
destination within the accounting period.

c. Bill and hold Sales Bill and hold sales is recognized

when all the following criteria are met:
• the reason for the bill and hold sales is substantive
• the product is identified separately as belonging to the
customer
• the product is currently ready for physical transfer to
the customer
• the company does not have the ability to use the
product or to direct it to another customer

4. Measurement
a. Revenue is recognized at the amount of the
transaction price that is allocated to the performance
obligation.

The transaction price is the amount of consideration to

which the Company expects to be entitled in exchange
for transferring promised goods or services to a
customer, excluding amount collected on behalf of
third parties.
In case of price escalation and ERV, revenue is recognized
at most likely amount to be realized from customer in
line with contractual terms.

b. In case where the contracts involve multiple

performance obligations, the company allocates the
transaction price to each performance obligation on the
relative standalone selling price basis.

Bundled Contracts - In case of a Bundled contract, where

separate fee for installation and commissioning or any
other separately identifiable component is not
stipulated, the Company applies the recognition criteria
to separately identifiable components (sale of goods and
installation and commissioning, etc.) of the transaction
and allocates the revenue to those separate components
based on stand-alone selling price.

Multiple Elements - In cases where the installation and

commissioning or any other separately identifiable
component is stipulated and price for the same agreed
separately, the Company applies the recognition criteria
to separately identified components (sale of goods and
installation and commissioning, etc.) of the transaction
and allocates the revenue to those separate components
based on their stand-alone selling price.
c. If the stand-alone selling price is not available the
company estimates the stand alone selling price.

5. Penalties

Penalties (including levy of liquidated damages for delay

in delivery) specified in a contract are not treated as an
inherent part of Transaction Price if the levy of same is
subject to review by the customer.

6.Significant financing component

Advances received towards execution of Defence related

projects are not considered for determining significant
financing component since the objective is to protect the
interest of the contracting parties. In respect of other
contracts, the existence of significant financing
component is reviewed on a case to case basis.
B. Other Income
Recognition of other income is as follows:
 Interest Income Interest income is recognized using
the effective interest rate method.
 Dividend Income:- Dividend income is recognized
when the Company’s right to receive the payment is
established.
 Rental Income Rental income arising from operating
leases is accounted for on a straight-line basis over
the lease term unless increase in rentals are in line
with expected inflation or otherwise justified.
 Duty Drawbacks Duty drawback claims on exports
are accounted on accrual basis.
 Other Income Other income not specifically stated
above is recognized on accrual basis.

Depreciation / Amortisation
 Depreciation is calculated on a straight-line basis
over
 the estimated useful lives of the assets.

 The Company, based on technical assessments,

depreciates certain items of building, plant and
equipment and other asset classes over estimated
useful lives which are different from the useful life
prescribed in Schedule II to the Companies Act,
2013.

 The Management believes that these estimated

useful lives are realistic and reflect fair
approximation of the period over which the assets
are likely to be used.

 Where cost of a part of the asset is significant to

total cost of the asset and estimated useful life of
that part is different from the estimated useful life of
the remaining asset, estimated useful life of that
significant part is determined separately and the
significant part is depreciated on straight-line basis
over its estimated useful life.
  The residual values, useful lives and methods of
depreciation / amortisation of property, plant and
equipment are reviewed at each financial year end
and adjusted prospectively, if appropriate.

Inventories

 All inventories of the Company other than

disposable scrap are valued at lower of cost or net
realisable value.

 Disposable scrap is valued at estimated net

realizable value.

 Cost of materials is ascertained by using the

weighted average cost formula.

 Cost of Work - in - progress and finished goods

include Materials, Direct Labour and appropriate
overheads.

 Adequate provision is made for inventory which are

more than five years old which may not be required
for further use.

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12. INVENTORIES a) Inventories are valued at lower of Cost and Net Realisable Value. b) The cost of raw
material excluding Goods-in-Transit, components and stores are assigned by using the weighted average
cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade
and Work-In- 176 Hindustan Aeronautics Limited Significant Accounting Policiesfor the financial year
2021-22 Progress, cost includes costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost includes Taxes and duties (other
than Taxes and duties for which input credit is available). c) Provision for redundancy is assessed on
ageing at a suitable percentage / level of the value of closing inventory of raw material and components,
stores and spare parts and construction material. Besides, wherever necessary, adequate provision is
made for the redundancy of such materials in respect of completed / specific projects and other
surplus / redundant material pending transfer to salvage stores. d) Saleable / Disposable scrap is valued
at Net Realisable Value. e) Stores declared surplus / unserviceable / redundant are charged to revenue
in the year of such identification. f) Consumables issued from stores and lying unused at the end of the
year are not reckoned as inventory

13. REVENUE RECOGNITION 13.1. Manufacturing of Aircraft/Helicopter/Spares/Repair Contracts a)

Revenue on Sale of Goods and Services is recognized at a point in time when the Company satisfies the
performance obligation on transfer of control of the products to the Customer in an amount that
reflects the consideration the Company expects to receive in exchange for those products pursuant to
the Contract with customer. Revenue from service Warranty is recognized on straight line basis over the
period of Warranty. Transfer of Control happens on: i. Acceptance by the buyer’s Inspector, by way of
Signaling Out Certificate (SOC) or Acceptance by the buyer’s pilot, by way of Certificate of Conformity
(COC), wherever, specifically required in the contract, in the case of Aircrafts/Helicopters, ii. Acceptance
by the Buyer’s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair& Overhaul of
Aircraft/Helicopter/Engine, Rotables, Site repairs, Cat ’B’ repair servicing etc., iii. For other deliverables
like Spares, Revenue is recognized based on the Acceptance by the buyer’s inspection agency or as
agreed to by the buyer. b) In case of Performance Based Logistic Contracts, Revenue is recognized over a
period of time, based on Helicopter Availability Certificate, Jointly signed by Seller and Buyer. c) Revenue
is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/
determined, the revenue is recognised at the most likely amount based on past experience. Differential
revenue, if any, is recognised on receipt of approval / sanction. 13.2. Development Contracts a) Revenue
is recognized over a period of time on incurrence of expenditure identifiable to work orders: i. where
milestones have been defined, on achievement of milestone under the output method. ii. where
milestones have not been defined, on incurrence of expenditure under the input method. b) Where the
customer’s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/
intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the
customer. 13.3. Significant Financing Component a) For the majority of the contracts, advance payments
are received, prior to commencement of work and milestone payments are paid in accordance with the
terms of the contract. Annual Report 2021-22 177 Significant Accounting Policiesfor the financial year
2021-22 b) Payments received from customers in advance are not considered to be a significant
financing component as they are given with the objective to protect the interest of the contracting
parties. 13.4. Contract Modification A contract modification exists when the change in scope is agreed
but the corresponding change in price is not determined. In such circumstances, revenue is recognized,
based on the Company’s assessment of the estimated change in the transaction price arising from the
modification. 13.5. Other Income Interest Income is accrued on a time proportion basis, by reference to
the principal outstanding and at the effective interest rate applicable. Dividend income from
investments is recognised when the right to receive payment has been established.

depreciation
Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated
impairment losses, if any.

Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of
the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies
Act 2013, the same is disclosed under Notes to Accounts.

The cost and the related accumulated depreciation are eliminated from the Financial Statements upon
sale or derecognition or retirement of the asset and the resultant gains or losses are recognized in the
Statement of Profit and Loss of the relevant period.

The estimated useful lives, residual values and depreciation / amortisation method are review

Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of
the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies
Act 2013, the same is disclosed under Notes to Accounts.