changes during the period in inventories and operating receivables and payables (ii) other non-cash items, and (iii) other items for which the cash effects are investing or financing cash flows Under the indirect method, the net cash flow from operating activities is determined by adjusting net profit or loss for the effects of 0) changes during the period in inventories and operating receivables and payables (ii) non-cash items such as depreciation, provisions, deferred taxes, and unrealized foreign exchange gains and losses, and (ii) all other items for which the cash effects are investing or financing cash flows Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the operating revenues and expenses, excluding non-cash items disclosed in the statement of profit and loss and the changes during the period in inventories and operating receivables and payables (c) Effect of Uncertainties on Revenue Recognition Para 9 of AS 9 on "Revenue Recognition" deals with the effect of uncertainties on Revenue Recognition The para states: (0) Recognition of revenue requires that revenue is measurable and at the time of sale or the rendering of the service it would not be unreasonable to expect ultimate collection (11) Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc. revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise, n revenue only when it is reasonably certain that the ultimate collection will be made. When there is uncertainty as to ultimate collection, revenue is recognised at the time of sale or rendering of service even though payments are made by instalments. (ii) When the uncertainty relating to collectability arises subsequent to the time of sale or rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded (iv) An essential criterion for the recognition of revenue is that the consideration receiv-able for the sale of goods, the rendering of services or from the use by others of enterprise resources is easonably When considerat Lis not inable within onable limits the recognition of revenue is postponed: (v) When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognised Sagar Limited belongs to the engineering industry. The Chief Accountant has prepared the draft accounts for the year ended 31.03.09. You are required to advise the company on the following items from the viewpoint of finalisation of accounts, taking note of the mandatory accounting standards. (a) An audit stock verification during the year revealed that the opening stock of the year was understated by Rs. 3 lakhs due to wrong counting. (b) The company purchased on 01.04.08 a special purpose machinery for Rs. 25 lakhs. It received a Central Government Grant for 20% of the price. The machine has an effective life of 10 years. (c) The company undertook a contract for building a crane for Rs. 10 lakhs. As on 31.03.09 it incurred a cost of Rs. 1.5 lakhs and expects that there will be Rs. 9 lakhs more for completing the crane. It has received so far Rs. 1 lakh as progress payment