2. MATERIAL ACCOUNTING POLICIES

This note provides a list of the material accounting
policies adopted in the preparation of these financial
statements. These policies have been consistently
applied to all the years presented, unless otherwise
stated.

a) Property, plant and equipment
• Recognition and measurement

Freehold land is carried at historical cost. All
other items of property, plant and equipment
are stated at cost less accumulated depreciation
and accumulated impairment loss, if any. Cost
comprises of purchase price and any directly
attributable costs of bringing the asset to its
working condition for the intended use. Any
trade discounts and rebates are deducted in
arriving at the purchase price.

Borrowing costs attributable to construction or
acquisition of a qualifying asset for the period
up to the date, the asset is ready for its intended
use are included in the cost of the asset to which
they relate.

Pre-operative expenditure including trial run
expenses comprising of revenue expenses
incurred as reduced by the revenue generated
during the period up to the date, the asset is
ready for its intended use are treated as part of
costs of that asset.

Capital work-in-progress comprises of the cost
of property, plant and equipment that are not
yet ready for their intended use as at the balance
sheet date.

Advances paid towards the acquisition of
property, plant and equipment outstanding at
each reporting date are disclosed under "Other
non-current assets".

• Subsequent costs

The cost of replacing a part of an item of
property, plant and equipment is recognised in
the carrying amount of the item if it is probable
that the future economic benefits embodied
within the part will flow to the company and
its cost can be measured reliably. The costs of
the day-to-day servicing of property, plant and
equipment are recognised in the statement of
profit and loss as incurred.

• Derecognition

An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected from its use
or disposal. Gains and losses on disposal of
an item of property, plant and equipment are
determined by comparing the proceeds from
disposal with the carrying amount of property,
plant and equipment, and are recognised net
and disclosed within other income or expenses
in the statement of profit and loss.

• Depreciation methods, estimated useful lives
and residual value

Depreciation is calculated over the depreciable
amount, which is the cost of an asset, or other
amount substituted for cost, less its residual
value. Depreciation is recognised in the
statement of profit and loss on a straight-line
basis over the estimated useful lives of each part
of an item of property, plant and equipment as
prescribed in Schedule II of the Companies Act
2013, as assessed by the management of the

b) Intangible assets

• Recognition and measurement

Intangible assets are recognised when the
asset is identifiable, is within the control of the
company, it is probable that the future economic
benefits that are attributable to the asset will
flow to the company and cost of the asset can be
reliably measured.

I ntangible assets acquired by the company that
have finite useful lives are measured at cost less
accumulated amortisation and any accumulated
impairment losses.

• Derecognition

An item of intangible asset is derecognised upon
disposal or when no future economic benefits
are expected from its use or disposal. Gains
and losses on disposal of intangible asset are
determined by comparing the proceeds from
disposal with the carrying amount of intangible
asset and are recognised net and disclosed within
other income or expenses in the statement of
profit and loss.

• Amortisation

Amortisation is calculated over the cost of the
asset, or other amount substituted for cost.

Amortisation is recognised in statement of
profit and loss on a straight-line basis over the
estimated useful lives of intangible assets from
the date that they are available for use, since
this most closely reflects the expected pattern
of consumption of the future economic benefits
embodied in the asset.

c) Investment properties

I nvestment properties are measured initially at
cost, including transaction costs. Subsequent
to initial recognition, investment properties are
stated at cost less accumulated depreciation and
accumulated impairment loss, if any.

The cost includes the cost of replacing parts
and borrowing costs for long-term construction
projects if the recognition criteria are met. When
significant parts of the property are required to be
replaced at intervals, the Company depreciates
them separately based on their specific useful
lives. All other repair and maintenance costs are
recognised in the statement of profit and loss as
incurred.

Investment properties are derecognized either
when they have been disposed off or when
they are permanently withdrawn from use and
no future economic benefit is expected from
their disposal. The difference between the net
disposal proceeds and the carrying amount of
the asset is recognised in the statement of profit
and loss in the period of derecognition.

d) Leases

At inception of a contract, the Company
assesses whether a contract is, or contains, a
lease. A contract is, or contains, a lease if the
contract conveys the right to control the use
of an identified asset for a period of time in
exchange for consideration. To assess whether
a contract conveys the right to control the use
of an identified asset, the Company assesses
whether:

• the contract involves the use of an identified
asset - this may be specified explicitly or
implicitly and should be physically distinct

or represent substantially all of the capacity
of a physically distinct asset. If the supplier
has a substantive substitution right, then
the asset is not identified.

• the Company has the right to obtain
substantially all of the economic benefits
from use of the asset throughout the period
of use; and

• the Company has the right to direct the use
of the asset. The Company has this right
when it has the decision-making rights that
are most relevant to changing how and for
what purpose the asset is used. In rare cases
where the decision about how and for what
purpose the asset is used is predetermined,
the Company has the right to direct the use
of the asset if either:

• t he Company has the right to operate the
asset; or

• t he Company designed the asset in a way
that predetermines how and for what
purpose it will be used.

At inception or on reassessment of a contract
that contains a lease component, the Company
allocates the consideration in the contract to
each lease component on the basis of their
relative stand-alone prices.

Company as a lessee

The Company recognises a right-of-use asset
and a lease liability at the lease commencement
date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments
made at or before the commencement date, plus
any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site
on which it is located, less any lease incentives
received.

The right-of-use asset is subsequently
depreciated using the straight-line method from
the commencement date to the earlier of the
end of the useful life of the right-of-use asset or
the end of the lease term. The estimated useful
lives of right-of-use assets are determined on the
same basis as those of property and equipment.
In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and

adjusted for certain remeasurements of the lease
liability.

The lease liability is initially measured at the
present value of the lease payments that are not
paid at the commencement date, discounted
using the interest rate implicit in the lease
or, if that rate cannot be readily determined,
the Company's incremental borrowing rate.
Generally, the Company uses its incremental
borrowing rate as the discount rate.

Lease payments included in the measurement of
the lease liability comprise the following:

• fixed payments, including in-substance
fixed payments.

• variable lease payments that depend on an
index or a rate, initially measured using the
index or rate as at the commencement date.

• amounts expected to be payable under a
residual value guarantee; and

• the exercise price under a purchase option
that the Company is reasonably certain to
exercise, lease payments in an optional
renewal period if the Company is reasonably
certain to exercise an extension option, and
penalties for early termination of a lease
unless the Company is reasonably certain
not to terminate early.

The lease liability is measured at amortised
cost using the effective interest method. It
is remeasured when there is a change in
future lease payments arising from a change
in an index or rate, if there is a change in the
Company's estimate of the amount expected to
be payable under a residual value guarantee,
or if the Company changes its assessment of
whether it will exercise a purchase, extension or
termination option.

When the lease liability is remeasured in this
way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount
of the right-of-use asset has been reduced to
zero.

The leasing arrangements for certain items
of plant & machinery taken on lease by the
Company contain purchase options. The
Company is reasonably certain to exercise these
purchase options and accordingly, the exercise

price payable under such purchase options
has been considered in the calculation of lease
liability and right of use asset. As it is reasonably
certain that the Company will exercise the
purchase options, the estimated useful life of
right of use asset is based on the useful life of
underlying plant and machinery.

Short-term leases and leases of low-value assets

The company has elected not to recognise right-
of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less
and leases of low-value assets. The company
recognises the lease payments associated with
these leases as an expense on a straight-line
basis over the lease term.

e) Impairment of non-financial assets

The company assesses at each balance sheet
date whether there is any indication that an asset
or cash generating unit (CGU) may be impaired.
If any such indication exists, the company
estimates the recoverable amount of the asset.
The recoverable amount is the higher of an
asset's or CGU's fair value less costs of disposal
or its value in use. Where the carrying amount of
an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written
down to its recoverable amount.

f) Inventories

Raw materials, consumables, stores and spares
are valued at lower of cost and net realizable
value. Cost is determined using moving average
method.

Work-in-process and finished goods are valued
at lower of cost and net realizable value. Cost
includes direct material and labour and a
proportion of manufacturing overhead based on
normal operating capacity. Cost is determined
using standard cost which approximates actual
cost.

Net realisable value is the estimated selling
price in the ordinary course of business, less
estimated costs of completion and the estimated
costs necessary to make the sale.

g) Cash and cash equivalents

Cash and cash equivalents in the balance sheet
comprise cash at banks and cash on hand and
short-term deposits with an original maturity of

three months or less, which are subject to an
insignificant risk of changes in value.

h) Revenue recognition

The company is primarily into business of
manufacturing and selling aluminum castings.
Sales are recognised when substantial control
of the products has been transferred to the
customer, being when the products are delivered
to the customer or its authorised representative
without any unfulfilled obligation that could
affect the customer's acceptance of the products.
Revenue towards satisfaction of a performance
obligation is measured at the amount of
transaction price (net of variable consideration)
allocated to that performance obligation. The
transaction price of goods sold and services
rendered is net of variable consideration on
account of various discounts and schemes
offered by the Company as part of the contract.
The company's obligation to provide a refund
for defects in the products is recognised as a
provision. A receivable is recognised when the
goods are delivered as this is the point in time
that the consideration is unconditional because
only the passage of time is required before the
payment is due.

The Company does not have any payment
terms exceeding one year for any contract.
Accordingly, the Company does not adjust any
of the transaction prices for the time value of
money.

The Company besides manufacturing the
products from its raw materials, also converts
raw materials supplied by its customers and
accounts for the gross receipts as 'conversion
income' once the job is completed and goods
are dispatched to the customers. Income from
development of such dies is accounted for in the
year in which dies are completed and invoiced.

Other operating revenue represents income
earned from the Company's principal activities
and is recognised when the right to receive the
income is established as per the terms of the
contract.

i) Other income

• Interest income

Interest income from debt instruments is
recognised using effective interest rate method
(EIR). EIR is the rate that exactly discounts the

estimated future cash payments or receipts over
the expected life of the financial instrument or a
shorter period, where appropriate, to the gross
carrying amount of the financial asset or to the
amortised cost of a financial liability.

• Dividends

Dividends are recognised in the statement of
profit and loss only when the right to receive the
payment is established, it is probable that the
economic benefits associated with the dividend
will flow to the company, and the amount can be
measured reliably.

• Any other income is accounted for on accrual
basis.

j) Borrowing costs

Borrowing costs consist of interest and other
costs that an entity incurs in connection with
the borrowing of funds. Borrowing cost also
includes exchange differences arising from
foreign currency borrowings to the extent they
are regarded as an adjustment to the interest
cost.

Borrowing are initially recognized net of
transaction cost incurred and measured at
amortized cost. Any difference between the
proceeds (net of transaction costs) and the
redemption amount is recognized in the
statement of Profit and Loss over the period of
the borrowings using effective interest method.

Interest and other borrowing costs that
are directly attributable to the acquisition,
construction or production of a qualifying
asset are capitalized. Other interest and other
borrowing cost are charged to profit and loss
account.

k) Foreign currency transactions and balances

Transactions in foreign currencies are initially
recorded at functional currency spot rates at the
date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in
foreign currencies which are outstanding, as at
the reporting period are translated at the closing
exchange rates and the resultant exchange
differences are recognised in the statement of
profit and loss.

Non-monetary assets and liabilities denominated
in foreign currencies that are measured in
terms of historical cost are translated using the
exchange rate at the date of the transaction.

l) Employee Benefits

Short-term employee benefits

All employee benefits payable wholly within
twelve months of rendering the services are
classified as short-term employee benefits.
Benefits such as salaries, wages, expected cost
of bonus and short-term compensated absences,
ex-gratia, performance pay etc. are recognised
in the period in which the employee renders the
related service.

Post-employment benefits
Defined contribution plans

Defined contribution plans are employee
state insurance scheme and Government
administered pension fund scheme for all
applicable employees. The company has
no further payment obligations once the
contributions have been paid. The contributions
are recognised as employee benefit expenses
when they are due.

Defined benefit plans

The employees' gratuity fund scheme is managed
by LIC, is the company's defined benefit plan.
The present value of the obligation under such
defined benefit plans is determined based on
actuarial valuation using the projected unit credit
method, which recognises each period of service
as giving rise to additional unit of employee
benefit entitlement and measures each unit
separately to build up the final obligation.

The obligation is measured at the present value
of the estimated future cash flows. The discount
rates used for determining the present value
of the obligation under defined benefit plans,
is based on the market yields on government
securities as at the reporting date, having
maturity periods approximating to the terms of
related obligations.

Remeasurements, comprising of actuarial
gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return
on plan assets, are recognised immediately in
the balance sheet with a corresponding debit

or credit to retained earnings through Other
Comprehensive Income (OCI) in the period in
which they occur. Remeasurements are not
reclassified to the statement of profit and loss in
subsequent periods.

I n case of funded plans, the fair value of the
plan's assets is reduced from the gross obligation
under the defined benefit plans, to recognise the
obligation on net basis.

Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in the
statement profit and loss as past service cost.

Net interest is calculated by applying the discount
rate to the net defined benefit liability or the fair
value of the plan asset. The cost is included in
employee benefit expense in the statement of
profit and loss.

Other long-term employee benefits

The liabilities for earned leave which are not
expected to be settled within twelve months
after the end of the reporting period in which
the employee render the related service. They
are therefore measured as the present value of
expected future payments to be made in respect
of services provided by employee up to the end
of the reporting period using the projected unit
credit method. The benefits are discounted using
the market yields on government securities
at the end of the reporting period that have
terms approximating the terms of the related
obligation. Remeasurements as a result of
experience adjustments and change in actuarial
assumptions are recognised in the statement of
profit and loss. The obligations are presented as
current liabilities in the balance sheet if the entity
does not have an unconditional right to defer
settlement for at least twelve months after the
reporting period, regardless of when the actual
settlement is expected to occur.

m) Share-based payments

Employees of the Company who are entitled to
receive remuneration in the form of share-based
payments, whereby employees render services
as consideration for equity instruments (equity-
settled transactions).

Equity-settled transactions

The cost of equity-settled transactions is
determined by the fair value at the grant date
using fair valuation model.

That cost is recognised, together with a
corresponding increase in share-based payment
reserves in equity, over the period in which
the performance and/or service conditions are
fulfilled in employee benefits expense. The
cumulative expense recognised for equity-
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting period has expired and the Company's
best estimate of the number of equity instruments
that will ultimately vest. The statement of profit
and loss represents the movement in cumulative
expense recognised as at the beginning and at
the end of the period and to be recognised in the
employee benefits expense.

The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.

n) Research and development cost

Research costs are expensed as and when
incurred. Development costs are expensed
as and when incurred, unless the technical
and commercial feasibility of the project is
demonstrated, future economic benefits are
probable and the costs can be measured reliably.
Research and development expenditure of a
capital nature includes the cost of relevant fixed
assets.

o) Income tax

Income tax expense comprises of current tax and
deferred tax. It is recognised in the statement of
profit and loss except to the extent that it relates
to the items recognised directly in OCI.

Current income tax

Current income tax assets and liabilities
are measured at the amount expected to be
recovered from or paid to the taxation authorities
based on the taxable profits computed for the
current accounting period. The tax rates and
tax laws used to compute the amount are those
that are enacted or substantively enacted, at the
reporting date.

Deferred tax

Deferred tax is provided on temporary differences
between the tax base of assets and liabilities and
their carrying amounts for financial reporting
purposes at the reporting date.

Deferred tax liabilities are recognised for all
taxable temporary differences, except when
the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in
a transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.

Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits (E.g. MAT Credit
entitlement) and any unused tax losses. Deferred
tax assets are recognised to the extent that it
is probable 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,
except when the deferred tax asset relating to
the deductible temporary difference arises from
the initial recognition of an asset or liability in
a transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.

The carrying amount of deferred 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 tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the
extent that it has become probable that future
taxable profits will allow the deferred tax asset
to be recovered.

Deferred tax assets and liabilities 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.

Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to set off current tax assets against current
tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation
authority.

p) Government grant

Grants from the Government are recognized
at their fair value where there is a reasonable
assurance that the grant will be received, and
the Company will comply with all attached
conditions. Government grants relating to
income are deferred and recognized in the
statement of profit and loss over the period
necessary to match them with the costs that
they are intended to compensate and presented
within other income.