2. Material accounting policies

A. Basis of preparation and presentation

The standalone financial statements have
been prepared in accordance with the
Companies (Indian Accounting Standards)
Rules, 2015 as per Section 133 of the Companies
Act, 2013 and relevant amendment rules
issued thereafter ("Ind AS") on the historical
cost basis except for certain financial assets
and liabilities measured at fair value at the
end of each reporting period, as explained in
the accounting policies below, the relevant
provisions of the Companies Act, 2013 (the
"Act") and the guidelines issued by the RBI/
NHB, to the extent applicable.

The Balance Sheet, the Statement of Profit
and Loss and the Statement of Changes
in Equity are prepared and presented in
the format prescribed in the Division III of
Schedule III to the Act. The Statement of Cash

Flows has been prepared and presented as
per the requirements of Ind AS 7 "Statement
of Cash Flows".

Amounts in the standalone financial
statements are presented in Indian Rupees
in lakhs rounded off to two decimal places
as permitted by Schedule III to the Act, except
when otherwise indicated.

B. Presentation of standalone financial

statements

The Company presents its balance sheet
in order of liquidity. An analysis regarding
recovery or settlement within 12 months after
the reporting date (current) and more than
12 months after the reporting date (non¬
current) is presented in Note 40.

Financial assets and financial liabilities are
generally reported gross in the balance sheet.
They are only offset and reported net when,
in addition to having an unconditional legally
enforceable right to offset the recognised
amounts without being contingent on a
future event, the parties also intend to
settle on a net basis in the normal course
of business, event of default or insolvency
or bankruptcy of the Company and/or its
counterparties.

2.1 Financial Instruments

2.1.1 Financial instruments - initial recognition

2.1.1.1 Date of recognition

Financial assets and liabilities, with the

exception of loans, debt securities, and
borrowings are initially recognised on the
trade date, i.e., the date that the Company
becomes a party to the contractual provisions
of the instrument. Loans are recognised when
fund transfers are initiated to the customers'
account or cheques for disbursement have
been prepared by the Company (as per the
terms of the agreement with the borrowers).
The Company recognises debt securities and
borrowings when funds reach the Company.

2.1.1.2 Initial measurement of financial
instruments

The classification of financial instruments
at initial recognition depends on their
contractual terms and the business model
for managing the instruments. Financial
instruments are initially measured at their fair
value, except in the case of financial assets
and financial liabilities recorded at Fair value

through profit and loss ("FVTPL"), transaction
costs are added to, or subtracted from, this
amount.

2.1.1.3 Measurement categories of financial assets
and liabilities

The Company classifies all of its financial
assets based on the business model for
managing the assets and the asset's
contractual terms, measured at either
amortised cost or FVTPL or Fair Value through
Other Comprehensive Income ("FVOCI").

2.1.2 Financial assets and liabilities

2.1.2.1 Bank balances, Loans, Trade receivables
and financial investments at amortised
cost

The Company measures bank balances,
loans, and other financial investments at
amortised cost if the financial asset is held
within a business model with the objective
to hold financial assets in order to collect
contractual cash flows and the contractual
terms of the financial asset give rise on
specified dates to cash flows that are Solely
Payments of Principal and Interest ("SPPI") on
the principal amount outstanding.

The details of these conditions are outlined
below.

2.1.2.1.1 Business model assessment

The Company determines its business model
at the level that best reflects how it manages
groups of financial assets to achieve its
business objective.

The Company's business model is not
assessed on an instrument-by-instrument
basis, but at a higher level of aggregated
portfolios and is based on observable factors
such as:

? How the performance of the business
model and the financial assets held within
that business model are evaluated and
reported to the entity's key management
personnel

? The risks that affect the performance of
the business model (and the financial
assets held within that business model)
and, in particular, the way those risks are
managed

? How managers of the business are
compensated (for example, whether

the compensation is based on the fair
value of the assets managed or on the
contractual cash flows collected)

? The expected frequency, value and timing
of sales are also important aspects of the
Company's assessment

The business model assessment is based
on reasonably expected scenarios without
taking 'worst case' or 'stress case' scenarios
into account. If cash flows after initial
recognition are realised in a way that is
different from the Company's original
expectations, the Company does not
change the classification of the remaining
financial assets held in that business
model, but incorporates such information
when assessing newly originated or newly
purchased financial assets going forward.

2.1.2.1.2 The SPPI test

As a second step of its classification process
the Company assesses the contractual
terms of financial to identify whether they
meet the SPPI test.

' Principal' for the purpose of this test is defined

as the fair value of the financial asset at
initial recognition and may change over the
life of the financial asset (for example, if there
are repayments of principal or amortisation
of the premium/discount).

The most significant elements of interest
within a lending arrangement are typically
the consideration for the time value of money
and credit risk. To make the SPPI assessment,
the Company applies judgement and
considers relevant factors such as the
currency in which the financial asset is
denominated, and the period for which the
interest rate is set. In contrast, contractual
terms that introduce a more than de
minimis exposure to risks or volatility in the
contractual cash flows that are unrelated
to a basic lending arrangement do not
give rise to contractual cash flows that are
solely payments of principal and interest on
the amount outstanding. In such cases, the
financial asset is required to be measured at
FVTPL.

2.1.2.2 Financial assets or financial liabilities held
for trading

The Company classifies financial assets
as held for trading when they have been

purchased or issued primarily for short¬
term profit making through trading activities
or form part of a portfolio of financial
instruments that are managed together, for
which there is evidence of a recent pattern
of short-term profit making. Held-for-trading
assets and liabilities are recorded and
measured in the balance sheet at fair value.
Changes in fair value are recognised in net
gain on fair value changes. Interest and
dividend income or expense is recorded in
net gain on fair value changes according to
the terms of the contract, or when the right to
payment has been established.

2.1.2.3 Equity instruments at FVOCI

The Company subsequently measures all
equity investments at fair value through profit
or loss, unless the Company's management
has elected to classify irrevocably some of
its equity investments as equity instruments
at FVOCI, when such instruments meet the
definition of Equity under Ind AS 32 Financial
Instruments: Presentation and are not held
for trading. Such classification is determined
on an instrument-by-instrument basis.

Gains and losses on these equity instruments
are never recycled to profit or loss. Dividends
are recognised in profit or loss as dividend
income when the right of the payment
has been established, except when the
Company benefits from such proceeds as a
recovery of part of the cost of the instrument,
in which case, such gains are recorded in
Other Comprehensive Income ("OCI"). Equity
instruments at FVOCI are not subject to an
impairment assessment.

2.1.2.4 Financial assets and financial liabilities at
fair value through profit or loss

Financial assets and financial liabilities in
this category are those that are not held for
trading and have been either designated
by management upon initial recognition or
are mandatorily required to be measured at
fair value under Ind AS 109. Financial assets
and financial liabilities at FVTPL are recorded
in the balance sheet at fair value. Changes
in fair value are recorded in profit and loss
with the exception of movements in fair
value of liabilities designated at FVTPL due
to changes in the Company's own credit
risk. Such changes in fair value are recorded
in the Own credit reserve through OCI and
do not get recycled to the profit or loss.

Interest earned or incurred on instruments
designated at FVTPL is accrued in interest
income or finance cost, respectively, using
the EIR, taking into account any discount/
premium and qualifying transaction costs
being an integral part of instrument. Interest
earned on assets mandatorily required to
be measured at FVTPL is recorded using
contractual interest rate.

2.1.3 Reclassification of financial assets and
liabilities

The Company does not reclassify its financial
assets subsequent to their initial recognition,
apart from the exceptional circumstances in
which the Company acquires, disposes of, or
terminates a business line. Financial liabilities
are never reclassified.

2.1.4 Derecognition of financial assets and
liabilities

2.1.4.1 Derecognition of financial assets due to
substantial modification of terms and
conditions

The Company derecognises a financial asset,
such as a loan to a customer, when the terms
and conditions have been renegotiated to
the extent that, substantially, it becomes a
new loan, with the difference recognised as a
derecognition gain or loss, to the extent that
an impairment loss has not already been
recorded. The newly recognised loans are
classified as Stage 1 for ECL measurement
purposes unless they are deemed to pass
through OCI. When assessing whether or
not to derecognise a loan to a customer,
amongst others, the Company considers the
following factors: Change in counterparty. If
the modification is such that the instrument
would no longer meet the SPPI criterion. If the
modification does not result in cash flows that
are substantially different, the modification
does not result in derecognition. Based on
the change in cash flows discounted at
the original EIR, the Company records a
modification gain or loss, to the extent that
an impairment loss has not already been
recorded.

2.1.4.2 Derecognition of financial assets other than
due to substantial modification

A financial asset is derecognised when
the rights to receive cash flows from the
financial asset have expired. The Company
also derecognises the financial asset if it has

both transferred the financial asset and the
transfer qualifies for derecognition.

A transfer only qualifies for derecognition
if either, the Company has transferred
substantially all the risks and rewards of the
asset or has neither transferred nor retained
substantially all the risks and rewards of
the asset, but has transferred control of the
asset. Control is considered to be transferred
if and only if, the transferee has the practical
ability to sell the asset in its entirety to an
unrelated third party and is able to exercise
that ability unilaterally and without imposing
additional restrictions on the transfer.

When the Company has neither transferred
nor retained substantially all the risks and
rewards and has retained control of the asset,
the asset continues to be recognised only
to the extent of the Company's continuing
involvement, in which case, the Company
also recognises an associated liability. The
transferred asset and the associated liability
are measured on a basis that reflects the
rights and obligations that the Company has
retained.

Continuing involvement that takes the form
of a guarantee over the transferred asset is
measured at the lower of the original carrying
amount of the asset and the maximum
amount of consideration the Company
could be required to pay.

In case when transfer of a part of financial
asset qualifies for derecognition, any
difference between the proceeds received
on such sale and the carrying value of the
transferred asset is derecognised as a gain
or loss on decrease of such financial asset.

2.1.4.3 Financial liabilities

A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires. Where an existing
financial liability is replaced by another from
the same lender on substantially different
terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as a derecognition
of the original liability and the recognition of
a new liability. The difference between the
carrying value of the original financial liability
and the consideration paid is recognised in
profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities
are offset and the net amount is reported
in the balance sheet if there is a currently
enforceable legal right to offset the
recognised amounts and there is an intention
to settle on a net basis, to realise the assets
and settle the liabilities simultaneously.

2.1.5 Impairment of financial assets

2.1.5.1 Overview of the ECL principles

The Company records allowance for
expected credit losses for all loans, other debt
financial assets not held at FVTPL, together
with loan commitments, in this section all
referred to as 'financial instruments'. Equity
instruments are not subject to impairment
under Ind AS 109.

The ECL allowance is based on the credit
losses expected to arise over the life of the
asset (the lifetime expected credit loss or
LTECL), unless there has been no significant
increase in credit risk since origination, in
which case, the allowance is based on the 12
months' expected credit loss (l2mECL).

The 12mECL is the portion of LTECLs that
represent the ECLs that result from default
events on a financial instrument that are
possible within the 12 months after the
reporting date.

Both LTECLs and 12mECLs are calculated on
either an individual basis or a collective basis,
depending on the nature of the underlying
portfolio of financial instruments.

The Company has established a policy to
perform an assessment, at the end of each
reporting period, of whether a financial
instrument's credit risk has increased
significantly since initial recognition, by
considering the change in the risk of default
occurring over the remaining life of the
financial instrument.

Based on the above process, the Company
categorises its loans into Stage 1, Stage 2 and
Stage 3, as described below:

Stage 1:

When loans are first recognised, the Company
recognises an allowance based on 12mECLs.
Stage 1 loans also include facilities where the
credit risk has improved and the loan has
been reclassified from Stage 2.

Stage 2:

When a loan has shown a significant increase
in credit risk since origination, the Company
records an allowance for the LTECLs. Stage 2
loans also include facilities, where the credit
risk has improved and the loan has been
reclassified from Stage 3.

Stage 3:

Loans considered credit-impaired. The
Company records an allowance for the
LTECLs.

Staging rules set have been applied to the
product categories to bucket them into
either Stage 1, Stage 2 or Stage 3.

In addition to days past due, the Company
also considers other qualitative factors in
determining significant increase in credit
risks since origination.

.1.5.2 The calculation of ECLs

The Company calculates ECLs to measure
the expected cash shortfalls, discounted at
an approximation to the EIR. A cash shortfall
is the difference between the cash flows that
are due to an entity in accordance with the
contract and the cash flows that the entity
expects to receive.

The key elements of the ECL are summarised
below:

PD:

The Probability of Default is an estimate of the
likelihood of default over a given time horizon.
A default may only happen at a certain time
over the assessed period, if the facility has
not been previously derecognised and is still
in the portfolio.

EAD:

The Exposure at Default is an estimate of the
exposure at a future default date (in case
of Stage 1 and Stage 2), taking into account
expected changes in the exposure after
the reporting date, including repayments of
principal and interest, whether scheduled by
contract or otherwise, expected drawdowns

on committed facilities, and accrued interest
from missed payments. In case of Stage 3
loans EAD represents exposure when the
default occurred.

LGD:

The Loss Given Default is an estimate of the
loss arising in the case where a default occurs
at a given time. It is based on the difference
between the contractual cash flows due
and those that the lender would expect to
receive, including from the realisation of
any collateral. It is usually expressed as a
percentage of the EAD.

Impairment losses and releases are
accounted for and disclosed separately
from modification losses or gains that are
accounted for as an adjustment of the
financial asset's gross carrying value

The mechanics of the ECL method are
summarised below:

Stage 1:

The 12mECL is calculated as the portion of
LTECLs that represent the ECLs that result
from default events on a financial instrument
that are possible within the 12 months after
the reporting date. The Company calculates
the 12mECL allowance based on the
expectation of a default occurring in the 12
months following the reporting date. These
expected 12-month default probabilities are
applied to a forecast EAD and multiplied
by the expected LGD and discounted by an
approximation to the original EIR.

Stage 2:

When a loan has shown a significant increase
in credit risk since origination, the Company
records an allowance for the LTECLs PDs and
LGDs are estimated over the lifetime of the
instrument. The expected cash shortfalls
are discounted by an approximation to the
original EIR.

Significant increase in credit risk

The Company monitors all financial
assets that are subject to the impairment
requirements to assess whether there has
been a significant increase in credit risk
since initial recognition. If there has been
a significant increase in credit risk the
Company will measure the loss allowance
based on lifetime rather than 12mECLs.

In assessing whether the credit risk on
a financial instrument has increased
significantly since initial recognition, the
Company compares the risk of a default
occurring on the financial instrument at
the reporting date based on the remaining
maturity of the instrument with the risk of a
default occurring that was anticipated for the
remaining maturity at the current reporting
date when the financial instrument was first
recognised. In making this assessment, the
Company considers both quantitative and
qualitative information that is reasonable
and supportable, including historical
experience and forward-looking information
that is available without undue cost or
effort, based on the Company's historical
experience and expert credit assessment
including forward-looking information.

Stage 3:

For loans considered credit-impaired, the
Company recognises the lifetime expected
credit losses for these loans. The method is
similar to that for Stage 2 assets, with the PD
set at 100%.

Credit-impaired financial assets

A financial asset is 'credit-impaired' when
one or more events that have a detrimental
impact on the estimated future cash flows
of the financial asset have occurred. Credit-
impaired financial assets are referred
to as Stage 3 assets. Evidence of credit-
impairment includes observable data about
the following events:

? significant financial difficulty of the
borrower;

? a breach of contract such as a default or
past due event;

? the lender of the borrower, for economic
or contractual reasons relating to the
borrower's financial difficulty, having
granted to the borrower a concession
that the lender would not otherwise
consider;

? the disappearance of an active market
for a security because of financial
difficulties; or

? the purchase of a financial asset at a
deep discount that reflects the incurred
credit losses.

It may not be possible to identify a single
discrete event—instead, the combined
effect of several events may have caused
financial assets to become credit-impaired.
The Company assesses whether debt
instruments that are financial assets
measured at amortised cost are credit-
impaired at each reporting date.

A loan is considered credit-impaired when
a concession is granted to the borrower due
to a deterioration in the borrower's financial
condition, unless there is evidence that as a
result of granting the concession the risk of
not receiving the contractual cash flows has
reduced significantly and there are no other
indicators of impairment. For financial assets
where concessions are contemplated but
not granted the asset is deemed credit
impaired when there is observable evidence
of credit-impairment including meeting the
definition of default. The definition of default
includes unlikeliness to pay indicators and
a back- stop if amounts are overdue for 90
days or more.

Loan commitment:

When estimating LTECLs for undrawn loan
commitments, the Company estimates the
expected portion of the loan commitment
that will be drawn down over its expected life.
The ECL is then based on the present value of
the expected shortfalls in cash flows if the loan
is drawn down. The expected cash shortfalls
are discounted at an approximation to the
expected EIR on the loan. For an undrawn
loan commitment, ECLs are calculated and
presented under provisions.

Forward looking information

In its ECL models, the Company relies on a
broad range of forward-looking information
as economic inputs. The inputs and models
used for calculating ECLs may not always
capture all characteristics of the market at
the date of the financial statements. To reflect
this, qualitative adjustments or overlays are
made as temporary adjustments.

Estimates and associated assumptions
applied in preparing the financial statements,
especially for the expected credit loss on
advances, are based on historical experience
and other emerging/forward looking factors
including those arising on account of the

COVID-19 pandemic. The Company has used
early indicators of moratorium and delayed
payment metrics observed along with an
estimation of potential stress on probability
of defaults and exposure at default due
to COVID-19 situation in developing the
estimates and assumptions to assess the
expected credit loss on loans.

2.1.5.3 Write-off

Loans and debt securities are written off
when the Company has no reasonable
expectations of recovering the financial
asset (either in its entirety or a portion of
it). This is the case when the Company
determines that the borrower does not
have assets or sources of income that could
generate sufficient cash flows to repay the
amounts subject to the write-off. A write¬
off constitutes a derecognition event. The
Company may apply enforcement activities
to financial assets written off. Recoveries
resulting from the Company's enforcement
activities will result in impairment gains.
Any subsequent recoveries are credited to
impairment on financial instruments in the
statement of profit and loss.

2.1.6 Financial Guarantee contracts

A financial guarantee contract is a contract
that requires the issuer to make specified
payments to reimburse the holder for a loss
it incurs because a specified debtor fails to
make payments when due in accordance
with the terms of a debt instrument.

Financial guarantee contracts issued by
an entity are initially measured at their fair
values and, are subsequently measured at
the higher of:

• the amount of loss allowance determined
in accordance with impairment
requirements of Ind AS 109;

• the amount initially recognised less, when
appropriate, the cumulative amount of
income recognised.

2.2 Recognition of Interest Income

2.2.1 The effective interest rate method

Interest income is recorded using the
effective interest rate ("EIR") method for all
financial instruments measured at amortised
cost, debt instrument measured at FVOCI
and debt instruments designated at FVTPL.

The effective interest rate (EIR) is the rate
that exactly discounts estimated future cash
flows of the financial instrument through the
expected life of the financial instrument or,
where appropriate, a shorter period, to the
net carrying amount of the financial asset or
financial liability.

2.2.2 Interest Income

The Company calculates interest income
by applying the EIR to the gross carrying
amount of financial assets other than credit-
impaired assets

When a financial asset becomes credit-
impaired and is, therefore, regarded as
'Stage 3', the Company calculates interest
income by applying the effective interest
rate to the net amortised cost of the financial
asset. If the financial assets cures and is no
longer credit-impaired, the Company reverts
to calculating interest income on a gross
basis.

2.2.3 Fees and commission Income

Fees and commission Income include
fees other than those that are an integral
part of EIR. The fees included in this part of
the Company's statement of profit or loss
include among other things fees charged for
servicing a loan including cheque bounce
charges, field visit charges, pre-closure
charges etc which are recognised upon
realisation.

2.2.4 Dividend Income

Dividend income (including from FVOCI
investments) is recognised when the
Company's right to receive the payment is
established, it is probable that the economic
benefits associated with the dividend will
flow to the entity and the amount of the
dividend can be measured reliably. This is
generally when the shareholders approve
the dividend.

2.3 Leases

The Company's Right-of-Use ("ROU") assets
consist of leases for buildings. The Company
assesses whether a contract contains a
lease, at inception of a contract. 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: (i) the contract involves the use
of an identified asset (ii) the Company has
substantially all of the economic benefits
from the use of the asset through the period
of the lease and (iii) the Company has the
right to direct the use of the asset.

At the date of commencement of the lease,
the Company recognises a right-of-use
asset and a corresponding lease liability for
all lease arrangements in which it is a lessee,
except for short-term leases and low value
leases. The Company applies the short-term
lease recognition exemption to its short¬
term leases of buildings (i.e., those leases
that have a lease term of 12 months or less
from the commencement date and do not
contain a purchase option). Lease payments
on short-term leases and leases of low value
assets are recognised as expense on a
straight-line basis over the lease term.

i) Right-of-use assets

The Company recognises right-of-use
assets at the commencement date of
the lease (i.e., the date the underlying
asset is available for use). Right-of-
use assets are measured at cost, less
any accumulated depreciation and
impairment losses, and adjusted for any
remeasurement of lease liabilities. The
cost of right-of-use assets includes the
amount of lease liabilities recognised,
initial direct costs incurred, and lease
payments made at or before the
commencement date less any lease
incentives received. Right-of-use assets
are depreciated on a straight-line basis
over the shorter of the lease term and
the estimated useful lives of the assets.

ii) Lease liabilities

At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease
term. The lease payments include fixed
payments (including in substance fixed
payments) less any lease incentives
receivable, variable lease payments
that depend on an index or a rate, and
amounts expected to be paid under
residual value guarantees.

In calculating the present value of
lease payments, the Company uses

The Company presents the first two
components of defined benefit costs in profit
or loss in the line item 'Employee benefits
expense'. Curtailment gains and losses are
accounted for as past service costs.

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 (excluding
amounts included in net interest on the net
defined benefit liability), are recognised
immediately in the balance sheet with a
corresponding debit or credit to retained
earnings through OCI in the period in which
they occur. Remeasurements are not
reclassified to profit or loss in subsequent
periods.

A liability for a termination benefit is
recognised at the earlier of when the entity
can no longer withdraw the offer of the
termination benefit and when the entity
recognises any related restructuring costs.

Short-term and other long-term employee
benefits

A liability is recognised for benefits accruing
to employees in respect of wages and
salaries in the period the related service is
rendered at the undiscounted amount of the
benefits expected to be paid in exchange for
that service.

Liabilities recognised in respect of short¬
term employee benefits are measured at
the undiscounted amount of the benefits
expected to be paid in exchange for the
related service.

Liabilities recognised in respect of leave
encashment and other long-term employee
benefits are measured at the present value
of the estimated future cash outflows
expected to be made by the company in
respect of services provided by employees
up to the reporting date. The Company
records the leave encashment liability based
on actuarial valuation computed using
projected unit credit method.

Share-based payments

Stock options are granted to the employees
under the stock option scheme. The costs
of stock options granted to the employees
(equity-settled awards) of the Company
are measured at the fair value of the equity

instruments granted. For each stock option,
the measurement of fair value is performed
on the grant date. The grant date is the date
on which the Company and the employees
agree to the stock option scheme. The fair
value so determined is revised only if the
stock option scheme is modified in a manner
that is beneficial to the employees.

This cost is recognised, together with a
corresponding increase in Employee Stock
Options Reserve 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 expense or credit for a period represents
the movement in cumulative expense
recognised as at the beginning and end of
that period and is recognised in employee
benefits expense.

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

If the options vests in instalments (i.e. the
options vest pro rata over the service
period), then each instalment is treated as a
separate share option grant because each
instalment has a different vesting period.

2.5 Taxes

Income tax expense represents the sum of
the current tax and deferred tax.

Current tax

Current tax assets and liabilities for the
current and prior years are measured at the
amount expected to be recovered from, or
paid to, the taxation authorities. The tax rates
and tax laws used to compute the amount
are those that are enacted, or substantively
enacted, by the reporting date in the
countries where the Company operates and
generates taxable income.

Current income tax relating to items
recognised outside profit or loss is recognised
outside profit or loss (either in other
comprehensive income or in equity). Current
tax items are recognised in correlation to

the underlying transaction either in OCI or
directly in equity. Management periodically
evaluates positions taken in the tax
returns with respect to situations in which
applicable tax regulations are subject to
interpretation and establishes provisions
where appropriate.

Deferred tax

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

Deferred tax liabilities are recognised for all
taxable temporary differences, except:

? In respect of taxable temporary
differences associated with investments
in subsidiaries, where the timing of the
reversal of the temporary differences
can be controlled and it is probable
that the temporary differences will not
reverse in the foreseeable future

Deferred tax assets are recognised for
all deductible temporary differences,
the carry forward of unused tax credits
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

? In respect of deductible temporary
differences associated with investments
in subsidiaries, deferred tax assets are
recognised only to the extent that it is
probable that the temporary differences
will reverse in the foreseeable future and
taxable profit will be available against
which the temporary differences can be
utilised

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 relating to items recognised
outside profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Deferred tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.

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.

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, at the time of the transaction,
affects neither the accounting profit nor
taxable profit or loss.

2.6 Property, plant and equipment ("PP&E")
and intangible assets

PP&E is stated at cost excluding the costs
of day-to-day servicing, less accumulated
depreciation and accumulated impairment
in value. Changes in the expected useful
life are accounted for by changing the
amortisation period or methodology, as
appropriate, and treated as changes in
accounting estimates. Depreciation on the
following categories of PP&E (other than
Freehold Land) has been provided on the
straight-line method, the useful lives of which
have been assessed as under, based on
technical assessment, taking into account
the nature of the asset, the estimated
usage of the asset, the operating conditions
of the asset, past history of replacement,
anticipated technological changes,
manufacturers warranties and maintenance
support, etc.

at each Balance sheet date to ascertain
impairment based on internal or external
factors.

The amortisation period and the amortisation
method for an intangible asset with a finite
useful life are reviewed at least at the end of
each reporting period.

An intangible asset is derecognised upon
disposal (i.e., at the date the recipient obtains
control) or when no future economic benefits
are expected from its use or disposal. Any
gain or loss arising upon derecognition
of the asset (calculated as the difference
between the net disposal proceeds and the
carrying amount of the asset) is included in
the statement of profit and loss when the
asset is derecognised.

2.7 Impairment of non-financial assets

The Company assesses, at each reporting
date, whether there is an indication that an
asset may be impaired. If any indication
exists, or when annual impairment testing for
an asset is required, the Company estimates
the asset's recoverable amount. An asset's
recoverable amount is the higher of an
asset's or cash-generating unit's (CGU) fair
value less costs of disposal and its value in
use. Recoverable amount is determined for
an individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets or
groups of assets. When 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.

In assessing value in use, the estimated future
cash flows are discounted to their present
value using a pre-tax discount rate that
reflects current market assessments of the
time value of money and the risks specific to
the asset. In determining fair value less costs
of disposal, recent market transactions are
taken in to account. If no such transactions
can be identified, an appropriate valuation
model is used. These calculations are
corroborated by valuation multiples, quoted
share prices for publicly traded companies
or other available fair value indicators.

The Company bases its impairment
calculation on detailed budgets and
forecast calculations, which are prepared
separately for each of the Company's CGUs

to which the individual assets are allocated.
These budgets and forecast calculations
generally cover a period of five years. For
longer periods, a long-term growth rate is
calculated and applied to project future cash
flows after the fifth year. To estimate cash
flow projections beyond periods covered
by the most recent budgets/forecasts, the
Company extrapolates cash flow projections
in the budget using a steady or declining
growth rate for subsequent years, unless an
increasing rate can be justified. In any case,
this growth rate does not exceed the long¬
term average growth rate for the products,
industries, or country or countries in which
the entity operates, or for the market in which
the asset is used.

Impairment losses of continuing operations,
are recognised in the statement of profit and
loss.

For assets excluding goodwill, an assessment
is made at each reporting date to determine
whether there is an indication that previously
recognised impairment losses no longer
exist or have decreased. If such indication
exists, the Company estimates the asset's
or CGU's recoverable amount. A previously
recognised impairment loss is reversed only if
there has been a change in the assumptions
used to determine the asset's recoverable
amount since the last impairment loss
was recognised. The reversal is limited so
that the carrying amount of the asset does
not exceed its recoverable amount, nor
exceed the carrying amount that would
have been determined, net of depreciation,
had no impairment loss been recognised
for the asset in prior years. Such reversal is
recognised in the statement of profit or loss
unless the asset is carried at a revalued
amount, in which case, the reversal is treated
as a revaluation increase.