Material Accounting Policies

1. Basis of Preparation

The financial statements are prepared and presented
in accordance with Generally Accepted Accounting
Principles in India (GAAP) comprises the mandatory
Indian Accounting Standards (Ind AS) [as notified under
section 133 of the Companies Act, 2013 read with Rule 3
of the Companies (Indian Accounting Standards) Rules,
2015], as amended from time to time, to the extent
applicable, the provisions of the Companies Act, 2013
and these have been consistently applied.

2. Use of Estimates

The preparation of the financial statements in conformity
with GAAP requires that the management make
estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent
liability and contingent assets as at the date of financial
statements and the reported amounts of revenue and
expenses during the reporting period. Although such
estimates are made on a reasonable and prudent basis
taking into account of all available information, actual
results could differ from these estimates and such
differences are recognised in the period in which the
results are ascertained.

3. Basis of Measurement

The financial statements have been prepared on a
historical cost basis except for the following assets and
liabilities which have been measured at fair value:

• Derivative financial instruments, if any

• Financial assets and liabilities that are qualified to
be measured at fair value

• The defined benefit asset / liability is recognised as
the present value of defined benefit obligation less
fair value of plan assets.

4. Functional and Presentation Currency

The financial statements are presented in Indian Rupee
(INR) which is the functional and the presentation
currency of the Company.

5. Revenue Recognition

A. Revenue from Contract with Customers

i. Revenue is recognised when (or as) the company satisfies
a performance obligation by transferring a promised
goods or services (i.e., an Asset) to a Customer.

ii. 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 performance 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 recognised to the extent
of costs incurred.

c. I n case of AMC contracts, where passage of time
is the criteria for satisfaction of performance
obligation, revenue is recognised using the
output method.

iii. 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 recognises
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

• t he 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 Inco- terms of
the contracts.

Ex-Works contract - In case of Ex-works contract,
revenue is recognised 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 recognised 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 recognised 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

• t he 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

iv. Measurement

a. Revenue is recognised 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.

I n case of price escalation and ERV, revenue is
recognised at most likely amount to be realised
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 stand-alone 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.

v. 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.

vi. 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:

i. Interest Income

I nterest income is recognised using the effective
interest rate method.

ii. Dividend Income

Dividend income is recognised when the Company's
right to receive the payment is established.

iii. 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.

iv. Duty Drawbacks

Duty drawback claims on exports are accounted on
accrual basis.

v. Other Income

Other income not specifically stated above is
recognised on accrual basis.

6. Property, Plant and Equipment, Capital Work-
in-Progress

Property, plant and equipment is initially measured at cost
and subsequently at cost less accumulated depreciation
and cumulative impairment losses, if any. Cost for this
purpose includes all attributable costs for bringing the
asset to its location and condition. The present value of
the expected cost for the decommissioning of an asset
after its use is included in the cost of the respective asset,
if the recognition criteria for a provision are met.

The cost of property, plant and equipment not ready for
their intended use as at each reporting date is disclosed
as capital work-in-progress.

Capital work-in-progress comprises supply-cum-erection
contracts; the value of capital supplies received at site and
accepted, capital goods in transit and under inspection.

7. Intangible Assets, Intangible Asset under
Development

The cost of software (which is not an integral part of the
related hardware) acquired for internal use and resulting
in significant future economic benefits, is recognised as
an Intangible Asset in the books of account when the
same is ready for use. Intangible Assets that are not yet
ready for their intended use as at the reporting date are
classified as "Intangible Assets under Development".

Cost of Developmental work which is completed,
wherever eligible, is recognised as an Intangible Asset.

Cost of Developmental work under progress, wherever
eligible, is classified as "Intangible Assets under
Development".

I ntangible Asset under Development includes amount
funded by the company to external agencies towards
developmental project(s) and expenditure incurred by
the company towards material cost, employee cost and
other direct expenditure.

I ntangible assets are initially measured at cost and
subsequently at cost less accumulated amortisation and
cumulative impairment losses, if any.

An intangible asset is derecognised on disposal or
when no future economic benefits are expected from
their use or disposal. Gains or losses on derecognition of
intangible assets, if any, are recognised in the statement
of profit and loss.

8. 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.

I ntangible assets are amortised over their respective
individual estimated useful lives on a straight-line

basis, from the date that they are available for use. The
residual values, useful lives and amortisation methods,
are reviewed at each financial year end and adjusted
prospectively, if appropriate.

9. Disposal of Property, Plant and Equipment

An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising
on derecognition of the property, plant and equipment
(calculated as the difference between the net disposal
proceeds, if any, and the carrying amount of the property,
plant and equipment) is included in the statement of
profit and loss when the property, plant and equipment
is derecognised.

10. Research and Development Expenditure

(i) Expenditure on Research activity is recognised as
an expense in the period when it is incurred.

(ii) Development expenditure (other than on
specific development - cum sales contracts and
Developmental projects initiated at customer's
request), is charged off as expenditure when incurred.
Developmental expenditure on development - cum
- sale contracts and on Developmental projects
initiated at customer's request are treated at par
with other sales contracts.

Development expenditure incurred in respect of
Joint development projects which are not fully
compensated by the development partner are
carried forward where the company is nominated as
a production agency and future economic benefits
are expected.

Developmental projects are reviewed periodically
and the amount carried forward, if any, is charged
off in the event of the project being declared closed
by the customer / end user without any commitment
to place order.

(iii) Expenditure incurred towards other developmental
activity (including joint developmental activity in
collaboration with external agencies) where the
research results or other knowledge is applied

for developing new or improved products or
processes, are recognised as an Intangible Asset
if the recognition criteria specified in Ind AS 38 are
met and when the product or process developed
is expected to be technically and commercially
usable, the company has sufficient resources to
complete development and subsequently use or
sell the intangible asset, and the product or process
is likely to generate future economic benefits.

(iv) Expenditure incurred on Developmental projects for
participating in No Cost No Commitment (NCNC)
trials, based on Request for Quote from customer,
are carried forward till conclusion of the trials and
will be amortised over the orders to be received.

In case customer order is immediately
not forthcoming:

• the amount is capitalised if further economic
benefit is expected from its use, or

• the amount is charged off in the event of the
project being closed by the customer / end
user without any commitment to place order.

11. Expenditure on Technical Know-How

Expenditure incurred on technical know-how is charged
off to Statement of Profit and Loss on incurrence unless
it qualifies for recognition as an Intangible Asset either
separately on its own or in combination with other assets
/ expenses.

12. Investment Property

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.

13. 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.

Reversal of impairment provision is made when there is
an increase in the estimated service potential of an asset
or Cash Generating Unit (CGU), either from use or sale,
on reassessment after the date when impairment loss for
that asset was last recognised.

14. Leases

Company as a Lessee:-

Contracts with third party, which give the company
the right of use in respect of an Asset, are accounted
in line with the provisions of Ind AS 116 - Leases, if
the recognition criteria as specified in the Accounting
standard are met.

Lease payments associated with Short terms leases and
Leases in respect of Low value assets are charged off as
expenses on straight line basis over lease term or other
systematic basis, as applicable.

At commencement date, the value of "right of use" is
capitalised at the present value of outstanding lease
payments plus any initial direct cost and estimated cost,
if any, of dismantling and removing the underlying asset
and presented as part of property, plant and equipment.

Subsequent measurement of right-of-use asset is made
using Cost model.

Liability for lease is created for an amount equivalent to
the present value of outstanding lease payments and
presented as Borrowing.

Each lease payment is allocated between the liability
created and finance cost. The finance cost is charged to
the Statement of Profit and loss over the lease period so
as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.

The right-of-use asset is depreciated over the shorter of
the asset's useful life and the lease term on a straight¬
line basis.

The lease payments are discounted using the interest
rate implicit in the lease, if that rate can be determined,
or the company's incremental borrowing rate.

Lease modifications, if any are accounted as a separate
lease if the recognition criteria specified in the standard
are met.

Company as a lessor:

Leases are classified as operating lease or a finance lease
based on the recognition criteria specified in Ind AS 116
- Leases.

a) Finance Lease :

At commencement date, amount equivalent to
the "net investment in the lease" is presented as
a Receivable. The implicit interest rate is used to
measure the value of the "net investment in Lease".

Each lease payment is allocated between the
Receivable created and finance income. The finance
income is recognised in the Statement of Profit and
loss over the lease period so as to reflect a constant
periodic rate of return on the net investment
in Lease.

The asset is tested for de-recognition and
impairment requirements as per Ind AS 109 -
Financial Instruments.

Lease modifications, if any are accounted as a
separate lease if the recognition criteria specified
in the standard are met.

b) Operating lease:

The company recognises lease payments from
operating leases as income on either a straight-line
basis or another systematic basis, if required.

Lease modifications, if any are accounted as a
separate lease if the recognition criteria specified
in the standard are met.

15. Borrowing Costs

Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost
of the asset. General borrowing costs are capitalised to
qualifying assets by applying a capitalisation rate to the
expenditure on that asset. The capitalisation rate is the
weighted average of the borrowing costs applicable
to general borrowings outstanding, other than specific
borrowings. All other borrowing costs are expensed
in the period in which they occur. 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 to the extent
regarded as an adjustment to the borrowing costs.

16. Government Grants

Grants from Government are measured at fair value and
initially recognised as Deferred Income.

The amount lying in Deferred Income on account of
acquisition of Fixed Asset is transferred to the credit
of Statement of Profit and Loss in proportion to the
depreciation charged on the respective assets to the
extent attributable to Government Grants utilised for
the acquisition.

The amount lying in Deferred Income on account
of Revenue Expenses is transferred to the credit of
Statement of Profit and Loss to the extent of expenditure
incurred in the ratio of the funding to the total sanctioned
cost, limited to the government grant received.

17. Investments in Joint Venture and Associates

The Company accounts for it's interests in associates and
joint ventures in the separate financial statements at cost.

18. 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 realisable
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.

19. Income Taxes

Income tax comprises of current and deferred tax.

(i) Current Income Tax

Current tax assets and liabilities 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 at the reporting
date. Current tax relating to items recognised
directly in other comprehensive income or equity
is recognised in other comprehensive income or
equity respectively and not in the statement of
profit and loss.

(ii) Deferred Tax

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

Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses to the extent
that it is probable that taxable profit will be available
against which the deductible 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.

20. Provision for Warranties

Provision for expenditure on account of performance
guarantee & replacement / repair of goods sold is made
on the basis of trend based estimates.

I n cases where a trend is not ascertainable, provision
for warranty is made based on the best estimates
of management.

21. Foreign currency transactions and translation

Transactions in foreign currencies are initially recorded by
the Company at their respective currency exchange rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency by
using the closing exchange rate at the reporting date.
Differences arising on settlement or translation of
monetary items are recognised in statement of profit and
loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rate at the dates of the initial transactions.

22. Employee Benefits

(i) All employee benefits payable wholly within twelve
months of rendering the related services are classified as
short term employee benefits and they mainly include (a)
Wages & Salaries; (b) Short-term compensated absences;
(c) Profit-sharing, incentives and bonuses and (d) Non¬
monetary benefits such as medical care, subsidised
transport, canteen facilities etc., which are valued on
undiscounted basis and recognised during the period
in which the related services are rendered.

(ii) Incremental liability for payment of long term
compensated absences such as Annual Leave, Sick
Leave and Half Pay Leave is determined as the difference
between present value of the obligation determined
annually on actuarial basis using Projected Unit Credit
method and the carrying value of the provision contained
in the balance sheet and provided for.

(iii) Incremental liability for payment of Gratuity and
Employee Provident fund to employees is determined
as the difference between present value of the obligation
determined annually on actuarial basis using Projected
Unit Credit Method and the Fair Value of Plan Assets
funded in an approved trust set up for the purpose for
which monthly contributions are made in the case of
provident fund and lump sum contributions in the case
of gratuity.

(iv) I ncremental liability under BEL Retired Employees
Contributory Health Scheme (BERECHS) is determined
annually on actuarial basis using Projected Unit Credit
Method and provided for.

(v) Actuarial liability for the year is determined with reference
to employees at the end of January of each year.

(vi) Actuarial gains and losses and the return on plan assets
(excluding interest) and the effect of the asset ceiling (if
any, excluding interest), are recognised immediately in
other comprehensive income (OCI). Net interest expense
(income) on the net defined liability (asset) is computed
by applying the discount rate, used to measure the
net defined liability (asset), to the net defined liability
(asset) at the start of the financial year after taking into
account any changes as a result of contribution and
benefit payments during the year. Net interest expense
and other expenses related to defined benefit plans are
recognised in statement of profit and loss.

When the benefits of a plan are changed or when a plan
is curtailed, the resulting change in benefit that relates
to past service or the gain or loss on curtailment is
recognised immediately in statement of profit and loss.

(vii) Payments of voluntary retirement benefits are charged
off to revenue on incurrence.

(viii) Defined Contribution Plan

The Company operates employee pension scheme
and superannuation pension scheme for its employees
that are categorised as a defined contribution plans.
For defined contribution plans, the Company pays
contributions to independently administered funds
at a fixed percentage of employees' pay. These

contributions are recorded in the statement of profit and
loss. The Company's liability is limited to the extent of
contributions made to these funds.