2.4: Material accounting policies

A. Property, plant and equipment & capital work-in-progress

O Recognition and measurement

Property, Plant and Equipment (PPE) are tangible items that are held for use in the production or supply
of goods and services, rental to others or for administration purposes and are expected to be used during
more than one period.

The cost of an item of Property, Plant and Equipment (including related subsequent costs) is being
recognised as an asset if and only if, It is probable that future economic benefit associated with item will
flow to the Company and cost of the item can be measured reliably.

Freehold lands are at cost.

Other items of property, plant and equipment are stated at original cost net of tax/ duty credit availed,
less accumulated depreciation and accumulated impairment losses. The cost of an asset includes the
purchase cost of material, including import duties and non-refundable taxes, and directly attributable

costs of bringing an asset to the location and condition of its intended use and trial run expenditure (Net
of amount realised on goods produced during trial run). For this purpose, cost includes carrying value
as Deemed cost on the date of transition. Interest on borrowings used to finance the construction of
qualifying assets are capitalised as part of the cost of the asset until such time that the asset is ready for
its intended use.

Items of spare parts, stand by equipment’s and servicing equipment which meet the definition of
Property, Plant and Equipment are capitalised. Other spare parts are carried as inventory and recognised
in statement of Profit & Loss on consumption. When parts of an item of PPE have different useful lives,
they are accounted for as separate components.

The carrying amount of an item of Property, Plant and Equipment shall be derecognised on disposal
or when no future economic benefits are expected from its use or disposal. When significant part of
the property, plant and equipment are required to be replaced at intervals, the company derecognized
the replaced part and recognized the new parts with its own associated useful life and depreciated it
accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount
of the plant and equipment if the recognition criteria are satisfied. All other repair and maintenance cost
are recognized in the statement of the profit and loss as incurred. The present value of the expected cost
for the decommissioning of the asset after its use is included in the cost of the respective asset if the
recognition criteria for a provision are met.

The cost and related accumulated depreciation are eliminated from the financial statement upon sale or
retirement of the asset and resultant gain or losses are recognized in the Statement of Profit and Loss.

Assets identified and technically evaluated as obsolete are retired from active use and held for disposal
are stated at the lower of its carrying amount and fair value less cost to sell.

Capital work-in-progress, representing expenditure incurred in respect of assets under development
and not ready for their intended use, are carried at cost. Cost includes related acquisition expenses,
construction cost, related borrowing cost and other direct expenditure, and trial run expenditure.

O Subsequent Expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated
with the expenditure will flow to the Company.

B. Investment properties

Investment 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 investment 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 recognized in the statement of profit & loss as & when incurred.

Though the Company measures investment property using cost based measurement, the fair value of investment
property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an
accredited external independent valuer.

Investment properties are derecognized either when they have been disposed of 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 recognized in statement of profit & loss in the
period of de-recognition.

Transfers are made to (or from) investment properties only when there is a change in use. Transfers between
investment property, owner-occupied property and inventories do not change the carrying amount of the
property transferred and they do not change the cost of that property for measurement or disclosure purposes.

C. Intangible assets

Intangible assets are recognized when it is probable that the future benefits that are attributable to the assets
will flow to the Company and the cost of the assets can be measured reliably.

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as
an intangible asset when the company can demonstrate:

a) The technical feasibility of completing the intangible assets so that the asset will be available for use
or sale.

b) Its intention to complete and its ability and intention to use or sale the assets.

c) How the asset will generate future economic benefits.

d) The availability of resources to complete the asset.

e) The ability to measure reliably the expenditure during development.

During the period of development, the asset is tested for impairment annually.

Intangible assets acquired separately including patents and licenses, are measured on initial recognition at cost/
deemed cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization
and accumulated impairment losses, if any. Amortisation of the assets begins when the asset is available for use.

The useful life of intangible assets are assessed as either definite or indefinite. Intangible assets with finite
lives are amortized over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortization period and the amortization method for an
intangible assets with a finite useful life are reviewed at least at the end of each reporting period. Changes in
the expected useful life or the expected pattern of consumption of future economic benefits embodied in the
assets are considered to modify the amortization period or method, as appropriate, and are treated as changes
in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either
individually or at cost generating unit level. The assessment of indefinite life is reviewed annually to determine
whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite
is made on prospective basis.

Internally generated intangible assets, excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss for the year in which the expenditure is incurred.

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its
use. Gains or losses arising from derecognition of an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss when the asset
is derecognized.

Deemed Cost is the carrying amount under the previous GAAP as at the transition date.

D. Depreciation and amortization

The classification of plant and machinery into continuous and non-continuous process is done as per their use
and depreciation thereon is provided accordingly. Depreciation commences when the assets are available for
their intended use. Depreciation is calculated using the straight-line method to allocate their cost, net of their
residual values, over their estimated useful lives.

(*) Based on technical evaluation, the management believes that useful life as given above represents the period
over which management expects to use these assets. Hence, the useful life for these assets is different from the
useful life as prescribed under Part C of Schedule II of the Companies Act, 2013.

Computers (including accessories and peripherals), temporary structures and assets costing H5,000 or below
are depreciated fully in the year of addition. All are depreciated in one-year period.

Intangible assets are amortized on a straight-line basis over the estimated useful economic life of the assets.
The Company uses a rebuttable presumption that the useful life of intangible assets is ten years from the date
when the assets is available for use. The estimated useful lives, residual values and depreciation method are
reviewed at the end of each financial year and are given effect to wherever appropriate.

Cost of finished goods and work-in-progress comprises of raw material cost (net realisable value/derived net
reliable value, in case of use of by-products as raw material), variable and fixed overheads, which are allocated
to work-in-progress and finished goods on full absorption cost basis. Cost of inventory also includes all other
cost incurred in bringing the inventory to their respective present location and condition. Borrowing cost are
not included in the value of inventories.

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

F. Cash and cash equivalents

Cash and cash equivalents includes cash on hand and at bank, other short-term highly liquid investments with
original maturities of three months or less that are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and cash equivalents consists of cash and short term
deposits, as defined above, net of outstanding bank overdraft as they being considered as integral part of the
Company’s cash management.

G. Leases

Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted
with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company
makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it
is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the
lease term, the Company considers factors such as any significant leasehold improvements undertaken over
the lease term, costs relating to the termination of the lease and the importance of the underlying asset to
Company’s operations taking into account the location of the underlying asset and the availability of suitable
alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current
economic circumstances.

The Company as a lessee

The Company’s lease asset classes primarily 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 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 recognizes a right-of-use asset (“ROU”) and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term
of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases,
the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of
the lease.

Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and
impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter
of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For
the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and
the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that

are largely independent of those from other assets. In such cases, the recoverable amount is determined for the
Cash Generating Unit (CGU) to which the asset belongs.

The lease liability is initially measured at amortized cost at the present value of the future lease payments. The
lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are re-measured
with a corresponding adjustment to the related right- of- use asset if the Company changes its assessment if
whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments have been classified as financing cash flows.

The Company as a lessor

Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as
a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor,
it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance
or operating lease by reference to the right-of-use asset arising from the head lease. For operating leases, rental
income is recognized on a straight line basis over the term of the relevant lease.

H. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss (before other comprehensive income)
for the period attributable to equity shareholders by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share are calculated by dividing the profit/(loss) for the year (before other
comprehensive income), adjusting the after tax effect of interest and other financing costs associated with
dilutive potential equity shares, attributable to the equity shareholders, by the weighted average number of
equity shares considered for deriving basic earnings per share and also the weighted average number of equity
shares which could be issued on the conversion of all dilutive potential equity shares.