3) MATERIAL ACCOUNTING POLICIES

(i) Property, Plant and Equipment (PPE)

Tangible Assets (PPE)

The PPE (Tangible assets) is initially recognized at cost.

The cost of an item of Property, Plant and Equipment comprises of its purchase price, including import
duties, non-refundable taxes, after deducting trade discounts & rebates, borrowing cost if capitalization
criteria are met and any cost directly attributable in bringing the asset to the location and condition
necessary for it to be ready for its intended use. Stores and spares which meet the recognition criteria of
Property, Plant and Equipment are capitalized and added in the carrying amount of the underlying asset.

The Company has adopted the cost model of subsequent recognition to measure the Property, Plant and
Equipment. Consequently, all Property, Plant and Equipment are carried at its cost less accumulated
depreciation and accumulated impairment losses, if any.

De-recognition

An item of PPE is derecognized on disposal, or when no future economic benefits are expected from use.
Gains or losses arising from de-recognition of a PPE measured as the difference between the net disposal
proceeds and the Carrying amount of the asset are recognized in the Statement of Profit and Loss when the
asset is derecognized.

Capital Work-in-Progress

The cost of PPE under construction at the reporting date is disclosed as 'Capital work-in-progress.' The
cost comprises purchase price, import duties, non-refundable taxes, after deducting trade discounts &
rebates, borrowing cost if capitalization criteria are met and any cost directly attributable in bringing the
asset to the location and condition necessary for it to be ready for its intended use. Advances paid for
the acquisition/ construction of PPE which are outstanding at the balance sheet date are classified under
'Capital Advances.'

(ii) Intangible Assets and Amortisation

Intangible assets are initially measured at cost. The cost comprises purchase price, import duties, non¬
refundable taxes, after deducting trade discounts & rebates, borrowing cost if capitalization criteria are met
and any cost directly attributable in bringing the asset to the condition necessary for it to be ready for its
intended use. Such assets are recognized where it is probable that the future economic benefits attributable
to the assets will flow to the Company.

All intangible assets with finite useful life are subsequently recognized at cost model. These intangible
assets are carried subsequently at its cost less accumulated amortization and accumulated impairment
loss if any.

Intangible Assets under Development

Expenditure incurred which are eligible for capitalization under intangible assets is carried as 'Intangible
assets under development' till they are ready for their intended use.

Derecognition

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from
use. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset are recognized in the Statement of Profit
and Loss when the asset is derecognized.

(iii) Depreciation and Amortization

Depreciation on Tangible PPE is provided in accordance with the manner and useful life as specified in

Schedule -II of the Companies Act 2013, on Written Down Basis (WDV) except for the assets mentioned as

below:

• Depreciation on Library books is provided @ 100% in the year of purchase.

• Depreciation on PPE of Solar Power Project is provided on Straight Line Method at rates/methodology
prescribed under the relevant Central Electricity Regulatory Commission (CERC) and relevant state
Commission Tariff Orders.

• Depreciation is provided @100% in the financial year of purchase in respect of assets of '5,000/- or
less.

• Amortization of intangible assets is being provided on straight line basis.

• Useful lives for all PPE & Intangible assets are reviewed at each reporting date. Changes, if any, are
accounted for as changes in accounting estimates.

(iv) Government and Other Grants / Assistance

The Company may receive government grants that require compliance with certain conditions related to the
Company's operating activities or are provided to the Company by way of financial assistance on the basis of
certain qualifying criteria.

Government grants are recognised when there is reasonable assurance that the grant will be received, and
the Company will be able to comply with the conditions attached to them. These grants are classified as
grants relating to assets and revenue based on the nature of the grant.

Government grants with a condition to purchase, construct or otherwise acquire long term assets are
initially recognized as deferred income. Once recognized as deferred income, such grants are recognised in
the statement of profit and loss on a systematic basis over the useful life of the asset. Changes in estimates
are recognized prospectively over the remaining life of the asset.

Grant related to subsidy are deferred and recognised in the statement of profit and loss over the period that
the related costs, for which it is intended to compensate, are expensed.

Grant-in-aid for financing projects in specified sectors of New and Renewable Sources of Energy (NRSE) is
treated and accounted as deferred income.

The expenditure incurred under Technical Assistance Programme (TAP) is accounted for as recoverable
and shown under the head 'Other Financial Assets'. The assistance reimbursed from Multilateral/Bilateral
Agencies is credited to the said account.

(v) Leases

? As a lessee

The Company assesses at contract inception 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:

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.

The Company applies a single recognition and measurement approach for all leases, except for short- term
leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments
and right-of-use assets representing the right to use the underlying assets.

i) Right-of-use assets

The Company recognizes 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 re-measurement 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 estimated useful life of the assets.

ii) Lease liabilities

At the commencement date of the lease, the Company recognizes 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. The
Company uses its incremental borrowing rate at the lease commencement date because the interest rate
implicit in the lease is not readily determinable. The incremental borrowing rate is the SBI MCLR rate for
the period of the loan if the loan is up to 3 years. For a period, greater than 3 years, SBI MCLR rate for 3
years may be taken.

iii) Short-term leases and leases of low-value assets

Lease payments on short-term leases (which has a lease term of up to 12 months) and leases of low value
assets (asset value up to ' 10,00,000/-) are recognised as expense over the lease term. Lease term is
determined by taking non-cancellable period of a lease, together with both:

a) Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that
option; and

b) Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise
that option.

? As a lessor

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease
or an operating lease. To classify each lease, the Company makes an overall assessment of whether the
lease transfers substantially all the risk and rewards incidental to the ownership of the underlying asset.
If this is the case, then the lease is a finance lease, if not, then it is an operating lease. As part of the
assessment, the Company considers certain indicators such as whether the lease is for the major part of
the economic life of the asset. If an arrangement contains lease and non-lease components, the Company
applies Ind AS 115 "Revenue from contract with customers" to allocate the consideration in the contract.
The Company recognizes lease payments received under operating lease as income on a straight-line basis
over the lease term as part of "Revenue from operations".

(vi) Investments in Subsidiary, Associates and Joint Venture

• The Company accounts investment in subsidiary, joint ventures, and associates at cost. An entity
controlled by the Company is considered as a subsidiary of the Company. Investments in subsidiary
Company outside India are translated at the rate of exchange prevailing on the date of acquisition.

• Investments where the Company has significant influence are classified as associates. Significant
influence is the power to participate in the financial and operating policy decisions of the investee but
is not control or joint control over those policies.

• A joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint arrangement is classified as a joint venture. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.

? Impairment Loss on Investment in Associate or joint Venture

If there is an indication of impairment in respect of entity's investment in associate or joint venture, the
carrying value of the investment is tested for impairment by comparing the recoverable amount with its
carrying value and any resulting impairment loss is charged against the carrying value of investment in
associate or joint venture.

(vii) Impairment of Non-Financial Asset

The Company assesses at each reporting date, whether there is an indication that an asset may be impaired.
If any indication exists, the Company estimates the asset's recoverable amount. An asset's recoverable
amount is the higher of an assets or cash-generating units (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 Group 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
into account. If no such transactions can be identified, an appropriate valuation model is used.

(viii) Cash and cash equivalents

Cash comprises of cash in hand, cash at bank including debit balance in bank overdraft, if any, demand
deposits with banks, commercial papers and foreign currency deposits. Cash equivalents are short term
deposits (with an original maturity of three months or less from the date of acquisition), highly liquid
investments that are readily convertible into known amounts of cash and which are subject to insignificant
risk of changes in value.

(ix) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of
qualifying asset are capitalized up-to the date when the asset is ready for its intended use after netting off
any income earned on temporary investment of such funds.

To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a
qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a
capitalisation rate to the expenditures on that asset.

Other borrowing costs are expensed in the period in which they are incurred.

(x) Foreign currency transactions

Transactions in currencies other than the functional currency are recognized at the rates of exchange
prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at
the rates prevailing at that date. Foreign exchange gains and losses resulting from the settlement of such
transactions and the re-measurement of monetary items denominated in foreign currency at period-end
exchange rates are recognized in the Statement of Profit and Loss.

Foreign Currency Monetary Item Translation Reserve Account (FCMITR) represents unamortized foreign
exchange gain/loss on Long-term Foreign Currency Borrowings that are amortized over the tenure of the
respective borrowings. IREDA had adopted exemption of para D13AA of Ind AS 101, according to which it may
continue the policy adopted for accounting for exchange differences arising from translation of long-term
foreign currency monetary items recognized in the financial statements for the period ending immediately
before the beginning of the first Ind AS financial reporting period as per the previous GAAP. Accordingly, all
transactions in foreign currency are recorded at the exchange rate prevailing at the date of the transaction.
The exchange differences arising on reporting of long-term foreign currency monetary items outstanding as
on March 31,2018, at rate prevailing at the end of each reporting period, different from those at which they
were initially recorded during the period, or reported in previous financial statements, are accumulated in
FCMITR Account, and amortized over the balance period of such long-term monetary item, by recognition
as income or expense in each of such period. Long-term foreign currency monetary items are those which
have a term of twelve months or more at the date of origination.

Short-term foreign currency monetary items (having a term of less than twelve months at the date of
origination) are translated at rate prevailing at the end of each reporting period. The resultant exchange
fluctuation is recognized as income or expense in each of such periods.

As per Para 27 of Ind AS 21, exchange difference on monetary items that qualify as hedging instruments in
cash flow hedge are recognized in other comprehensive income to the extent hedge is effective. Accordingly,
Company recognize the exchange difference due to translation of foreign currency loans at the exchange
rate prevailing on reporting date in cash flow hedge reserve.

(xi) Earnings per Share

The basic earnings per share is computed by dividing the net profit after tax by the weighted average number
of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing adjusted net profit after tax by the aggregate of weighted
average number of equity shares and dilutive potential equity shares outstanding during the year. The
number of equity shares and potentially dilutive equity shares are adjusted for share splits /reverse share
splits and bonus shares, as appropriate.