2 Material Accounting Policies

a Basis of Preparation

These financial statements have been prepared in accordance with the Generally Accepted
Accounting Principles in India (‘Indian GAAP’) to comply with the Accounting Standards specified
under Section 133 of the Companies Act, 2013, as applicable. The financial statements have
been prepared under the historical cost convention on accrual basis, except for certain financial
instruments which are measured at fair value.

b. Property, Plant and Equipment

Property, Plant and Equipment are stated at cost, less accumulated depreciation / amortisation.
Costs include all expenses incurred to bring the asset to its present location and condition.
Property, Plant and Equipment exclude computers and other assets individually costing Rs. 5000 or
less which are not capitalised except when they are part of a larger capital investment programme.

d Impairment of assets

At each balance sheet date, the management reviews the carrying amounts of its assets included
in each cash generating unit to determine whether there is any indication that those assets were
impaired. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of impairment. Recoverable amount is the higher of an asset’s net selling
price and value in use. In assessing value in use, the estimated future cash flows expected from the
continuing use of the asset and from its disposal are discounted to their present value using a pre¬
tax discount rate that reflects the current market assessments of time value of money and the risks
specific to the asset. Reversal of impairment loss is recognised as income in the statement of profit
and loss.

e Investment

Long-term investments and current maturities of long-term investments are stated at cost, less
provision for other than temporary diminution in value. Current investments, except for current
maturities of long-term investments, comprising investments in mutual funds, government securities
and bonds are stated at the lower of cost and fair value.

f Inventories

Raw materials are carried at the lower of cost and net realisable value. Cost is determined on a
weighted average basis. Purchased goods-in-transit are carried at cost. Work-in-progress is carried
at the lower of cost and net realisable value. Stores and spare parts are carried at lower of cost and
net realisable value. Finished goods produced or purchased by the Company are carried at lower
of cost and net realisable value. Cost includes direct material and labour cost and a proportion of
manufacturing overheads.

g Cash and cash equivalents

The Company considers all highly liquid financial instruments, which are readily convertible into
known amount of cash that are subject to an insignificant risk of change in value and having original
maturities of three months or less from the date of purchase, to be cash equivalents.

h Revenue recognition

Revenue from the sale of products are recognised upon delivery, which is when title passes to the
customer: Revenue is reported net of discounts.

Dividend is recorded when the right to receive payment is established. Interest income is recognised
on time proportion basis taking into account the amount outstanding and the rate applicable.

i Employee Benefits

Post-employment benefit plans

Contributions to defined contribution retirement benefit schemes are recognised as expense when
employees have rendered services entitling them to such benefits.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit
Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains
and losses are recognised in full in the statement of profit and loss for the period in which they occur.
Past service cost is recognised immediately to the extent that the benefits are already vested, or

amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of
the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the
fair value of scheme assets. Any asset resulting from this calculation is limited to the present value
of available refunds and reductions in future contributions to the scheme.

Other employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the
services rendered by employees is recognised during the period when the employee renders the
service. These benefits include compensated absences such as paid annual leave, overseas social
security contributions and performance incentives.

Compensated absences which are not expected to occur within twelve months after the end of
the period in which the employee renders the related services are recognised as an actuarially
determined liability at the present value of the defined benefit obligation at the balance sheet date.

j Foreign currency transactions

Income and expense in foreign currencies are converted at exchange rates prevailing on the date
of the transaction. Foreign currency monetary assets and liabilities other than net investments in
non-integral foreign operations are translated at the exchange rate prevailing on the balance sheet
date and exchange gains and losses are recognised in the statement of profit and loss. Exchange
difference arising on a monetary item that, in substance, forms part of an enterprise’s net investments
in a non-integral foreign operation are accumulated in a foreign currency translation reserve.

k Taxation

Current income tax expense comprises taxes on income from operations in India and in foreign
jurisdictions. Income taxpayable in India is determined in accordance with the provisions of the
Income Tax Act, 1961. Tax expense relating to foreign operations is determined in accordance with
tax laws applicable in countries where such operations are domiciled.

Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to
future economic benefits in the form of adjustment of future income tax liability, is considered as
an asset if there is convincing evidence that the Company will pay normal income tax after the tax
holiday period. Accordingly, MAT is recognised as an asset in the balance sheet when the asset
can be measured reliably and it is probable that the future economic benefit associated with it will
fructify.

Deferred tax expense or benefit is recognised on timing differences being the difference between
taxable income and accounting income that originate in one period and is likely to reverse in one or
more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and

tax laws that have been enacted or substantively enacted by the balance sheet date.

Advance taxes and provisions for current income taxes are presented in the balance sheet after off¬
setting advance tax paid and income tax provision arising in the same tax jurisdiction for relevant tax
paying units and where the Company is able to and intends to settle the asset and liability on a net
basis.

The Company offsets deferred tax assets and deferred tax liabilities if it has a legally enforceable
right and these relate to taxes on income levied by the same governing taxation laws.