2. Basis of preparation and Summary of material accounting policies

This note provides a list of the material accounting policies adopted in the preparation of these
standalone financial statements. These policies have been consistently applied to all the years presented,
unless otherwise stated. The standalone financial statements are for the Company consisting of MKP
Mobility Limited (the ‘Company’).

In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted
Indian Accounting Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting
Standards) Rules, 2015.

2.1 Basis of preparation and presentation of standalone financial statements(i) Statement of Compliance

The standalone financial statements have been prepared in accordance with the accounting principles
generally accepted in India including Indian Accounting Standards (Ind AS) notified under Section 133 of
the Companies Act, 2013 (the Act) read with Companies (Indian Accounting Standards) Rules, 2015 as
amended from time to time and presentation and disclosures requirement of Division II of revised
Schedule III of the Companies Act 2013, as applicable to standalone financial statement.

The standalone financial statements have been prepared on accrual and going concern basis. The
accounting policies are applied consistently to all the periods presented in the standalone financial
statements.

(ii) Historical cost convention

The standalone financial statements have been prepared on a historical cost basis, except for the
following:

• Certain financial assets and liabilities (including derivative instruments) - measured at fair value;

• Assets held for sale - measured at fair value less cost to sell

(iii) Current versus Non-current classification

The Company presents assets and liabilities in the balance sheet based on current/non-current
classification.

An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realised within twelve months after the reporting period; or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in the normal operating cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the reporting period; or there is no unconditional
right to defer the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Operating cycle of the Company is the time between the acquisition of assets for processing and their
realization in cash or cash equivalents. Based on the nature of products and the time between the
acquisitions of assets for processing and their realization in cash and cash equivalents, the company has
ascertained operating cycle of 12 months for the purpose of current and non-current classification of
assets and liabilities.

(iv) Segment reporting:

The Company primarily operates in the Distribution of Automobile spare parts and lubricants. The board
of directors of the Company, which has been identified as being the chief operating decision maker
(CODM), evaluates the Company’s performance, allocates resources based on the analysis of the various
performance indicators of the Company as a single unit. Therefore, there is no reportable segment for the
Company as per the requirement of IND AS 108 “Operating Segments”.

(v) Cash flow statement

The Cash Flow Statement is prepared by the indirect method set out in Ind AS 7 on Cash Flow Statements
and presents cash flows by operating, investing and financing activities of the Company.

2.2 Property, plant and equipmentInitial recognition

All items of property, plant and equipment (including capital work-in-progress) are measured at its cost.
The cost of an item of property, plant and equipment comprises:

(a) Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade
discounts and rebates.

(b) Any costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management.

(c) The initial estimate of the costs of dismantling and removing the item and restoring the site on which
it is located, the obligation for which an entity incurs either when the item is acquired or as a
consequence of having used the item during a particular period for purposes other than to produce
inventories during that period.

Measurement after recognition

The Company has elected revaluation model for measurement of land whose fair value can be measured
reliably at each reporting period.

(a) Revaluation model for certain class of property, plant and equipment

Land is recognised at fair value based on periodic, but at least once in three years, valuations by external
independent valuers, less subsequent depreciation for buildings.

Increases in the carrying amounts arising on revaluation of land are recognised, net of tax, in other
comprehensive income and accumulated in reserves in shareholders’ equity. To the extent that the
increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in
profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other
comprehensive income to the extent of the remaining surplus attributable to the asset; all other
decreases are charged to profit or loss. Each year, the difference between depreciation based on the
revalued carrying amount of the asset charged to profit or loss and depreciation based on the asset’s
original cost, net of tax, is reclassified from the revaluation reserve to retained earnings.

(b) Cost model for other class of assets

All other items of property, plant and equipment are stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also
include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are
charged to profit or loss during the reporting period in which they are incurred.

(c) Depreciation methods, estimated useful lives and residual value.

Depreciation is calculated using the WDV method to allocate the cost of the assets, net of their residual
values, over their estimated useful lives as follows:

2.3 Intangible assets (including intangible assets under development)Software:

Intangible assets are recognized at cost. Intangible assets are amortised on a straight line basis over the
estimated useful economic life so as to reflect the pattern in which the assets economic benefits are
consumed.

Following summarizes the nature of intangible and the estimated useful life:

An intangible asset is derecognized on disposal or when no future economic benefits are expected from
use or disposal. 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, and are recognized in
the profit or loss when the asset is derecognized.

2.4 Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary
course of business. Trade receivables are recognised initially at the amount of consideration that is
unconditional unless they contain significant financing components, when they are recognised at fair
value. The Company holds the trade receivables with the objective of collecting the contractual cash
flows and therefore measures them subsequently at amortised cost.

2.5 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value

2.6 Other financial assets(i) Classification

The Company classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income. For investments in equity instruments that are not held for trading, this will
depend on whether the Company has made an irrevocable election at the time of initial recognition to
account for the equity investment at FVOCI.

(ii) Recognition

Regular way purchases and sales of financial assets are recognised on trade-date, being the date on which
the Company commits to purchase or sell the financial asset.

(iii) Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Company’s business model for managing the
asset and the cash flow characteristics of the asset. There are three measurement categories into which
the Company classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost. Interest income from
these financial assets is included in Other Income using the effective interest rate method. Any gain or
loss arising on de-recognition is recognised directly in profit or loss and presented in other gains/ (losses).
Impairment losses are presented as separate line item in the statement of profit and loss.

• Fair value through other comprehensive income (FVOCI): Assets that are held for collection of
contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely
payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken
through OCI, except for the recognition of impairment gains or losses, interest income and foreign
exchange gains and losses which are recognised in profit and loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit
or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in
other income using the effective interest rate method. Foreign exchange gains and losses are presented in
other gains/ (losses) and impairment expenses are presented as separate line item in statement of profit
and loss.

• Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are
measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently
measured at fair value through profit or loss is recognised in profit or loss and presented net within other
gains/ (losses) in the period in which it arises. Interest income from these financial assets is included in
other income.

Equity instruments

The Company subsequently measures all equity investments at fair value. Where the Company’s
management has elected to present fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the de-recognition of the investment. Dividends from such investments are recognised in
profit or loss as other income when the Company’s right to receive payments is established.

Changes in the fair value of financial assets at fair value through profit or loss are recognised in other
gain/ (losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on
equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment of financial assets

The Company assesses on a forward looking basis the expected credit losses associated with its assets
carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.

De-recognition of financial assets

A financial asset is derecognised only when:

• the Company has transferred the rights to receive cash flows from the financial asset or

• retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients.

Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially
all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised.
Where the entity has not transferred substantially all risks and rewards of ownership of the financial
asset, the financial asset is not derecognised.

Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is derecognised if the Company has not retained
control of the financial asset. Where the Company retains control of the financial asset, the asset is
continued to be recognised to the extent of continuing involvement in the financial asset.

2.7 Income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in India where the company operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment.

The Company measures its tax balances either based on the most likely amount or the expected value,
depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the standalone financial
statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it
is probable that future taxable amounts will be available to utilise those temporary differences and
losses.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current
tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset
and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.

2.8 Inventories

Cost of inventories for traded goods is computed on weighted-average basis. Inventories are stated at
lower of cost or net realisable value. The cost of stock-in-trade includes direct expenses.

Net realisable value is the estimated selling price in the ordinary course of business less any applicable
selling expenses.