2. Significant accounting policies

This note provides a list of the significant 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.

2.1 Basis of preparation of standalone financial statements

(i) Compliance with Ind AS

The Standalone financial statements comply in all material
aspects with Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013 (the
Act) Companies (Indian Accounting Standards) Rules as
amended from time to time and other relevant provisions
of the Act.

(ii) Historical cost convention

The Standalone financial statements have been prepared
as a going concern on accrual basis of accounting. The
company has adopted historical cost basis for assets
and liabilities except for certain items which have been
measured on a different basis and such basis is disclosed in
the relevant accounting policy.

(iii) Current and non-current classification

An asset is classified as current, if

(i) It is expected to be realized or sold or consumed in
the company's normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is expected to be realized within twelve months
after the reporting period; or

(iv) It is cash or a cash equivalent unless it is 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 classified as current, if

(i) It is expected to be settled in normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is expected to be settled within twelve months after
the reporting period;

(iv) It has no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period.

All other liabilities are classified as non-current.

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

All assets and liabilities have been classified as current
or non-current as per company's operating cycle and
other criteria set out in Schedule-III of the Companies
Act, 2013. Based on the nature of business, the Company
has ascertained its operating cycle as 12 months for the
purpose of current or non-current classification of assets
and liabilities.

2.2 Segment reporting

Operating segments are reported in a manner consistent with
the internal reporting provided to the Chief Operating Decision
Maker, who is responsible for allocating resources and assessing
performance of the operating segments. Managing Director has
been identified as being the Chief Operating Decision Maker
(CODM) as defined under IND AS 108. CODM reviews overall
financial information of the Company together for performance
evaluation and allocation of resources and does not review any
discrete information to evaluate performance of any individual
product or geography

The company is engaged in the business of "High Energy
Materials" and has only one reportable segment in accordance
with Ind AS 108 "Operating Segment"

In accordance with paragraph 4 of Ind AS 108- " Operating
Segments" the company has disclosed segment information
only on the basis of consolidated financial statements.

2.3 Foreign currencies Transactions and Translation

(i) Functional and presentation currency

Items included in the standalone financial statements of the
company are measured using the currency of the primary
economic environment in which the entity operates ('the
functional currency'). The standalone financial statements
are presented in Indian rupee (INR), which is company's
functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the
functional currency using the exchange rates at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange
rates are generally recognised in statement of profit and
loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency, using the exchange
rate at the date of the transaction. Non-monetary items
that are measured at fair value in a foreign currency are
translated using the exchange rates at the date when
the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as
part of the fair value gain or loss. For example, translation
differences on non- monetary assets and liabilities such
as equity instruments held at fair value through profit or
loss are recognised in statement of profit and loss as part
of the fair value gain or loss and translation differences on
non-monetary assets such as equity investments classified
as Fair value through other comprehensive income (FVOCI)
are recognised in other comprehensive income.

2.4 Critical estimates and judgements

The preparation of standalone financial statements requires the
use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise
judgement in applying the Company's accounting policies.
Uncertainty about these judgments and estimates could result
in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.

This note provides an overview of the areas that involved a
higher degree of judgement or complexity, and of items which
are more likely to be materially adjusted due to estimates and
assumptions turning out to be different than those originally
assessed. Detailed information about each of these estimates
and judgements is included in relevant notes together with
information about the basis of calculation for each affected line
item in the standalone financial statements.

The areas involving critical estimates or judgements are

• Estimation of current tax expense and payable

• Estimation of defined benefit obligation [ refer note: 25(a)
(ii)]

• Estimation of expected credit loss on financial assets [ refer
note: 32(A)]

• Estimation of useful life of property, plant and equipment [
refer note: 2.6]

• Estimation of useful life of intangible asset [ refer note: 2.7]

• Estimation of Variable consideration [ refer note :2.5]

Estimates and judgements are continually evaluated. They are
based on historical experience and other Factors, including
expectations of future events that may have the financial impact

of the Company and that are believed to be reasonable under
the circumstances.

2.5 Revenue recognition

Sale of Products - Recognition & Measurement

Revenue from the sale of products is recognised at the point
in time when the products are delivered to the customer (as it
considered as that customer has obtained the control / legal
title has been transferred) as per the terms of the contract.
Revenue is measured based on the transaction price, which is
the consideration, adjusted for volume discounts, service level
credits, performance bonuses, price concessions and incentives,
if any, as specified in the contract with the customer. Revenue
also excludes taxes collected from customers.

The Company's customers pay for products received in
accordance with payment terms that are customary in the
industry and do not have significant financing components.

For revenues disaggregated by geography and timing of
recognition [refer note 21]

In determining the transaction price for the sale of goods or
rendering of services, the Company considers the effects of
variable consideration and provisional pricing, considering
contractually defined terms of payment and excluding taxes or
duties collected on behalf of the government.

Variable consideration

• Liquidated damages and penalties are accounted as per
the contract terms wherever there is a delay / default
attributable to the Company and when there is a reasonable
certainty with which the same can be estimated.

• The Group estimates provision for powder factor on
revenue from sale of products to certain customers which
is generally the percentage of blast output achieved at
the time of blasting of the products at the customer 's site.
Powder factor is based on the agreement with customer,
volume of output achieved at the site, which is measured
at a later date. Accordingly, the provision is made based on
the likely powder factor to be achieved on current sales
of products, which is reduced from the revenue for the
period.

Sale of Services- Recognition & Measurement

Revenue from operations and maintenance services are
recognised on output basis measured by efforts expended,
number of transactions processed, etc.

Some contracts include multiple deliverables, such as the sale
of products required for maintenance services. It is therefore
accounted for as a separate performance obligation. The
revenue from sale of products is recognised at a point in time
when the product is delivered, the legal title has been passed
and the customer has accepted the product.

Dividend income

Dividend income on investments is accounted for when the
right to receive the payment is established, which is generally
when shareholders approve the dividend. Dividend income is
included in Other income in the Statement of profit and loss.

Interest income

Interest income on all financial assets measured at amortised
cost, interest income is recognised using the effective interest
rate (EIR) method, is recognised in the statement of profit and
loss as part of other income.

Interest income is calculated by applying the effective interest
rate to the gross carrying amount of the financial asset except
for financial assets that subsequently become credit impaired.
For credit impaired financial assets, the effective interest rate is
applied to the net carrying amount of the financial asset (after
deduction of the expected credit loss).

2.6 Property, plant and equipment

Freehold land is carried at deemed cost. On transition to Ind AS,
the company has elected the option of fair value as deemed cost
of land as at April 01,2016.

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. On transition to Ind AS, the company has elected to
continue with the carrying value of all its property, plant and
equipment recognised as at April 01,2016 measured as per the
previous GAAP and use that carrying value as the deemed cost
of the Property, plant and equipment. The cost comprises the
purchase price and directly attributable costs of bringing the
asset to its working condition for its intended use.

Subsequent costs are included in the asset's carrying amount
or recognised as a separate asset, as appropriate in property,
plant and equipment the cost of replacing part of such an item
when the cost is incurred if the recognised criteria are met. The
carrying amount of any component accounted for as 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.

An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefit is expected to arise
from the continued use of the asset. Any gain or loss arising
on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of
the item) is recognised in profit and loss in the period the item is
derecognised.

Advances paid towards the acquisition of property, plant and
equipment outstanding at each Balance sheet date is classified
as capital advances under other non-current assets and the cost
of assets not ready to use before such date are disclosed under
'Capital work-in-progress'

Capital work-in-progress includes cost of property, plant and
equipment under installation / under development as at the
balance sheet date.

Depreciation methods, estimated useful lives and residual
value

Depreciation is computed on a straight-line method to allocate
their cost, net of their residual values, over their estimated useful
lives in the manner prescribed in Schedule II of the Act.

The Company reviews the residual value, useful lives and
depreciation method annually and, if expectations differ from
previous estimates, the change is accounted for as a change in
accounting estimate on a prospective basis. The residual values
are not more than 5% of the original cost of the asset. Property,
plant and equipment individually costing Rs. 5,000 or below
are fully depreciated in the year of purchase. Depreciation on
additions /deletions is calculated on a monthly pro-rata basis.

2.7 Intangible assets and amortisation

Intangible assets including software licenses of enduring nature
and contractual rights acquired separately are measured on
initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less accumulated amortization and
accumulated impairment losses, if any. Cost comprises the
purchase price and any directly attributable cost of bringing the
asset to its working condition for its intended use.

(i) Computer software

Costs associated with maintaining software are recognised
as an expense as incurred. Development costs that
are directly attributable to the design and testing of
identifiable and unique software products controlled by
the Company are recognised as intangible assets when the
following criteria are met:

- it is technically feasible to complete the software so
that it will be available for use

- the expenditure attributable to the software during
its development can be reliably measured.

(ii) Transfer of Technology

Separately acquired transfer of technology are shown
at historical cost. They have a finite useful life and are
subsequently carried at cost less accumulated amortisation
and impairment losses.

(iii) Other Licence

Separately acquired licence are shown at historical cost.
Following initial recognition, intangible assets are carried
at cost less accumulated amortization and accumulated
impairment losses, if any.

(iv) Amortisation methods and periods

The company amortises intangible assets using the
straight-line method over the following periods:

• Computer software - 3 years based on their estimated
useful lives.

• Transfer of Technology - is amortised over the license
period.

• Other Licence - 5 years.

All intangible assets are tested for impairment. The
estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a

prospective basis. Amortisation expenses and impairment
losses and reversal of impairment losses are taken to the
Statement of profit and loss. Thus, after initial recognition,
an intangible asset is carried at its cost less accumulated
amortisation and/or impairment losses.

2.8 Equity instruments

An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the amount of proceeds, net of direct costs of the
capital issue.

2.9 Financial instruments

Classification, initial recognition and measurement

A financial instrument is any contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument
of another entity. Financial instruments are recognised on the
balance sheet when the Company becomes a party to the
contractual provisions of the instrument.

(i) Financial assets

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 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.

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.

For assets measured at fair value, gains and losses will
either be recorded in profit or loss or other comprehensive
income. For investments in debt instruments, this will
depend on the business model in which the investment
is held. For investments in equity instruments, 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 fair value through other
comprehensive income.

The Company reclassifies debt investments when and
only when its business model for managing those assets
changes.

Subsequent measurement - 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

At amortised cost

Financial assets having contractual terms that give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal outstanding and
that are held within a business model whose objective is to
hold such assets in order to collect such contractual cash
flows are classified in this category. Subsequently, these
are measured at amortised cost using the effective interest
method less any impairment losses.

At 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 asset's
cash flows represent solely 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 and
loss and recognised in other gains/(losses). Interest income
from these financial assets is included in other income
using effective interest rate method. Foreign exchange
gains/ (losses) and impairment expenses are presented as
separate line item in statement of profit and loss.

At fair value through profit or loss (FVTPL)

Assets that do not meet the criteria for amortised cost or
FVOCI measured at fair value through profit or loss. A gain
or loss on a debt instrument 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.

Investment in subsidiaries and joint ventures

Investment in subsidiaries and Joint ventures are measured
at cost less impairment (if any) as per Ind AS 27. I nvestments
are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not
be recoverable.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise
cash at banks and on hand and short-term deposits with
an original maturity of three months or less, which are
subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term deposits,
as defined above, net of outstanding bank overdrafts as
they are considered an integral part of the Company's cash
management.

Trade receivables

Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.

(ii) Financial liabilities

Classification, initial recognition and measurement

Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, or payables, as appropriate. All financial
liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly
attributable transaction costs. The Company's financial
liabilities include trade and other payables, loans and
borrowings including bank overdrafts.

Subsequent measurement

Financial liabilities are carried at amortised cost using the
effective interest method. For trade and other payables
maturing within one year from the balance sheet date, the
carrying amounts approximate fair value due to the short
maturity of these instruments.

Trade and other payables

These amounts represent liabilities for goods and services
provided to the company prior to the end of financial year
which are unpaid. Trade and other payables are presented
as current liabilities unless payment is not due within 12
months after the reporting period. They are recognised
initially at their fair value and subsequently measured at
amortised cost using the effective interest method.

Loans and borrowings

Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the
borrowings using the effective interest method. Fees paid
on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised
as a prepayment for liquidity services and amortised over
the period of the facility to which it relates.

Buyers credit

The Company enters into arrangements whereby financial
institutions make direct payments to suppliers for raw
materials. The financial institutions are subsequently
repaid by the Company at a later date providing working
capital timing benefits. These are normally settled up to
twelve months, where these arrangements are for raw
materials with a maturity of up to twelve months.

Packing credit

The company enters into arrangements whereby financial
institutions will provide working capital based on the
export order. These are normally settled up to twelve
months.

Derecognition of financial instruments

The Company derecognises a financial asset when the
contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all
the risks and rewards of ownership of the asset to another
party. On de-recognition of a financial asset the difference
between the carrying amount and the consideration
received is recognised in the statement of profit and loss.

The company derecognises financial liabilities when, and
only when, the Company's obligations are discharged,
cancelled or have expired. On de-recognition of a financial
liability the difference between the carrying amount of the
financial liability derecognised and the consideration paid
and payable is recognised in the statement of profit and
loss.

Offsetting financial instruments

Financial assets and liabilities are offset and the net
amount is reported in the balance sheet where there is a
legally enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis or realise
the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events
and must be enforceable in the normal course of business
and in the event of default, insolvency or bankruptcy of the
counterparty.

2.10 Impairment of assets
Financial assets

The Company assesses at each date of balance sheet whether
a financial asset or a group of financial assets is impaired. In
accordance with Ind AS 109, the Company uses 'Expected Credit
Loss' (ECL) model for evaluating impairment of financial assets
other than those measured at fair value through profit and loss
(FVTPL).The impairment methodology applied depends on
whether there has been a significant increase in credit risk.

Expected credit losses are measured through a loss allowance at
an amount equal to

- The 12-months expected credit losses (expected credit
losses that result from those default events on the financial
instrument that are possible within 12 months after the
reporting date); or

- Full lifetime expected credit losses (expected credit losses
that result from all possible default events over the life of
the financial instrument).

For trade receivables Company applies 'simplified approach'
which requires expected lifetime losses to be recognised
from initial recognition of the receivables. The Company uses
historical default rates to determine impairment loss on the
portfolio of trade receivables. At every reporting date these

historical default rates are reviewed and changes in the forward¬
looking estimates are analysed.

For other assets, the Company uses 12 month ECL to provide for
impairment loss where there is no significant increase in credit
risk. If there is significant increase in credit risk full lifetime ECL is
used.

Non-financial assets

Property, plant & equipment and intangible assets

Property, plant and equipment and intangible assets with finite
life are evaluated for recoverability when there is any indication
that their carrying amounts may not be recoverable. If any such
indication exists, the recoverable amount (i.e. 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. If the
recoverable amount of an asset or CGU is estimated to be less
than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An impairment loss is
recognised in the profit or loss.

2.11 Borrowing costs

General and specific borrowing costs that are directly
attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period of time that
is required to complete and prepare the asset for its intended
use or sale. Qualifying assets are assets that necessarily take a
substantial period of time to get ready for their intended use or
sale.

Borrowing costs include exchange differences arising from
foreign currency borrowings to the extent they are regarded as
an adjustment to the interest cost.

Interest income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are charged to the statement of profit
and loss for the period for which they are incurred.

2.12 Inventories

(i) Raw materials and stores and spares are valued at lower
of cost, calculated on First-in-First-Out ("FIFO") basis, and
net realisable value. Items held for use in the production of
inventories are not written down below cost if the finished
products in which these will be incorporated are expected
to be sold at or above cost.

(ii) Finished goods and work-in-progress are valued at lower
of cost and net realisable value. Cost includes materials,
labour and a proportion of appropriate overheads based
on normal operating capacity.

(iii) Cost of inventories also includes all other costs incurred
in bringing the inventories to their present location
and condition. Costs are assigned to individual items of
inventory on the basis of first-in-first-out basis.

(iv) Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the
sale.

(v) Scrap is valued at net realisable value. Obsolete, defective
and unserviceable inventories are duly provided for.

2.13 Taxation

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. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulations is subject to interpretation.
It establishes provisions, where appropriate , on the basis of
amounts expected to be paid to the tax authorities.

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
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
realized, 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 utilize those temporary
differences and losses.

Deferred tax liabilities are not recognised for temporary
differences between the carrying amount and tax bases of
investments in subsidiaries where the Company is able to control
the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable
future.

Deferred tax assets are not recognised for temporary differences
between the carrying amount and tax bases of investments in
subsidiaries where it is not probable that the differences will
reverse in the foreseeable future and taxable profit will not be
available against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities
and when 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 are 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.

Deferred tax assets include Minimum Alternative Tax (MAT)
paid in accordance with the tax laws in India, which is likely
to give future economic benefits in the form of availability of
set off against future income tax liability. Accordingly, MAT is
recognised as deferred tax asset in the Balance sheet when the
asset can be measured reliably and it is probable that the future
economic benefit associated with the asset will be realised.

2.14 Leases
As a lessee

The Company accounts for each lease component within the
contract as a lease separately from non-lease components of the
contract and allocates the consideration in the contract to each
lease component on the basis of the relative stand-alone price
of the lease component and the aggregate stand-alone price of
the non-lease components.

The Company recognises right-of-use asset representing its
right to use the underlying asset for the lease term at the
lease commencement date. The cost of the right-of-use asset
measured at inception shall comprise of the amount of the
initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date
less any lease incentives received, plus any initial direct costs
incurred and an estimate of costs to be incurred by the lessee in
dismantling and removing the underlying asset or restoring the
underlying asset or site on which it is located. The right-of-use
assets is subsequently measured at cost less any accumulated
depreciation, accumulated impairment losses, if any and
adjusted for any remeasurement of the lease liability. The right-
of-use assets is depreciated using the straight-line method
from the commencement date over the shorter of lease term
or useful life of right-of-use asset. The estimated useful lives of
right-of use assets are determined on the same basis as those
of property, plant and equipment. Right-of-use assets are tested
for impairment whenever there is any indication that their
carrying amounts may not be recoverable. Impairment loss, if
any, is recognised in the statement of profit and loss.

The Company measures the lease liability at the present value of
the lease payments that are not paid at the commencement date
of the lease. The lease payments are discounted using the interest
rate implicit in the lease, if that rate can be readily determined.
If that rate cannot be readily determined, the Company uses
incremental borrowing rate. For leases with reasonably similar
characteristics, the Company, on a lease by lease basis, may
adopt either the incremental borrowing rate specific to the lease
or the incremental borrowing rate for the portfolio as a whole.
The lease payments shall include fixed payments, variable
lease payments, residual value guarantees, exercise price of a
purchase option where the Company is reasonably certain to
exercise that option and payments of penalties for terminating
the lease, if the lease term reflects the lessee exercising an
option to terminate the lease. The lease liability is subsequently
remeasured by increasing the carrying amount to reflect
interest on the lease liability, reducing the carrying amount to
reflect the lease payments made and remeasuring the carrying
amount to reflect any reassessment or lease modifications or to
reflect revised in-substance fixed lease payments. The company
recognises the amount of the re-measurement of lease liability

due to modification as an adjustment to the right-of-use asset
and statement of profit and loss depending upon the nature
of modification. Where the carrying amount of the right-of-use
asset is reduced to zero and there is a further reduction in the
measurement of the lease liability, the Company recognises any
remaining amount of the re-measurement in statement of profit
and loss.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition
exemption to its short-term leases of vehicles, and office
buildings (i.e., those leases that have a lease term of 12 months
or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment that are
considered to be low value. Lease payments on short-term
leases and leases of low-value assets are recognised as expense
on a straight-line basis over the lease term.

As a lessor

At the inception of the lease the Company classifies each of
its leases as either an operating lease or a finance lease. The
Company recognises lease payments received under operating
leases as income on a straight-line basis over the lease term. In
case of a finance lease, finance income is recognised over the
lease term based on a pattern reflecting a constant periodic rate
of return on the lessor's net investment in the lease. When the
Company is an intermediate lessor it accounts for its interests
in the head lease and the sub-lease separately. It assesses the
lease classification of a sub-lease with reference to the right-of-
use asset arising from the head lease, not with reference to the
underlying asset. If a head lease is a short term lease to which
the Company applies the exemption described above, then it
classifies the sub-lease as an operating lease.