1.3 MATERIAL ACCOUNTING POLICIES

A. Property, Plant and Equipment:

I. Recognition and measurement

Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and
rebates less accumulated depreciation and impairment losses, if any. Such cost includes
purchase price, borrowing cost and any cost directly attributable to bringing the assets 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, only when it is probable that future economic benefits associated with the item
will flow to the entity and the cost can be measured reliably. Property, Plant and Equipment
which are significant to the total cost of that item of Property, Plant and Equipment and having
different useful life are accounted separately.

Expenses incurred relating to project, net of income earned during the project development
stage prior to its intended use, are disclosed under Capital Work - in - Progress.

Gains or losses arising from de-recognition of a property, plant and equipment are measured as
the difference between the net disposal proceeds and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss when the asset is derecognised.

II. Depreciation

Depreciation is recognised so as to write off the cost of the assets (other than freehold land
and Capital work in progress) less their residual values over their useful lives, using the written
down value method as per the useful life prescribed in schedule II to the Companies Act, 2013.
The Estimated useful lives, residual values and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes in the estimated accounted for on a
prospective basis.

B. Financial Instruments

1. Financial Assets

a) Initial Recognition and Measurement

All Financial Assets are initially recognized at fair value. Transaction costs that are
directly attributable to the acquisition or issue of Financial Assets, which are not at Fair
Value through Profit or Loss, are adjusted to the fair value on initial recognition.
Purchase and sale of Financial Assets are recognised using trade date accounting.

b) Subsequent measurement

> Financial Assets measured at Amortised Cost

A Financial Asset is measured at Amortised Cost if it is held within a business model
whose objective is to hold the asset in order to collect contractual cash flows and the
contractual terms of the Financial Asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.

> Financial Assets measured at Fair Value Through Other Comprehensive Income
(FVTOCI)

A Financial Asset is measured at FVTOCI if it is held within a business model whose
objective is achieved by both collecting contractual cash flows and selling Financial
Assets and the contractual terms of the Financial Asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal amount
outstanding.

> Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)

A Financial Asset which is not classified in any of the above categories are measured
at FVTPL.

c) Other Equity Investments

All other equity investments are measured at fair value, with value changes recognised
in Statement of Profit and Loss, except for those equity investments for which the
Company has elected to present the value changes in 'Other Comprehensive Income'.

d) Loans to Employees

Loans given to employees are repayable to the company on demand and hence are
carried at cost in the financial statements.

e) Cash & Cash Equivalents

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

f) Impairment of Financial Assets

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).

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 the 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.

2. Financial Liabilities & Equity Instruments

a) Classification as debt or equity

Financial liabilities and equity instruments issued by the Company are classified
according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument.

b) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of
the Company after deducting all of its liabilities. Equity instruments are recorded at the
proceeds received.

c) Financial Liabilities: Initial Recognition and Measurement

All Financial Liabilities are recognized at fair value and in case of borrowings, net of
directly attributable cost. Fees of recurring nature are directly recognised in the
Statement of Profit and Loss as finance cost.

d) Financial Liabilities: Subsequent Measurement

Financial Liabilities are carried at amortized cost using the effective interest rate (EIR)
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.

3. De-recognition of Financial Instruments

The Company derecognizes a Financial Asset when the contractual rights to the cash
flows from the Financial Asset expire or it transfers the Financial Asset and the transfer
qualifies for de-recognition under Ind AS 109. A Financial liability (or a part of a
financial liability) is derecognized from the Company's Balance Sheet when the
obligation specified in the contract is discharged or cancelled or expires.

4. Offsetting

Financial Assets and Financial Liabilities are offset and the net amount is presented in
the balance sheet when, and only when, the Company has a legally enforceable right
to set off the amount and it intends, either to settle them on a net basis or to realise
the asset and settle the liability simultaneously.

C. Inventories:

Inventories are measured at the lower of Cost and Net Realizable Value.Cost of inventories is
based on the first-in first-out formula, and includes expenditure incurred in acquiring the
inventories, production or conversion costs and other costs incurred in bringing them to their
present location condition. In the case of manufactured inventories and work in
progress,includes an appropriate share of fixed production overheads based on normal
operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses. The Net realisable value of work in
progress is determined with reference to the selling prices of related finished products.

Raw materials, components and other supplies held for use in the production of finished
products are not written down value below cost except in cases where material prices have
declined and it is estimated that the cost of the finished products will exceed their net realisable
value.

Constructed property includes cost of land (including development rights), external
development charges, construction costs, allocated overheads, development / construction
materials and other expenditure is valued at cost.

The comparison of cost and net realisable value is made on an item-by-basis.

D. Cash and Cash Equivalents:

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

E. Foreign Currency Translation:

Items included in the financial statements of the Company are measured using the currency of
the primary economic environment in which the entity operates ('the functional currency'). The
Indian Rupee (INR) is the functional and presentation currency of the Company.

Foreign currency transactions are recorded on initial recognition in the functional currency,
using the exchange rate at the date of the transaction. At each balance sheet date, foreign
currency monetary items are reported using the closing exchange rate. Exchange differences
that arise on settlement of monetary items or on reporting at each balance sheet date of the
Company's monetary items at the closing rate are recognized as income and expenses in the
Statement of Profit and Loss, in the period in which they arise.

F. Revenue recognition:

Revenue is recognised upon transfer of control of promised products or services to customers
in an amount that reflects the consideration which the Company expects to receive in exchange
for those products or services.

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.

Dividend income is recorded when the right to receive payment is established. Interest income
is recognised using the effective interest method.

Construction Project Income:

As per the Guidance Note, the revenue is recognized on percentage of completion method and
on the percentage of actual project costs incurred thereon to total estimated project cost.
Provided, all of the following conditions are met at the reporting date:

1. Required critical approvals for commencement of the project have been obtained;

2. At least 25% of estimated construction and development costs (excluding land cost) has
been incurred;

3. At least 25% of saleable project are is secured by the agreements to sell/ application forms
(containing salient terms of the agreement to sell); and

4. At least 10% of the total revenue as per agreement to sell are realised in respect of these
agreements.

G. Employee benefits:

Short-term obligations:

Liabilities for wages and salaries, including non-monetary benefits that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employee's services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled.
The liabilities are presented as current employee benefit obligations in the balance sheet.

Provident Fund:

Contribution towards provident fund for employees is made to the regulatory authorities, where
the Company has no further obligations. Such benefits are classified as Defined Contribution
Schemes as the Company does not carry any further obligations, apart from the contributions
made on a monthly basis.

Gratuity

Incremental expenditure on gratuity for each year is arrived at as per actuarial valuation and is
recognised and charged to the statement of profit and loss in the year in which employee has
rendered services.

H. Borrowing costs:

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.

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

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

I. Income tax:

Tax expenses comprise of current and deferred tax.

1. Current Tax:

Current tax is measured at the amount expected to be paid on the basis of reliefs and
deductions available in accordance with the provisions of the Income Tax Act, 1961. The
tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date.

Current tax items are recognised in co-relation to the underlying transaction either in
statement of profit and loss, OCI or directly in Equity.

2. Deferred Tax:

Deferred tax is provided using the liability method on temporary differences between the
tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date. Deferred tax liabilities are recognised for all taxable
temporary differences.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets
are re-assessed at each reporting date and are recognised to the extent that it has become
probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates [and tax laws] that have
been enacted or substantively enacted at the reporting date and are expected to apply in
the year when the asset is realised or the liability is settled. Deferred tax items are
recognised in co-relation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists
to set off current tax assets against current tax liabilities.

J. Impairment of Non-Financial Assets

The Company assesses at each reporting date as to whether there is any indication that any
Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash
Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount
of an asset or CGU is estimated to determine the extent of impairment, if any.

When it is not possible to estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the CGU to which the asset belongs.

An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's
carrying amount exceeds its recoverable amount. The recoverable amount is higher of an
asset's fair value less cost of disposal and value in use. Value in use is based on the estimated
future cash flows, discounted to their present value using pre-tax discount rate that reflects
current market assessments of the time value of money and risk specific to the assets

The impairment loss recognised in prior accounting period is reversed if there has been a
change in the estimate of recoverable amount.