Note 3: Significant Accounting Policies
Inventories: (Ind AS 2)

Inventories are valued in accordance with the method of valuation prescribed by The Institute of Chartered
Accountants of India at lower of cost or net realizable value.

Cost of raw materials, stores, spares, consumable tools and traded goods comprises cost of purchases and
includes taxes and duties and is net of eligible credits under GST scheme. Cost of work-in-progress, work-
made components and finished goods comprise direct materials, direct labour and an appropriate proportion
of variable and fixed overheads, which is allocated on a systematic basis. Cost of inventories also includes
all other related costs incurred in bringing the inventories to their present location and condition

Net realizable value represents the estimated selling price for inventories less all estimated costs of
completion and costs necessary to make the sale.

Cost of inventories are determined as follows:

•Raw materials, stores, spares, consumable tools, traded goods: on moving weighted average basis; and

•Work-in-progress and finished goods: on moving weighted average basis plus appropriate share of
overheads.

Cost of obsolete / non-moving inventories is provided based on policy adopted from transition date (Apr
1, 2016) which is as under:

Raw Materials, Consumables and spare parts non-moving over two years are provided in statement of
profit and loss. Work-in-progress and finished goods non-moving over considerable period of time are
provided in statement of profit and loss.

Cash Flow Statement: (Ind AS 7)

Cash flows are reported using the indirect method, where by profit for the period is adjusted for the effects
of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or
payments and item of income or expenses associated with investing or financing cash flows. The cash
flows from operating, investing and financing activities of the Company are segregated The Company
considers all highly liquid investments that are readily convertible to known amounts of cash to be cash
equivalents.

Taxes on Income: (Ind AS 12)

Income tax expense comprises current and deferred income tax Income tax expense is recognized in net
profit in the Statement of Profit and Loss except to the extent that it relates to items recognize directly in
equity, in which case it is recognized in other comprehensive income. Current income tax for current and

prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using
the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred income tax assets and liabilities are recognized for all temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realized.

Property, Plant & Equipment: (Ind AS 16)

Property, plant and equipment are stated at acquisition cost net of accumulated depreciation and
accumulated impairment losses, if any. Subsequent costs are included in the asset’s carrying amount or
recognized 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. All
other repairs and maintenance are charged to the Statement of Profit and Loss during the period in which
they are incurred.

Gains or losses arising on retirement or disposal of property, plant and equipment are recognized in the
Statement of Profit and Loss.

Depreciation is provided on a pro-rata basis on the straight-line method based on estimated useful life
prescribed under Schedule II to the Companies Act, 2013.

Freehold land is not depreciable, hence no depreciation charged to statement of profit and loss.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.

Revenue Recognition: (Ind AS 18)

Sale of goods:

Revenue from sale of products is recognized at the point in time when control of the asset is transferred to
the Customer, generally when the product is shipped to the Customer and accepted by the Customer.

Revenue is measured at the fair value of the consideration received or receivable.

Sale of services:

Revenue from services is recognized on completion of the service in accordance with the terms of contract
and upon Customer acceptance.

Other income is comprised primarily of interest income and Rental Income from lease of property. Interest
income is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable (provided that it is probable that the economic benefits will flow to the Company and the
amount of income can be measured reliably).

Employee Benefits: (Ind AS 19)

Retirement benefit costs and termination benefits:

Payments to defined contribution plans i.e., Company’s contribution to provident fund, superannuation fund,
employee state insurance and other funds are determined under the relevant schemes and/ or statute and
charged to the Statement of Profit and Loss in the period of incurrence when the services are rendered by
the Employees.

For defined benefit plans i.e. Company's liability towards gratuity (partly funded), other retirement/
terminations benefits and compensated absences, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting
period. Defined benefit costs are comprised of:

• Service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements);

• Net interest expense or income; and

• Re-measurement.

The Company presents the first two components of defined benefit costs in profit or loss in the line item ‘
Employee benefits expense’. Curtailment gains and losses are accounted for as past service costs.

Re-measurement of net defined benefit liability/ asset pertaining to gratuity comprise of actuarial gains/
losses (i.e.changes in the present value resulting from experience adjustments and effects of changes in
actuarial assumptions) is reflected immediately in the balance sheet with a charge or credit recognised in
other comprehensive income in the period in which they occur. Re-measurement recognised in other
comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss.

Shortterm Employee Benefits:

Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement
of Profit and Loss of the year in which the related services are rendered.

In respect of Gratuity, the Company offers a non-contributory defined benefit plan to its Employees. The
liability for the same, as at the year end, is provided for on the basis of Actuarial Valuation. The entity is
operating through SPIC Electronic & System Limited Gratuity fund for all payments related to gratuity and
the trust accounts are subjected to Audit.

In respect of Provident fund, the employees and the Company make fixed monthly contributions to the
SPEL Semiconductor Limited Provident Fund equal to a specified percentage of the covered employee’s
salary. The interest rate payable by the Trust to the beneficiaries is being notified by the aforesaid Trust
every year which is not less than the interest rate notified by the Government of India under the Employees
Provident Fund Scheme. The Company has an obligation to make good the shortfall, if any, in the fund.

a) Transactions in foreign currencies are initially recorded by the Company at the functional currency spot
rates at the date at which the transaction first qualifies for recognition. However, for practical reasons, the
Company uses an average rate, if the average approximates the actual rate at the date of the transaction.

b) Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or
translation of monetary items are recognised in profit or loss.

c) Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the
recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items
whose fair value gain or loss is recognized in OCI or profit or loss are also recognised in OCI or profit or loss,
respectively).

d) Gain on Foreign exchange (recognized in P&L a7c) : (8.53) Lakhs

e) Earnings in Foreign Currency : 8,28.83 Lakhs

f) Expenditure in foreign currency : 7.51 Lakhs

g) Value of Imports (on C.I.F basis) : 404.55 Lakhs

Borrowing Costs: (Ind AS 23)

Borrowing cost include interest computed using effective interest rate method, amortization of ancillary costs
incurred and exchange differences from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost.

Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset
is capitalized as part of the cost of that asset which takes substantial period of time to get ready for its
intended use. The Company determines the amount of borrowing cost eligible for capitalization by applying
capitalisation rate to the expenditure incurred on such cost. The capitalisation rate is determined based on
the weighted average rate of borrowing cost applicable to the borrowings of the Company which are
outstanding during the period, other than borrowings made specifically towards purchase of the qualifying
asset. The amount of borrowing cost that the Company capitalises during the period does not exceed the
amount of borrowing cost incurred during that period. All other borrowings costs are expensed in the period
in which they occur.

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 recognised in the statement of profit and loss in the period in which they are
incurred.

Related Party Disclosure: (Ind AS 24)

a) List of parties having significant influence

Ultimate Holding Company : Natronix Semiconductor Technology PTE LTD (Singapore)

Fellow Subsidiaries : Natronix Semiconductor Technology Private Limited

The basic earnings per share are computed by dividing the net profit for the period attributable to equity
shareholders by the weighted average number of equity shares outstanding during the period.

Diluted EPS is computed by dividing the net profit aftertax by the weighted average number of equity shares
considered for deriving basic EPS and also weighted average number of equity shares that could have been
issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed
converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are
determined independently for each period presented. The number of equity shares and potentially dilutive
equity shares are adjusted for bonus shares, as appropriate.

At the end of each reporting period, the Company determines whether there is any indication that its assets
(property, plant and equipment, intangible assets) have suffered an impairment loss with reference to their
carrying amounts If any indication of impairment exists, the recoverable amount (i.e. higher of the fair value
less costs of disposal and value in use) of such assets is estimated and impairment is recognised, if the
carrying amount exceeds the 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 for which the estimates of future cash flows
have not been adjusted.

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

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss.