Accounting Policies of Deep Industries Ltd. Company

Mar 31, 2023

significant accounting policies

a) Current versus non-current classification
An asset is treated as current when it is:

(i) Expected to be realized or intended to be sold or consumed in normal operating cycle; or

(ii) Held primarily for the purpose of trading; or

(iii) Expected to be realized within twelve months after the reporting period; or

(iv) 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 treated as current when it is:

(i) Expected to be settled in normal operating cycle; or

(ii) Held primarily for the purpose of trading; or

(iii) Due to be settled within twelve months after the reporting period; or

(iv) 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.

The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash
equivalents. The Company has identified twelve months as its operating cycle.

b) Foreign currencies

The Company financial statements are presented in Indian Rupees. The Company determines the functional currency and
items included in the financial statements are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at
the date the transaction first qualifies for recognition.

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.

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 recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively).

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the
derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction
is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the
advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date
for each payment or receipt of advance consideration.

c) Fair value measurement

The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset
in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as
a whole:

- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly
or indirectly observable

- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level
input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value are disclosed
in the relevant notes.

d) Revenue from contract with customer

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer
at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or
services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically
controls the goods or services before transferring them to the customer.

Sale of products/ Service

Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer.
Amounts disclosed as revenue are net of returns and allowances, trade discounts and rebates. The Company collects
Goods & Service Tax (GST) on behalf of the government and therefore, these are not economic benefits flowing to the
Company. Hence, these are excluded from the revenue.

Variable consideration includes trade discounts, volume rebates and incentives, etc. The Company estimates the variable
consideration with respect to above based on an analysis of accumulated historical experience. The Company adjusts
estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the
consideration becomes fixed.

Interest Income

Other revenue streams Interest Income For all debt instruments measured at amortised cost, interest income is recorded
using the Effective Interest Rate (EIR). EIR is the rate that exactly discounts the estimated future cash receipts over the
expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial
asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the
contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not
consider the expected credit losses. Interest income is included in “other income” in the Statement of Profit and Loss.

Interest income on fixed deposits is recognised on a time proportion basis taking into account the amount outstanding and
the applicable interest rate. Interest income is included under the head “other income” in the Statement of Profit and Loss.

Dividend income

Dividend on financial assets is recognised when the Company''s right to receive the dividends is established, it is probable
that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of
part of cost of the investment and the amount of dividend can be measured reliably.

Contract balances

Contract assets

A contract asset is initially recognised for revenue earned from sale of goods or services. Upon acceptance by the customer,
the amount recognised as contract assets is reclassified to trade receivables.

Contract assets are subject to impairment assessment. Refer to accounting policies on impairment of financial assets in
section - Financial instruments - initial recognition and subsequent measurement.

Trade receivables

A trade receivable is recognised if the amount of consideration is unconditional (i.e., only the passage of time is required
before payment of the consideration is due). Refer to accounting policies of financial assets in section - Financial instruments
- initial recognition and subsequent measurement.

Contract liabilities

A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before
the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company
performs under the contract (i.e., transfers control of the related goods or services to the customer).

e) Taxes

Current Tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at
the reporting date in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in
OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority
will accept an uncertain tax treatment. The Company shall reflect the effect of uncertainty for each uncertain tax treatment by
using either most likely method or expected value method, depending on which method predicts better resolution of the
treatment.

Deferred Tax

Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements at the reporting date.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any
unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can
be utilized.

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 utilised. 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 that are expected to apply in the year when the asset is
realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive
income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in
equity.

The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off
current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes
levied by the same taxation authority.

f) Property, plant and equipment (PPE)

Capital work in progress is stated at cost, net of accumulated impairment loss, if any. Plant and equipment are stated at cost,
net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of
the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When
significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately
based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance
costs are recognised in profit or loss as incurred.

Depreciation is calculated on a Straight Line Method (SLM) over the estimated useful lives of assets.

The Company has based on a technical review and re-assessment by the management, decided to adopt the existing useful
life for certain asset blocks which is lower as against the useful life recommended in Schedule II to the Companies Act, 2013,
since the Company believes that the estimates followed are reasonable and appropriate, considered current usage of such
assets.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
statement of profit and loss when the asset is derecognised.

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.

g) Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation
expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms
part of carrying value of another asset.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and
loss when the asset is derecognised.

Software

Cost of software is amortised over its useful life of 36 months starting from the month of project implementation. Gains or
losses arising from derecognition of an intangible asset 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.

h) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other
borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent
regarded as an adjustment to the borrowing costs.

i) Leases

The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.

Company as a lessee

The Company applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.

i) Right-of-use assets

The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of
lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the assets. If ownership of the leased asset transfers to the Company at the
end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the
estimated useful life of the asset.

The right-of-use assets are also subject to impairment. Refer to the accounting policies in section “Impairment of non¬
financial assets”.

ii) Lease Liabilities

At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments (including in substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of
a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the
lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not
depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the
period in which the event or condition that triggers the payment occurs. In calculating the present value of lease
payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate
implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased
to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g.,
changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying asset.

iii) Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases of guest house. (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 guest house 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.

Company as a lessor

Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified
as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the
leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as
revenue in the period in which they are earned.

j) Inventories

Inventories are stated at lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

- Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on weighted average basis.

- Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing
overheads (to the extent apportioned based on the stage of completion) based on the normal operating capacity but
excluding borrowing costs. Cost is determined on weighted average basis.

- Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on FIFO basis.

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

k) Impairment of non-financial assets

The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable
amount. An asset''s recoverable amount is the higher of an asset''s or Cash-Generating Unit''s (CGU) net selling price and its
value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its 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. In determining fair
value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.

Impairment losses, including impairment on inventories, are recognised in the Statement of Profit and Loss, except for
properties previously revalued with the revaluation surplus, if any, taken to OCI. For such properties, the impairment is
recognised in OCI up to the amount of any previous revaluation surplus.

The impairment assessment for all assets is made at each reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates
the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the Statement of Profit and Loss.