Accounting Policies of Diffusion Engineers Ltd. Company

Mar 31, 2025

1 CORPORATE INFORMATION:

We are engaged in the business of manufacturing
welding consumables, wear plates and wear parts
and heavy engineering machinery for core industries.
The company was incorporated in 1982 and with
over four decades of experience, our Company
is dedicated to providing specialized repairs and
reconditioning services for heavy machinery and
equipment.Additionally, we are also involved in
trading of anti-wear powders and welding and cutting
machinery. We provide a super conditioning process
at our manufacturing facilities, a surface treatment
solution for machine components that enhances
wear resistance, eliminates stress and improves their
repairability ultimately extending their lifespan and
reducing production costs. We have developed a
synergistic system of forward integration whereby
we manufacture special purpose electrodes and flux
cored wires which are utilized for manufacturing wear
resistance plates (commonly known as wear plates).

2 BASIS OF PREPARATION OF FINANCIAL
STATEMENTS AND SIGNIFICANT ACCOUNTING
POLICIES:

2.1 Basis of Preparation

These financial statements have been prepared in
accordance with Indian Accounting Standards (''Ind AS'')
as per the Companies (Indian Accounting Standards)
Rules, 2015 notified under Section 133 of Companies Act,
2013, (the ''Act'') and other relevant provisions of the Act

2.2 Basis of Measurement

These financial statements have been prepared in
Indian Rupee which is the functional currency of
the Company. These financial statements have been
prepared on historical cost basis, except for certain
financial instruments which are measured at fair value
or amortised cost at the end of each reporting period,
as explained in the accounting policies below.

2.3 Use of judgments, estimates and assumptions

In preparing these standalone financial statements,
management has made judgments, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income, expenses and disclosures. Actual results may
differ from these estimates.

Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised prospectively.

2.4 Property, plant and equipment
Recognition and measurement

Freehold land is carried at historical cost. All other
items of property, plant and equipment are measured

at cost of acquisition or construction less accumulated
depreciation and accumulated impairment loss, if any.

The cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and other non-refundable taxes or levies and
any directly attributable cost of bringing the asset
to its working condition for its intended use; any
discounts and rebates are deducted in arriving at the
purchase price.

Borrowing costs directly attributable to the
construction or acquisition of a qualifying asset up to
completion or acquisition are capitalized as part of the
cost. The present value of the expected cost for the
decommissioning of an asset after its use is included
in the cost of the respective asset if the recognition
criteria for a provision are met.

When parts of an item of property, plant and equipment
have different useful lives, they are accounted for
as separate items (major components) of property,
plant and equipment.

Property, plant and equipment under construction
are disclosed as capital work-in-progress. Advances
paid towards the acquisition of property, plant and
equipment outstanding at each reporting date are
disclosed under "Other non-current assets".

Subsequent costs

The cost of replacing a part of an item of property, plant
and equipment is recognised in the carrying amount
of the item if it is probable that the future economic
benefits embodied within the part will flow to the
Company and its cost can be measured reliably. The
carrying amount of the replaced part is derecognised.
The costs of the day-to-day servicing of property, plant
and equipment are recognised in the statement of
profit and loss as incurred.

Disposal

An item of property, plant and equipment is
derecognised upon disposal or when no future benefits
are expected from its use or disposal. Gains and losses
on disposal of an item of property, plant and equipment
are determined by comparing the proceeds from
disposal with the carrying amount of property, plant
and equipment, and are recognised net within other
income/expenses in the statement of profit and loss.

Depreciation

Depreciation is calculated over the depreciable
amount, which is the cost of an asset, or other amount
substituted for cost, less its residual value. Depreciation
is recognised in the statement of profit and loss on a
straight-line basis over the estimated useful lives of

each part of an item of property, plant and equipment
as prescribed in Schedule II of the Companies Act
2013 except in the cases mentioned below where the
management based on the technical evaluation have
estimated the life to be lower than the life prescribed
in schedule II.

Depreciation is not recorded on capital work-in¬
progress until construction and installation are
complete and the asset is ready for its intended use.
Depreciation is also not recorded for Land.

2.5 Intangible assets
Recognition and measurement

Intangible assets are recognised when the asset is
identifiable, is within the control of the Company, it is
probable that the future economic benefits that are
attributable to the asset will flow to the Company and
cost of the asset can be reliably measured.

Intangible assets acquired by the Company that have
finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses (if any).

Subsequent measurement

Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in
the specific asset to which it relates.

Amortisation

Amortisation is calculated over the cost of the asset,
or other amount substituted for cost, less its residual
value. Amortisation is recognised in statement of profit
and loss on a straight-line basis over the estimated
useful lives of intangible assets from the date that they
are available for use, since this most closely reflects
the expected pattern of consumption of the future
economic benefits embodied in the asset.

Amortisation is not recorded on intangible assets under
development until development is complete and the
asset is ready for its intended use.

The intangible asset are amortised over the estimated
useful lives as given below: -
Computer Software : 3 years

2.6 Inventories

Raw materials and traded goods are valued at lower
of cost or net realizable value. The costs of these items
of inventory comprises of cost of purchase and other
incidental costs incurred to bring the inventories to their
present location and condition. However, raw materials
are written down below cost only when the finished
product to which they belong are written down below
cost and the replacement cost of that raw material is
lower than cost. Cost of raw materials and traded goods
are determined on "Weighted Average" /"FIFO" basis.

Work-in-process and Finished goods are valued
at lower of cost or net realizable value. The cost
includes direct materials, labour, other direct costs
and related production overheads based on normal
operating capacity. Cost is determined on "Weighted
Average" /"FIFO" basis.

2.7 Foreign currencies transactions

Transactions and balances

In preparing the financial statements of each individual
Company entity, transactions in currencies other than
the entity''s functional currency (foreign currencies) are
recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at
the rates prevailing at the date when the fair value was
determined. Non monetary items that are measured
in terms of historical cost in a foreign currency are
not retranslated.

Exchange differences on monetary items are recognised
in profit or loss in the period in which they arise.

2.8 Borrowing costs

Borrowing costs are interest and other costs that an
entity incurs in connection with the borrowing of funds.

Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are
capitalized in the cost of that asset. Qualifying assets
are those assets which necessarily takes a substantial
period of time to get ready for its intended use. All
other borrowing costs are recognised in the year in
which they are incurred.

2.9 Current and Non-Current Classification

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

All assets and liabilities are classified into current
and non-current.

An asset is treated as current when it is:

It is expected to be realised in or is intended for sale or
consumption in the Company''s normal operating cycle;

Held primarily for the purpose of trading;

It is expected to be realised within 12 months after the
reporting date; or

It is cash or cash equivalent unless it is restricted from
being exchanged or used to settle a liability for at least
12 months after the reporting date.

Current assets include the current portion of non¬
current financial assets. All other assets are classified
as non-current.

A liability is current when:

It is expected to be settled in the Company''s normal
operating cycle;

It is held primarily for the purpose of being traded;

It is due to be settled within 12 months after the
reporting date; or

The company does not have an unconditional right to
defer settlement of the liability for at least 12 months
after the reporting date. Terms of a liability that
could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not
affect its classification.

Current liabilities include current portion of non¬
current financial liabilities. All other liabilities are
classified as non-current.

Operating cycle is the time between the acquisition of
assets for processing and their realisation in cash and
cash equivalents.

2.10 Investment

Current investments are carried at lower of cost and
fair value. Non-current investments except quoted
investments are stated at cost. Provision for diminution
in the value of long term investment is made only if
such a decline is other than temporary.

Investments in subsidiaries and associates

The Company has elected to recognise its investments
in subsidiary and associate companies at cost in
accordance with the option available in Ind AS 27,
Separate Financial Statements.

2.11 Employee benefits
Short-term employee benefits

Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised
for the amount expected to be paid e.g., under short¬
term cash bonus, if the Company has a present legal or
constructive obligation to pay this amount as a result
of past service provided by the employee, and the
amount of obligation can be estimated reliably.

Defined Benefit Plans

A defined benefit plan is a post-employment benefit
plan other than a defined contribution plan. The
Company''s net obligation in respect of defined
benefit plans is calculated separately for each plan
by estimating the amount of future benefit that

employees have earned in the current and prior
periods, discounting that amount and deducting the
fair value of any plan assets.

The calculation of defined benefit obligation is
performed annually by a qualified actuary using the
projected unit credit method. When the calculation
results in a potential asset for the Company, the
recognised asset is limited to the present value
of economic benefits available in the form of any
future refunds from the plan or reductions in future
contributions to the plan (''the asset ceiling''). In
order to calculate the present value of economic
benefits, consideration is given to any minimum
funding requirements.

Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect of the
asset ceiling (if any, excluding interest), are recognised
in OCI. The Company determines the net interest
expense (income) on the net defined benefit liability
(asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the
beginning of the annual period to the then-net defined
benefit liability (asset), taking into account any changes
in the net defined benefit liability (asset) during
the period as a result of contributions and benefit
payments. Net interest expense and other expenses
related to defined benefit plans are recognised in
profit or loss.

When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service (''past service cost'' or ''past service
gain'') or the gain or loss on curtailment is recognised
immediately in profit or loss. The Company recognises
gains and losses on the settlement of a defined benefit
plan when the settlement occurs.

Other long-term employee benefits

The Company''s net obligation in respect of long¬
term employee benefits other than post-employment
benefits is the amount of future benefit that employees
have earned in return for their service in the current and
prior periods; that benefit is discounted to determine
its present value, and the fair value of any related assets
is deducted. The obligation is measured on the basis of
an annual independent actuarial valuation using the
projected unit credit method. Remeasurements gains
or losses are recognised in profit or loss in the period in
which they arise.

Termination benefits are expensed at the earlier of
when the Company can no longer withdraw the offer
of those benefits and when the Company recognises
costs for a restructuring.

Defined contribution plans

A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts.
The Company makes specified monthly contributions
towards government administered provident fund
scheme. Obligations for contributions to defined
contribution plans are recognised as an employee
benefit expense in profit or loss in the periods during
which the related services are rendered by employees.

Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in future
payments is available.

2.12 Lease

The Company, as a lessee, recognises a right-of-use
asset and a lease liability for its leasing arrangements,
if the contract conveys the right to control the use of an
identified asset.

The contract conveys the right to control the use
of an identified asset, if it involves the use of an
identified asset and the Company has substantially
all of the economic benefits from use of the asset
and has right to direct the use of the identified asset.
The cost of the right-of-use asset 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 plus any initial direct
costs incurred. 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 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 short-term and low value leases, the Company
recognises the lease payments as an operating expense
on a straight-line basis over the lease term.

2.13 Income tax

Income tax expense comprises current tax and deferred
tax. Income tax expenses are recognised in statement
of profit or loss except to the extent that it relates to
items recognized in other comprehensive income (OCI).

Current tax

Current tax is the tax payable or receivable on the
taxable income or loss for the year and any adjustment
to the tax payable or receivable in respect of the
previous year. It is measured using tax rates (and
tax laws) enacted or substantially enacted by the
reporting date.

Current tax assets/liabilities are offset only if there is
a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and
settle the liability on a net basis.

Deferred tax

Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
corresponding amounts used for taxation purposes.

Deferred tax assets (if any) are recognised only to the
extent that it is probable that future taxable profits will
be available against which they can be used. Deferred
tax assets/liabilities are reviewed at each balance sheet
date and are recognised/ reduced to the extent that it
is probable / no longer probable respectively that the
related tax benefit will be realised.

Deferred tax is measured at the tax rates that are
expected to apply to the period when the asset is
realised or the liability is settled, based on the laws that
have been enacted or substantively enacted by the
reporting date.

---

Mar 31, 2024

1 Corporate Information:

We are engaged in the business of manufacturing welding consumables, wear plates and wear parts and heavy engineering machinery for core industries. With over four decades of experience, our Company is dedicated to providing specialized repairs and reconditioning services for heavy machinery and equipment.Additionally, we are also involved in trading of anti-wear powders and welding and cutting machinery. We provide a super conditioning process at our manufacturing facilities, a surface treatment solution for machine components that enhances wear resistance, eliminates stress and improves their repairability ultimately extending their lifespan and reducing production costs. We have developed a synergistic system of forward integration whereby we manufacture special purpose electrodes and flux cored wires which are utilized for manufacturing wear resistance plates (commonly known as wear plates).

2 Basis of preparation of financial statements and significant accounting policies:

2.1 Basis of Preparation

These financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS’) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act for the purpose of preparation of Red Herring prospectus.

2.2 Basis of Measurement

These financial statements have been prepared in Indian Rupee which is the functional currency of the Company. These financial statements have been prepared on historical cost basis, except for certain financial instruments which are measured at fair value or amortised cost at the end of each reporting period, as explained in the accounting policies below.

2.3 Use of judgments, estimates and assumptions

In preparing these standalone financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

2.4 Property, plant and equipment Recognition and measurement

Freehold land is carried at historical cost. All other items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and accumulated impairment loss, if any.

The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any discounts and rebates are deducted in arriving at the purchase price.

Borrowing costs directly attributable to the construction or acquisition of a qualifying asset up to completion or acquisition are capitalized as part of the cost. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Property, plant and equipment under construction are disclosed as capital work-in-progress. Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date are disclosed under "Other non-current assets".

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as of April 1, 2021 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date

Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount ofthe replaced part is derecognised. The costs ofthe day-to-day servicing ofproperty, plant and equipment are recognised in the statement of profit and loss as incurred.

Disposal

An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use or disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income/expenses in the statement of profit and loss.

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment as prescribed in Schedule II of the Companies Act 2013 except in the cases mentioned below where the management based on the technical evaluation have estimated the life to be lower than the life prescribed in schedule II.

Depreciation is not recorded on capital work-in-progress until construction and installation are complete and the asset is ready for its intended use.Depreciation is also not recorded for Land.

2.5 Intangible assets Recognition and measurement

Intangible assets are recognised when the asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured.

Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses (if any).

Subsequent measurement

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.

Amortisation

Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in statement of profit and loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Amortisation is not recorded on intangible assets under development until development is complete and the asset is ready for its intended use.

The intangible asset are amortised over the estimated useful lives as given below: -

Computer Software : 3 years

2.6 Inventories

Raw materials and traded goods are valued at lower of cost or net realizable value. The costs of these items of inventory comprises of cost of purchase and other incidental costs incurred to bring the inventories to their present location and condition. However, raw materials are written down below cost only when the finished product to which they belong are written down below cost and the replacement cost of that raw material is lower than cost. Cost of raw materials and traded goods are determined on “Weighted Average” /"FIFO" basis.

Work-in-process and Finished goods are valued at lower of cost or net realizable value. The cost includes direct materials, labour, other direct costs and related production overheads based on normal operating capacity. Cost is determined on “Weighted Average” /"FIFO" basis.

2.7 Foreign currencies transactions Transactions and balances

In preparing the financial statements of each individual Company entity, transactions in currencies other than the entity s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

2.8 Borrowing costs

Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized in the cost of that asset. Qualifying assets are those assets which necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are recognised in the year in which they are incurred.

2.9 Current and Non-Current Classification

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

All assets and liabilities are classified into current and non-current.

An asset is treated as current when it is:

It is expected to be realised in or is intended for sale or consumption in the Company''s normal operating cycle;

Held primarily for the purpose of trading;

It is expected to be realised within 12 months after the reporting date; or

It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets. All other assets are classified as non-current.

A liability is current when:

It is expected to be settled in the Company’s normal operating cycle;

It is held primarily for the purpose of being traded;

It is due to be settled within 12 months after the reporting date; or

The company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.

2.10 Investment

Current investments are carried at lower of cost and fair value. Non-current investments are stated at cost. Provision for diminution in the value of long term investment is made only if such a decline is other than temporary.

Investments in subsidiaries and associates

The Company has elected to recognise its investments in subsidiary and associate companies at cost in accordance with the option available in Ind AS 27, Separate Financial Statements.

2.11 Employee benefits Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., under short-term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan (‘the asset ceiling’). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (‘past service cost’ or ‘past service gain’) or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

Other long-term employee benefits

The Company’s net obligation in respect oflong-term employee benefits other than post-employment benefits is the amount offuture benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is measured on the basis of an annual independent actuarial valuation using the projected unit credit method. Remeasurements gains or losses are recognised in profit or

Termination benefits are expensed at the earlier ofwhen the Company can no longer withdraw the offer ofthose benefits and when the Company recognises costs for a restructuring.

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The Company makes specified monthly contributions towards government administered provident fund scheme. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which the related services are rendered by employees.

Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

2.12 Lease

The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements, ifthe contract conveys the right to control the use of an identified asset.

The contract conveys me iigm to control the use of an identified asset, if it involves the use of an identified asset and the Company

has substantially all of the economic benefits from use of the asset and has right to direct the use of the identified asset. The cost of the right-of-use asset shall comprise ofthe amount ofthe initial measurement ofthe lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. 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

The Company measures the lease liability at the present value ofthe 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 ifthat rate can be readily determined. Ifthat rate cannot be readily determined, the Company uses incremental borrowing rate.

For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease term.

2.13 Income tax

Income tax expense comprises current tax and deferred tax. Income tax expenses are recognised in statement of profit or loss except to the extent that it relates to items recognized in other comprehensive income (OCI).

Current tax

Current tax is the tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of the previous year. It is measured using tax rates (and tax laws) enacted or substantially enacted by the reporting date.

Current tax assets/liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.

Deferred tax assets (if any) are recognised only to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets/liabilities are reviewed at each balance sheet date and are recognised/ reduced to the extent that it is probable / no longer probable respectively that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.

2.14 Provisions

A Provision is recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect

2.15 Contingent Liabilities

Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by the future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

Contingent Assets

Contingent assets are not recognised in the financial statements. A contingent asset is disclosed where an inflow of economic benefits is probable. Contingent assets are assessed continually and , if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

2.16 Financial Instruments:

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.

(a) Financial assets

Financial assets include cash and cash equivalents, trade and other receivables, investments in securities and other eligible current and non-current assets.

At initial recognition, all financial assets are measured at fair value. Such financial assets are subsequently classified under one of the following three categories according to the purpose for which they are held. The classification is reviewed at the end of each reporting period.

Financial assets at amortised cost: At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates. These financial assets are intended to be held until maturity. Therefore, they are subsequently measured at amortised cost by applying the Effective Interest Rate (EIR) method to the gross carrying amount of the financial asset. The EIR amortisation is included as interest income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.

Financial assets at fair value through other comprehensive income: At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates, as well as held for selling. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in Other Comprehensive Income (OCI). Interest income calculated using the Effective Interest Rate (EIR) method, impairment gain or loss and foreign exchange gain or loss are recognised in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from the OCI to Statement of Profit and Loss.

Financial assets at fair value through profit or loss: At the date of initial recognition, financial assets are held for trading, or which are measured neither at Amortised Cost nor at Fair Value through OCI. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in the Statement of Profit and Loss.

Investment in Equity shares of subsidiaries and associates are valued at cost.

The Company derecognises 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 derecognition under Ind AS 109.

The company assesses impairment based on the expected credit losses (ECL) model to all its financial assets measured at amortised cost.

(b) Financial liabilities

Financial liabilities include long-term and short-term loans and borrowings, trade and other payables and other eligible current and non-current liabilities.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and other payables, net of directly attributable transaction costs. After initial recognition, financial liabilities are classified under one of the following two categories:

Financial liabilities at amortised cost: After initial recognition, such financial liabilities are subsequently measured at amortised cost by applying the Effective Interest Rate (EIR) method to the gross carrying amount ofthe financial liability. The EIR amortisation is included in finance expense in the profit or loss.

Financial liabilities at fair value through profit or loss: which are designated as such on initial recognition, or which are held for trading. Fair value gains / losses attributable to changes in own credit risk is recognised in OCI. These gains / losses are not subsequently transferred to Statement of Profit and Loss. All other changes in fair value of such liabilities are recognised in the Statement of Profit and Loss.

The Company derecognises a financial liability when the obligation specified in the contract is discharged, cancelled or expires.

2.17 Revenue Recognition

Revenue from contracts with customer

Revenue from contract with customers is recognised when the Company satisfies performance obligation by transferring promised goods and services to the customer. Performance obligations are satisfied at the point oftime when the customer obtains controls of the asset. Revenue is measured based on transaction price, which is the fair value ofthe consideration received or receivable, stated net of discounts, returns and goods & service tax. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts if any.

Rental income

Rental income from investment property is recognised as part of revenue from operations in profit or loss on a straight-line basis over the term of the lease.

Dividend and interest income

Dividend income from investments is recognised when the shareholder''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.

Receipts from insurance claims are accounted after the same is approved by the insurance company.

Basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

2.19 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company.

The Company has not presented standalone segment information as permitted by Ind AS 108 - Operating Segments, as segment information of the Group is included in consolidated financial statements.

2.2 Cash and Cash Equivalents

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

2.21 Statement of Cash Flows

Statement of Cash flows is reported using the indirect method, whereby profit for the year is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

2.22 Operating Cycle

Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current

Share holder of diffusion engineers Ltd has approved bonus of 1:6 in the EGM dated 18th Nov 2023 and allotment made vide Board

2.23 Meeting dated 29th Nov 2023

Total No of shares 3.73

issue 0.26

current share 4.00

Bonus 1:6 24.01

Total Shares After Bonus Issue 28.02