Accounting Policies of Fabtech Technologies Ltd. Company

Mar 31, 2025

3. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied by the Company in the preparation of its financial
statements are listed below. Such accounting policies have been applied consistently to all the
periods presented in these financial statements, unless otherwise indicated.

A) Functional and Presentation Currency

Items included in the financial statements are measured using the currency of the primary
economic environment in which the Company operates. The financial statements are presented
in Indian Rupees (INR) and all values are rounded to the nearest lakhs with two decimals, except
when otherwise indicated.

B) Use of estimates and critical accounting judgements

The preparation of the financial statements in conformity with Ind AS requires management to
make estimates, judgements and assumptions.

The preparation of financial statements requires the use of accounting estimates which, by
definition, may differ from the actual results. Management also needs to exercise judgement in
applying the Company''s accounting policies.

These estimates, judgements and assumptions affect the application of accounting policies and
the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities
as at the date of the financial statements and reported amounts of revenues and expenses during
the period. Accounting estimates could change from period to period. Actual results could differ
from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which the estimate is
revised and future periods affected.

Detailed information about each of these estimates and judgements is included in relevant notes
together with information about the basis of calculation for each affected line item in the financial
statements

Critical estimates and judgements

The areas involving critical estimates or judgements are:

• Estimation of defined benefit obligation - Note 43

• Impairment of trade receivables - Note 14

Estimation and judgements are continuously evaluated. They are based on historical experience
and other factors including expectation of future events that may have a financial impact on the
Company and that are believed to be reasonable under the circumstances

C) Current versus Non-current classification

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

An asset is classified as current when it satisfies any of the following criteria:

a) it is expected to be realised in, or is intended for sale or consumption in the company''s normal
operating cycle;

b) it is held primarily for the purpose of being traded;

c) it is expected to be realised within 12 months after the reporting date; or

d) 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 classified as current when it satisfies any of the following criteria:

a) it is expected to be settled in the company''s normal operating cycle;

b) it is held primarily for the purpose of being traded;

c) it is due to be settled within 12 months after the reporting date; or

d) 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.

All assets and liabilities have been classified as current or noncurrent as per the Company''s
normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
Based on the nature of product and the time between the acquisition of assets for processing and
their realization in cash and cash equivalents, the Company has ascertained its operating cycle
as 12 months for the purpose of current / non-current classification of assets and liabilities

D) Revenue recognition

To determine revenue recognition, the Company follows a 5-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied

Under Ind AS 115 - Revenue from Contracts with Customers, revenue is recognised upon transfer of
control of promised goods or services to customers. Revenue is measured at the transaction price
agreed with the customers received or receivable, excluding discounts, incentives, performance
bonuses, price concessions, amounts collected on behalf of third parties, or other similar items, if
any, as specified in the contract with the customer. Revenue is recorded provided the recovery of
consideration is probable and determinable. Sales are recognised when control of the products
has transferred, the customer has full discretion over price to sell/ use of the product, and there is
no unfulfilled obligation that could affect the customer''s acceptance of the products
The Company is providing start to finish turnkey solutions, which includes supplying pharmaceutical
machineries / equipment, in house designing engineering, procurement, installation, validation
and to undertake other activities required in various projects including standalone equipment
supply and installation. Revenue is measured at the fair value of consideration received or
receivable by the Company for goods supplied and services rendered, excluding trade discounts
and applicable taxes. It is recognized when the following criteria are met:

• The control of the goods or services is transferred to the customer in accordance with the
contractual terms.

• The revenue amount can be reliably measured.

• It is probable that the economic benefits from the transaction will flow to the Company.

• The costs incurred or to be incurred can be measured reliably.

Revenue recognition is classified as follows:

i. Turnkey Contracts

Turnkey contracts typically involve the design, engineering, supply, installation, and commissioning
of facilities and their internal infrastructure. The contract price is usually a fixed consideration that
varies on a case-by-case basis.

Such contracts usually represent a single performance obligation, where control of goods and
services is transferred progressively over the contract period. The performance obligation is
considered satisfied upon the completion of contractual scope and formal customer acceptance.
Contract revenue and related costs, where execution spans multiple accounting periods, are
recognized based on actual shipments as of the reporting date.

ii. Sale of Services

Revenue from services such as management consultancy and installation services is recognized
when the services are performed in accordance with the terms agreed with the customer. The
transaction price represents the amount agreed with the customer, excluding trade discounts
and applicable taxes.

iii. Export Incentive: under various scheme notified by government has been recognized on the
basis of credits afforded in the passbook or amount received.

iv. Interest & Dividend Income

Interest income is recognized on a time proportion basis taking into account the amount
outstanding and the interest rate applicable.

Income from dividend is recognized when right to receive payment is established.

v. Other Income

Other Incomes are accounted as and when the right to receive such income arises and it is
probable that the economic benefits will flow to the Company and the amount of income can be
measured reliably.

E) Product Warranty Expenses

The product warranties are supported by the vendor''s own warranty on the products. As this
is a back-to-back warranty arrangement, no separate provision for warranty costs has been
established. Any potential future warranty claims for the materials supplied will be covered by the
company''s vendor.

F) Property, Plant and equipment

Freehold Land is carried at historical cost. Property, plant and equipment are stated at cost of
acquisition or construction less accumulated depreciation or accumulated impairment loss, if
any.

Cost of item of property, plant and equipment includes purchase price, taxes, non- refundable
duties, freight and other costs that are directly attributable to bringing assets to their working
condition for their intended use. Expenses capitalized include applicable borrowing costs for
qualifying assets, if any.

This recognition principle is applied to the costs incurred initially to acquire an item of property,
plant and equipment and also to costs incurred subsequently to add to, replace part of, or
service it. All other repair and maintenance costs, including regular servicing, are recognised in
the statement of profit and loss as incurred. When a replacement occurs, the carrying value of
the replaced part is de-recognised. Where an item of property, plant and equipment comprises
major components having different useful lives, these components are accounted for as separate
items An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in
the Statement of Profit and Loss.

The residual values, useful lives and method of depreciation of Property, Plant & Equipment is
reviewed at each financial year and adjusted prospectively, if any.

Property, Plant and Equipment under construction are recognized as capital work in progress.

G) Intangible assets, Amortization and useful live

Intangible assets that are acquired by the Company are measured initially at cost. All intangible
assets are with finite useful lives and are measured at cost less accumulated amortisation.

Goodwill arising on acquisition of business is measured at cost less any accumulated impairment
loss. Goodwill is assessed at every balance sheet date for any impairment.

Intangible assets are only recognized when it is probable that associated future economic benefits
would flow to the Company.

Intangibles in respect of non- compete and customer relationships acquired in a business
combination are recognized at fair value at the acquisition date. They have a finite useful life and
are subsequently carried at costs less accumulated amortization and accumulated impairment
losses, if any.

Intangible assets in respect of software''s acquired separately are measured on initial recognition
at cost. Following initial recognition, they are carried at cost less accumulated amortization and
accumulated impairment losses, if any.

Intangible assets are derecognised either on their disposal or where no future economic benefits
are expected from their use.

Gains or losses arising from derecognition of an intangible assets are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognized in
the Statement of Profit and Loss when the asset is derecognized.

Subsequent to initial recognition, intangible assets with definite useful lives are reported at cost
less accumulated amortisation and accumulated impairment losses.

H) Depreciation of Property, Plant and Equipment

Depreciation on tangible assets has been provided on the straight-line method as per the useful
life prescribed in Schedule II to the Companies Act, 2013.

The estimates of useful lives of property, plant and equipment are as follows:

Leasehold Improvement is estimate to be depreciate over the period of lease terms of 9 years.

Gains or losses arising on the disposal of property, plant and equipment are determined as
the difference between the disposal proceeds and the carrying amount of the assets and are
recognized in statement of profit and loss within other income or other expenses.

These charges are commenced from the dates the assets are available for their intended use
and are spread over their estimated useful economic lives. The estimated useful lives of assets
and residual values are reviewed regularly and, when necessary, revised.

Assets individually costing INR 5,000 or less are fully depreciated in the year of acquisition.

Advances paid towards the acquisition of property, plant and equipment outstanding at each
balance sheet date is classified as capital advances under non-current assets.

I) Amortisation of Intangible assets

Intangible assets except Goodwill are amortised in Statement of Profit or Loss over their estimated
useful lives, from the date that they are available for use based on the expected pattern of
consumption of economic benefits of the asset. Accordingly, at present, these are being amortised
on straight line basis.

The estimated useful lives of Intangible Assets are as follows

The useful lives are reviewed atleast at each year end. Changes in expected useful lives are
treated as changes in accounting estimates.

J) Impairment of non-financial assets

Assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable

The carrying amounts of property, plant & equipment, capital work in progress and intangible
assets are reviewed at each Balance Sheet date, to determine whether there is any indication of
impairment. If any such indication exists, the assets recoverable amounts are estimated at each
reporting date. Recoverable amount is the higher of fair value less costs to sell and value in use. In
assessing the value in use, the estimated future cash flows are discounted to their present value
using a prediscount rate that reflects the current market assessments of the time value of money
and the risks specific to the asset or the cash-generating unit. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generate cash inflows
from continuing use that are largely independent of the cash inflows of other assets or groups of
assets (the "cash-generating unit").

An impairment loss is recognised whenever the carrying amount of an asset or the cash generating
unit exceeds the corresponding recoverable amount. Impairment losses are recognised in the
Statement of Profit and Loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the assets carrying amount does not exceed the carrying
amount that would have been determined net of depreciation or amortisation, if no impairment
loss had been recognised. Impairment loss recognized for goodwill is not reversed in a subsequent
period unless the impairment loss was caused by a specific external event of an exceptional
nature that is not expected to recur, and subsequent external events have occurred that reverse
the effect of that event.

K) Borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost

Borrowing costs that are attributable to the acquisition, construction or production of qualifying
assets are treated as direct cost and are considered as part of cost of such assets. A qualifying
asset is an asset that necessarily requires a substantial period of time to get ready for its intended
use or sale. Capitalisation of borrowing costs is suspended in the period during which the active
development is delayed beyond reasonable time due to other than temporary interruption. All
other borrowing costs are charged to the statement of profit and loss as incurred.

Borrowings are classified as current liabilities unless the Company has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.

L) Inventories

Inventories of traded goods, components and stores consumables and packing material are
valued at lower of cost and net realisable value. Cost includes purchase price, duties and taxes
(other than those subsequently recoverable by the Company from taxing authorities), freight
inward and other expenditure in bringing inventories to present locations and conditions. In
determining the cost, Firstin-First-out (FIFO) method is used.

Net Realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.

M) Leases

The Company has adopted Ind AS 116 "Leases" and applied the standard to all lease contracts.
Company as a lessee

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 amortization,
accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is amortized 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. When the lease liability is remeasured due
to change in contract terms, a corresponding change is made to the carrying amount of right-
of-use asset, or is recorded in the profit and loss account if the carrying amount of right-of-use
asset is reduced to zero.

Company as lessor

The Company as a lessor, classifies leases as either operating lease or finance lease. A lease
is classified as a finance lease if it transfers substantially all the risks and rewards incidental
to ownership of an underlying asset. Initially asset held under finance lease is derecognised in
balance sheet and presented as a receivable at an amount equal to the net investment in the
lease. Finance income is recognized over the lease term, based on a pattern reflecting a constant
periodic rate of return on Company''s net investment in the lease. A lease which is not classified
as a finance lease is an operating lease. Accordingly, the Company recognises lease payments
as income on a straight-line basis in case of assets given on operating leases.

The Company presents underlying assets subject to operating lease in its balance sheet under
the respective class of asset.

N) Employee benefits

The Company''s obligation towards various employee benefits have been recognized as follows:
Short term benefits

Employee benefits payable wholly within twelve months of receiving employees services are
classified as short-term employee benefits. These benefits include salaries and wages, bonus and
ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for
employee services is recognized as an expense as the related service is rendered by employees.
The company recognizes a liability & expense for bonuses. The company recognizes a provision
where contractually obliged or where there is a past practice that has created a constructive
obligation.

Post-employment Benefits
Defined contribution plans

The Company pays provident fund, employee state insurance and other regulatory funds
contributions as per local regulations. The Company has no further payment obligations once the
contributions have been paid. The contributions are accounted for as defined contribution plans
and the contributions are recognized as employee benefit expense when they are due.

Defined benefit plans

Recognition and measurement of defined benefit plans:

For defined benefit schemes i.e. gratuity and post-retirement benefit schemes, the cost of
providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation
being carried out at each balance sheet date. Re-measurement gains and losses of the net
defined benefit liability/ (asset) are recognized immediately in other comprehensive income.
Such re-measurements are not re-classified to the Statement of Profit & Loss in the subsequent
period. The service cost and net interest on the net defined benefit liability/ (asset) is treated as
a net expense within employment costs and are recongnised in the statement of Profit and Loss.

Past service cost is recognised as an expense when the plan amendment or curtailment occurs or
when any related restructuring costs or termination benefits are recognised, whichever is earlier.
The defined benefit obligation recognised in the balance sheet represents the present value of
the defined-benefit obligation as reduced by the fair value of plan assets.

Long-term employee benefits

Compensated absences

Liabilities recognised in respect of other long-term employee benefits such as annual leave and
sick leave are measured at the present value of the estimated future cash outflows expected to
be made by the Company in respect of services provided by employees up to the reporting date
using the projected unit credit method with actuarial valuation being carried out at each year
end balance sheet date. Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to Other Comprehensive Income in
the period in which they arise. Compensated absences which are not expected to occur within
twelve months after the end of the period in which the employee renders the related service are
recognized based on actuarial valuation.

Basis of Preparation, Significant Accounting Policies

Termination Benefits

Termination Benefits, in the nature of voluntary retirement benefits or Termination Benefits arising
from restructuring, are recognized in the Statement of Profit & Loss. The Company recognizes
Termination Benefits at the earlier of the following dates:

(a) when the Company can no longer withdraw the offer of these benefits, or

(b) when the Company recognizes costs for a restructuring that is within the scope of Ind AS 37
and involves the payment of termination benefits.

Benefits falling due more than 12 months after the end of the reporting period are discounted to
their present value.

O) Foreign exchange transactions

(i) Functional and presentation currency:

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

(ii) Transactions and balances:

Foreign currency transactions are translated into the functional currency using the exchange rates
at the dates of the transactions. Year-end monetary assets and liabilities denominated in foreign
currencies are translated at the year-end foreign exchange rates. Non- Monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of transaction. Non-monetary items, measured at fair value denominated in a
foreign currency are translated using the exchange rates that existed when the fair value was
determined.

Exchange differences arising on settlement or translation of monetary items are recognised in
the Statement of Profit and Loss. 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 other comprehensive income (OCI) or profit and loss are also recognised in OCI or profit and
loss, respectively).