Accounting Policies of Gem Aromatics Ltd. Company

Mar 31, 2026

(2) Material accounting policies

(2.01) Statement of compliance

These Standalone Financial Statements of the
Company comprising the Balance Sheet as at March
31, 2026, Statement of Profit and Loss (including other
comprehensive income), Statement of Changes in Equity,
and Statement of Cash Flows for the year ended March
31, 2026, and a summary of material accounting policies
and other explanatory information have been prepared by
the Company in accordance with the Indian Accounting
Standards notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time) (Ind
AS) under Section 133 of the Companies Act, 2013 (the
‘Act''), presentation requirements of Division II of Schedule
III of the Act and other relevant provisions of the Act.

(2.02) Basis of preparation and presentation

Basis of Presentation

The Standalone Financial Statements have been prepared
on a historical cost basis, except for certain financial assets
and liabilities measured at fair value (refer accounting
policy regarding financial instruments) and employee''s
defined benefit plan as per actuarial valuation.

Functional and Presentation Currency

The standalone financial statements are presented in Indian
Rupees, which is the functional currency of the Company
and the currency of the primary economic environment
in which the Company operates. All amounts have been
rounded off to two decimals to the nearest million, unless
otherwise stated.

(2.03) Significant accounting estimates,
judgements and assumptions

The preparation of the Standalone financial statements
in conformity with Ind AS requires management to make
judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and

liabilities and the accompanying disclosures, and the
disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount
of assets or liabilities affected in future periods. The
estimates and associated assumptions are based on
historical experience and various other factors that are
believed to be reasonable under the circumstances existing
when the Standalone financial statements were prepared.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revision to accounting estimates is
recognized in the year in which the estimates are revised
and in any future year affected.

In the process of applying the company''s accounting
policies, management has made the following judgements
which have significant effect on the amounts recognized in
the Standalone financial statements:

a. Useful Lives of property, plant and equipment and
intangible assets: Determination of the estimated
useful life of tangible assets and intangible assets and
the assessment as to which components of the cost may
be capitalized. Useful life of tangible assets is based
on the life specified in Schedule II of the Companies
Act, 2013 and also as per management estimate for
certain category of assets. Assumption also need to
be made, when company assesses, whether as asset
may be capitalized and which components of the cost
of the assets may be capitalized.

b. Contingencies: Management judgement is required for
estimating the possible outflow of resources, if any,
in respect of contingencies/ claim/ litigation against
company as it is not possible to predict the outcome of
pending matters with accuracy.

c. Fair value measurements and valuation processes:
Some of the Companies assets and liabilities are
measured at fair value for financial reporting purposes.
The Management determines the appropriate
valuation techniques and inputs for the fair value
measurements. In estimating the fair value of an asset
or a liability, the company used market-observable
data to the extent it is available. Where level 1 inputs
are not available, the company engaged third party
qualified valuers to perform the valuations in order
to determine the fair values based on the appropriate
valuation techniques and inputs to fair value
measurements such as Discounted Cash Flow model.
The inputs to these models are taken from observable
markets where possible, but where this is not feasible,
a degree of judgment is required in establishing fair
values. Judgments include considerations of inputs
such as liquidity risk, credit risk and volatility. Changes
in assumptions about these factors could affect the
reported fair value of financial instruments.

d. Estimation of defined benefit plans: The obligation
arising from defined benefit plan is determined on
the basis of actuarial assumptions. Key actuarial
assumptions include discount rate, trends in salary
escalation, actuarial rates and life expectancy. The
discount rate is determined by reference to market
yields at the end of the reporting period on government
bonds. The period to maturity of the underlying bonds
correspond to the probable maturity of the post¬
employment benefit obligation.

e. Tax expense: Tax expense is calculated using
applicable tax rate and laws that have been enacted
or substantially enacted. In arriving at taxable profit
and all tax bases of assets and liabilities, the company
determines the taxability based on tax enactments,
relevant judicial pronouncements and tax expert
opinions, and makes appropriate provisions which
includes an estimation of the likely outcome of any
open tax assessments / litigations. Any difference is
recognized on closure of assessment or in the period in
which they are agreed.

Deferred income tax assets are recognized to the
extent that it is probable that future taxable income
will be available against which the deductible
temporary differences, unused tax losses, unabsorbed
depreciation and unused tax credits could be utilised.

f. Operating Lease commitments - company as Lessee:
The company has entered into lease agreement for
office premises. The company has determined based
on an evaluation of the terms and conditions of the
arrangements, such as the lease term not constituting
a major part of the economic life of the asset and the
fair value of the asset, that it retains all the significant
risks and rewards of ownership of these properties
and accounts for the contracts as operating leases.

(2.04) Current versus non-current classification

The company presents assets and liabilities in the balance
sheet based on current/non-current classification as per
the provisions of the Schedule III notified under the Act, and
the Company''s normal operating cycle. The operating cycle
is the time between the acquisition of assets for processing
and their realisation in cash and cash equivalents. The
company has identified twelve months as its operating cycle
for the purpose of Current & Non-Current classification of
assets and liabilities.

An asset is treated as current when it is:

- Expected to be realised or intended to be sold or
consumed in normal operating cycle;

- Held primarily for the purpose of trading;

- Expected to be realised within twelve months after
the reporting period, or

- 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 current when:

- It is expected to be settled in normal operating cycle;

- It is held primarily for the purpose of trading;

- It is due to be settled within twelve months after the
reporting period, or

- 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.

Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.

(2.05) Property, Plant and Equipment

All items of property, plant and equipment are stated
at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items. Cost includes its purchase price including non¬
refundable taxes and duties, borrowing costs and directly
attributable costs of bringing the asset to its present
location and condition.

Subsequent costs are included in the asset''s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the company and the
cost of the item can be measured reliably.

The carrying amount of any component accounted for as
a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to the Statement of
profit and loss during the reporting period in which they
are incurred.

An asset''s carrying amount is written down immediately
to its recoverable amount if the asset''s carrying amount is
greater than its estimated recoverable amount.

The residual values and useful lives of property, plant
and equipment are reviewed at each financial year end
and changes, if any, are accounted in line with revisions to
accounting estimates.

Spare parts, stand-by equipment and servicing equipment
are recognised as property, plant and equipment if they are
held for use in the production or supply of goods or services
and are expected to be used during more than one period.

Property, plant and equipment which are not ready for
intended use as on the date of Balance Sheet are disclosed
as ‘Capital Work-in-Progress''.

Depreciation

Depreciation on property, plant and equipment is provided
on ''Written Down Value'' (WDV) method, which is in line
with the estimated useful life as specified in Schedule II of
the Act.

Depreciation commences when the assets are ready for
their intended use. The asset''s residual values and useful
lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.

Gains and losses on disposals are determined by comparing
net disposal proceeds with carrying amount. These are
included in the Statement of profit and loss.

The estimated useful lives are as follows :

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

(2.06) Intangible Assets

Intangible assets with finite useful life are stated at cost
of acquisition, less accumulated depreciation/ amortisation
and impairment loss, if any. Cost includes taxes, duties and
other incidental expenses related to acquisition and other
incidental expenses. Amortisation is recognised in profit or
loss on a diminishing balance method over the estimated
useful lives of respective intangible assets.

The estimated useful lives are as follows :

Intangible assets are amortised in 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.

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 or loss when the
asset is derecognised.

(2.07) Impairment of property, plant and
equipment and intangible assets

Consideration is given at each balance sheet date to
determine whether there is any indication of impairment
of the carrying amount of the company''s each class of
the property, plant and equipment or intangible assets.
If any indication exists, an asset''s recoverable amount is
estimated. An impairment loss is recognised whenever
the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the net
selling price or value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value based on an appropriate discount factor.

(2.08) Fair value measurement

The company measures financial instruments 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 best
economic 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 Standalone 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 — Inputs are quoted (unadjusted) market prices
in active markets for identical assets or liabilities that the
entity can access at the measurement date;

Level 2 — Inputs that are other than quoted prices included
in Level 1, 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 financial assets and liabilities maturing within one year
from the balance sheet date and which are not carried at
fair value, the carrying amount approximates fair value due
to short term maturity of these instruments.

The company recognises the transfer between the levels
of fair value hierarchy at the end of the reporting period
during which the changes have occurred.

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.

This note summarize accounting policy for fair value. Other
fair value related disclosures are given in the relevant notes.

a. Financial instruments (including those carried at
amortised cost) (Refer note 32)

(2.09) Revenue Recognition

Revenue from contracts with customers is recognised
on transfer of control of promised goods or services to a
customer at an amount that reflects the consideration to
which the Company is expected to be entitled to in exchange
for those goods or services. Revenue towards satisfaction
of a performance obligation is measured at the amount of
transaction price allocated to that performance obligation.

Sale of products :

Revenue from sale of products is recognised when the
control of the goods have been transferred to the customer.
The performance obligation in case of sale of product is
satisfied at a point in time i.e., when the material is shipped
to the customer or on delivery to the customer, as may be
specified in the contract.

Rendering of services:

Revenue from services is recognised over time by measuring
progress towards satisfaction of performance obligation
for the services rendered.

Other income:

Revenue in respect of overdue interest, insurance claims,
etc. is recognised to the extent the company is reasonably
certain of its ultimate realisation.

Interest / Dividend income:

Interest income is accounted on accrual basis. Dividend
income is accounted for when the right to receive is
established. Interest from customers on delayed payments
are recognised when there is a certainty of realisation.

Export Incentive / Duty drawback :

Export incentive is recognised in the statement of profit and
loss when the right to receive credit as per the terms of the
scheme is established in respect of export made, and there
is no uncertainty as to its receipt.

(2.10) Inventories

Inventories are valued at the lower of cost (including
purchase cost, non-refundable taxes and duties and
other overheads incurred in bringing the inventories to
their present location and condition) and estimated net
realisable value, after providing for obsolescence, where
appropriate. Raw materials, packing materials and other
supplies held for use in production of inventories are not
written down below cost except in cases where material
prices have declined, and it is estimated that the cost of
the finished products will exceed their net realisable value.

Raw materials, packing materials and stores and spares
are valued at cost computed on weighted average basis.
The cost includes purchase price, inward freight and other
incidental expenses net of refundable duties, levies and
taxes, where applicable.

Finished goods produced and work-in-progress are carried
at lower of net realisable value and cost (including purchase
cost, non-refundable taxes and duties and other overheads
incurred in bringing the inventories to their present location
and condition), computed on a weighted average basis.

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.

(2.11) Taxes

Income tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation
authorities in accordance with the Income Tax Act 1961.
The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the
reporting date.

Income tax relating to items recognised outside profit or
loss is recognised outside profit or loss (either in other

comprehensive income or in equity). Income tax items are
recognised in correlation to the underlying transaction
either in Other Comprehensive Income (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
establishes provisions where appropriate.

Income tax assets and Income tax liabilities are offset when
there is a legally enforceable right to set off the recognised
amounts and there is an intention to settle the asset and
the liability on a net basis.

Deferred Tax

Deferred tax is recognised using balance sheet approach
at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purpose at the reporting date. Deferred tax is
also not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business
combination that at the time of the transaction affects
neither accounting profit nor taxable profit /(tax loss).

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 profits 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 assets to be recovered.

Deferred tax assets and liabilities are measured using the
tax rates that are expected to apply in a year when asset
is realised or the liability is expected to be settled based
on the tax rates and tax laws that have been enacted or
substantively enacted by the reporting date.

Deferred tax assets and liabilities are classified as non¬
current assets and non current liabilities. Deferred tax
assets and deferred tax liabilities are offset when there is a
legally enforceable right to set off assets against liabilities
representing Income tax where the deferred tax assets and
deferred tax liabilities relate to taxes on income levied by
the same governing taxation laws.

Current and deferred tax for the period

Current and deferred tax are recognised in the statement
of profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in
equity respectively.

(2.12) Foreign Currency Transactions
Functional and Presentation currency

Items included in the Standalone financial statements of the
company are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency''). The Standalone financial statements
are presented in Indian rupee (INR), which is functional and
presentation currency of the company.

Transaction and balances

Transactions in foreign currencies are initially recognised in
the Standalone financial statements using exchange rates
prevailing on the date of transaction. Monetary assets and
liabilities denominated in foreign currencies are translated
to the functional currency at the exchange rates prevailing
at the reporting date and foreign exchange gain or loss are
recognised in the Statement of profit and 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.

The Company enters into a variety of derivative financial
instruments to manage its exposure to interest rate and
foreign exchange rate risks, including foreign exchange
forward contracts.

Derivatives are initially recognised at fair value at the
date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end
of each reporting period. The resulting gain or loss is
recognised in the Standalone Statement of Profit and Loss.