Accounting Policies of Ratnaveer Precision Engineering Ltd. Company

Mar 31, 2025

3. Material Accounting Policies

3.1 Revenue Recognition

Revenue from contracts with customers is recognized
when control of the goods or services are transferred
to the customer at an amount that reflects the
consideration entitled in exchange for those goods
or services. The Company is generally the principal
as it typically controls the goods or services before
transferring them to the customer.

3.1.1 Revenue is generated primarily from sale of S.
S. Products. Revenue is recognized at the point
in time when the performance obligation is
satisfied and control of the goods is transferred
to the customer in accordance with the terms
of customer contracts. In case of domestic
customers, generally revenue recognition take
place when goods are dispatched and in case
of export customers when goods are shipped
onboard based on bill of landing as per the terms
of contract. Revenue is measured based on the
transaction price, which is the consideration,
adjusted for trade discounts, if any, as specified
in the contract with the customer. Revenue also
excludes taxes collected from customers.

A contract liability is the obligation to transfer
goods to the customer for which the Company
has received consideration from the customer.
Contract liabilities are recognized as revenue
when the Company performs under the contract.

3.1.2 Sale of Services

Revenue is recognized from rendering of services
when the performance obligation is satisfied
and the services are rendered in accordance
with the terms of customer contracts. Revenue is
measured based on the transaction price, which
is the consideration, as specified in the contract
with the customer. Revenue also excludes taxes
collected from customers.

A contract liability is the obligation to render
services to the customer for which the Company
has received consideration from the customer.
Contract liabilities are recognized as revenue
when the Company performs under the contract.

3.1.3 Export Incentive

Export incentives are accounted on accrual basis
at the time of export of goods, if the entitlement
can be estimated with reasonable accuracy and
conditions precedent to claim are fulfilled.

3.1.4 Other Income

(a) Interest Income

Interest income is recognized using
effective interest rate method. The effective
interest rate is the rate that exactly discounts
estimated future cash receipts through
expected life of the financial asset to the
gross carrying amount of the financial asset.
When calculating the effective interest rate,
the company estimates the expected cash
flows by considering all the contractual
terms of the financial instrument but does
not consider the expected credit losses.

(b) Dividend income

Dividend are recognized in the Statement
of Profit and Loss only when the right
to receive payment is established, it is
probable that the economic benefits
associated with the dividend will flow
to the Company, and the amount of the
dividend can be measured reliably.

(c) Gain or loss on de recognition of Financial
Assets

Gain or Loss on de recognition of financial
asset is determined as the difference
between the sale price (net of selling costs)
and carrying value of financial asset.

(d) All other Incomes are recognized and
accounted for on accrual basis

3.2 Property, Plant and Equipment

Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at historical cost less accumulated depreciation and
accumulated impairment losses, if any. Historical
cost includes expenditure that is directly attributable
to the acquisition of the items.

The cost comprises the purchase price, borrowing
cost if capitalization criteria are met and directly
attributable cost of bringing the asset to its working
condition for its intended use. Any trade discounts
and rebates are deducted in arriving at the
purchase price.

Subsequent expenditures relating to property, plant
and equipment is capitalized only when it is probable
that future economic benefits associated with these
will flow to the company and the cost of the item can
be measured reliably.

All other expenses on existing fixed assets, including
day-to-day repair and maintenance expenditure and
cost of replacing parts, are charged to the statement
of profit and loss for the period during which such
expenses are incurred.

For transition to Ind AS, the carrying value of Property
Plant and Equipment under previous GAAP as on 1st
April, 2020 is regarded as its cost. The carrying value
was original cost less accumulated depreciation and
cumulative impairment.

Property, Plant and Equipment not ready for the
intended use on the date of the Balance Sheet are
disclosed as "Capital work-in-progress”.

Gains or losses arising from de recognition of fixed
assets are measured as the difference between the
net disposal proceeds and the carrying amount of
the asset at the time of disposal and are recognized
in the statement of profit and loss when the asset
is derecognized.

Depreciation on Tangible Assets is calculated on
written down value method basis using the ratio
arrived as per the useful life prescribed under
Schedule II to the Companies Act, 2013.

In respect of Property, Plant and Equipment
purchased during the year, depreciation is provided
on a pro-rata basis from the date on which such
asset is ready to use.

The residual value, useful live and method of
depreciation of Property, Plant and Equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.

Intangible Assets

Expenditure on research is recognized as an expense
when it is incurred. Expenditure on development
which does not meet the criteria for recognition
as an intangible asset is recognized as an expense
when it is incurred. Costs incurred on individual
development projects are recognized as intangible
assets from the date when it meets the criteria of the
Intangible Assets.

Intangible Assets are amortized over a period of five
years as per straight line method.

3.3 Financial Instruments

3.3.1 Initial recognition

The company recognizes financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument.

All financial assets and liabilities are recognized
at fair value on initial recognition.

Transaction costs that are directly attributable
to the acquisition or issue of financial assets and
financial liabilities, which are not at fair value
through profit or loss, are added to or deducted
from the fair value of financial assets or financial
liabilities on initial recognition.

Transaction costs directly attributable to the
acquisition of financial assets or financial
liabilities at fair value through profit or loss are
recognized immediately in profit or loss.

Regular way purchase and sale of financial
assets are accounted for at trade date.

3.3.2Subsequent Measurement

(a) Non-derivative financial instruments

(i) Financial assets measured at
amortized cost

A financial asset is subsequently
measured at amortized cost if it is
held within a business model whose
objective is to hold the asset in order
to collect contractual cash flows and
the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.

(ii) Financial assets measured at fair
value through profit or loss (FVTPL)

A Financial Asset which is not
classified in any of the above
categories are measured at FVTPL.
Financial assets are reclassified
subsequent to their recognition, if the
Company changes its business model
for managing those financial assets.
Changes in business model are made
and applied prospectively from the

reclassification date which is the first
day of immediately next reporting
period following the changes in
business model in accordance with
principles laid down under Ind AS 109
- Financial Instruments.

(iii) Financial liabilities

Financial liabilities and equity
instruments issued by the Company are
classified according to the substance of
the contractual arrangements entered
into and the definitions of a financial
liability and an equity instrument.

Interest bearing bank loans, overdrafts
and issued debt are initially measured
at fair value and are subsequently
measured at amortized cost using
the effective interest rate method.
Any difference between the proceeds
(net of transaction costs) and
the settlement or redemption of
borrowings is recognized over the term
of the borrowings in the statement of
profit and loss.

(b) Equity instruments

An equity instrument is a contract that
evidences residual interest in the assets
of the company after deducting all of
its liabilities. Incremental costs directly
attributable to the issuance of equity
instruments are recognized as a deduction
from equity instrument net of any tax effects.

(c) Derivative financial instruments and
hedge accounting

In the ordinary course of business, the
Company uses certain derivative financial
instruments to reduce business risks
which arise from its exposure to foreign
exchange and interest rate fluctuations.
The instruments are confined principally
to forward foreign exchange contracts,
cross currency swaps, interest rate swaps
and collars. The instruments are employed
as hedges of transactions included in the
financial statements or for highly probable
forecast transactions/firm contractual
commitments. These derivatives contracts
do not generally extend beyond six months,
Except for certain currency swaps and
interest rate derivatives.

Derivatives are initially accounted for and
measured at fair value on the date the
derivative contract is entered into and
are subsequently remeasured to their fair
value at the end of each reporting period
through profit and Loss Statement.

Effective Interest rate method

The effective interest method is a method
of calculating the amortized cost of a
financial instrument and of allocating
interest income or expense over the
relevant period. The effective interest rate is
the rate that exactly discounts future cash
receipts or payments through the expected
life of the financial instrument, or where
appropriate, a shorter period.

3.3.3De-recognition

The company derecognizes 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 de
recognition under Ind AS 109. A financial liability
is derecognized when obligation specified in the
contract is discharged or cancelled or expires.

3.3.4 Off-setting

Financial assets and liabilities are offset and the net
amount is presented in the balance sheet when
the company currently has a legally enforceable
right to offset the recognized amounts and
intends either to settle on a net basis or to realize
the asset and settle the liability simultaneously.

3.4 Fair Value Measurement

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 assumes 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.

A fair value measurement of a non-financial asset
takes into account a market participant''s ability to
generate economic benefit 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 is available to measure fair value,
maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorized within the fair value hierarchy. The
fair value hierarchy is based on inputs to valuation
techniques that are used to measure fair value that
are either observable or unobservable and consists of
the following three levels:

Level 1 - inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities

Level 2 - inputs are other than quoted prices included
within level 1 that are observable for the asset or
liability either directly (i.e. as prices) or indirectly (i.e.
derived prices)

Level 3 - inputs are not based on observable
market data (unobservable inputs). Fair values are
determined in whole or in part using a valuation
model based on assumption that are neither
supported by prices from observable current market
transactions in the same instrument nor are they
based on available market data.

3.5 Income Tax

The income tax expense or credit for the period is
the tax payable on the current period''s taxable
income based on the applicable income tax rate,
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and
to unused tax losses.

3.5.1 Current Tax

The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the end of the reporting period.
Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation. It establishes provisions, wherever
appropriate, on the basis of amounts expected
to be paid to the tax authorities.

Current tax is recognized in the Statement of
Profit and Loss, except to the extent that it relates
to items recognized in Other Comprehensive
Income or directly in equity. In this case, the
tax is also recognized in Other Comprehensive
Income or directly in equity, respectively.

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

Current tax assets and current tax liabilities are
offset, where company has a legally enforceable
right to set off the recognized amounts and
where it intends either to settle on a net basis,
or to realize the asset and settle the liability
simultaneously.

3.5.2Deferred Tax

Deferred tax is recognized in profit or loss, except
when it relates to items that are recognized
in other comprehensive income or directly in
equity, in which case, the deferred tax is also
recognized in other comprehensive income or
directly in equity, respectively.

Deferred tax liabilities are recognized for all
taxable temporary differences, except to the
extent that the deferred tax liability arises
from initial recognition of goodwill; or initial
recognition of an asset or liability in a transaction
which is not a business combination and at the
time of transaction, affects neither accounting
profit nor taxable profit or loss.

Deferred tax assets are recognized for all
deductible temporary differences, carry forward
of unused tax losses and carry forward of unused
tax credits to the extent that it is probable that
taxable profit will be available against which
those temporary differences, losses and tax credit
can be utilized, except when deferred tax asset
on deductible temporary differences arise from
the initial recognition of an asset or liability in a
transaction that is not a business combination
and at the time of the transaction, affects neither
accounting profit nor taxable profit or loss.

Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply to the
period when the asset is realized or the liability is
settled, based on the tax rules and tax laws that
have been enacted or substantively enacted by
the end of the reporting period.

Deferred tax assets and deferred tax liabilities are
offset, where company has a legally enforceable
right to set off the recognized amounts and
where it intends either to settle on a net basis,
or to realize the asset and settle the liability
simultaneously.

Deferred tax assets are reviewed at each
reporting date and are reduced to the extent
that it is no longer probable that the related tax
benefit will be realized.

3.6 Impairment

3.6.1 Financial assets

The Company recognizes loss allowances
for expected credit losses on financial assets
measured at amortized cost.

At each reporting date, the Company assesses
whether financial assets carried at amortized
cost is credit impaired. A financial asset is ''credit
-impaired'' when one or more events that have
a detrimental impact on the estimated future
cash flows of the financial asset have occurred.

Loss allowances for trade receivables are always
measured at an amount equal to lifetime expected
credit losses. The Company follows ''simplified
approach'' for recognition of impairment loss
allowance on trade receivables. Under the
simplified approach, the Company is not required
to track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime
expected credit losses together with appropriate
management estimates for credit loss at each
reporting date, right from its initial recognition.

The Company uses a provision matrix to
determine impairment loss allowance on the
group of trade receivables. The provision matrix
is based on its historically observed default rates
over the expected life of the trade receivable
and is adjusted for forward looking estimates.
At every reporting date, the historical observed
default rates are updated and changes in the
forward-looking estimates are analyzed.

3.6.2 Financial assets - investment in subsidiary
and associates

The company assesses at each reporting date
whether there is an indication that an asset may
be impaired. Such indication include, though
are not limited to, significant or sustained
decline in revenues or earnings and material
adverse changes in the economic environment.

If any indication exists, the company estimates the
asset''s recoverable amount based on value in use.

To calculate value in use, the estimated future
cash flows are discounted to their present value
using a pre-tax discount rate that reflects current
market rates and the risk specific to the asset

Where the carrying amount of an asset exceeds
its value in use amount, the asset is considered
impaired and is written down to its recoverable
amount. The impairment loss is recognized in
statement of profit and loss.

3.6.3 Non financial assets

The company assesses at each reporting date
whether there is an indication that an asset may
be impaired. If any indication exists the company
estimates the asset''s recoverable amount.

An asset''s recoverable amount is the higher
of an assets net selling price and its value in
use. The recoverable amount is determined
for an individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets or
groups of assets.

Where the carrying amount of an asset exceeds
its recoverable amount, the asset is considered
impaired and is written down to its recoverable
amount. The impairment loss is recognized in
the statement of profit and loss.

In assessing value in use, the estimated future
cash flows are discounted to their present
value using a pre-tax discount rate that reflects
current market assessments of the time value of
money and the risks specific to the asset.

In determining net selling price, recent market
transactions are taken into account, if available.
If no such transactions can be identified, an
appropriate valuation model is used.

3.7 Borrowing Costs

Borrowing cost includes interest and other costs
that company has incurred in connection with the
borrowing of funds.

Borrowing costs directly attributable to the
acquisition, construction or production of an asset
that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalized
as part of the cost of the respective asset.

All other borrowing costs are charged to the
Statement of Profit and Loss for the period for which
they are incurred.

Investment income earned on temporary investment
of specific borrowing pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalization.

3.8 Employee Benefits

Short term employee benefits for salary and wages
including accumulated leave that are expected to
be settled wholly within 12 months after the end of
the reporting period in which employees render the
related service are recognized as an expense in the
statement of profit and loss.

The company measures the expected cost of
absences as the additional amount that it expects
to pay as a result of the unused entitlement that has
accumulated at the reporting date. As per Company''s
policy, no leave is expected to be carried forward
beyond 12 months from the reporting date.

Retirement benefit in the form of provident fund is
a defined contribution scheme. The company has
no obligation, other than the contribution payable
to the provident fund. The company recognizes
contribution payable to the provident fund scheme
as an expenditure, when an employee renders the
related service.

The company operates one defined benefit plan
for its employees, viz., gratuity plan. The costs of
providing benefits under the plan are determined
on the basis of actuarial valuation at each year-
end. Actuarial valuation is carried out using the
projected unit credit method made at the end
of each reporting date. Re-measurement of the
net defined benefit liability (asset) comprise of
actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest
on the net defined benefit liability (asset) and the
return on plan assets (excluding amounts included
in net interest on the net defined benefit liability /
(asset)). Re-measurement are recognized in other
comprehensive income and will not be reclassified
to profit or loss in a subsequent period.

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Mar 31, 2024

3. Material Accounting Policies

3.1 Revenue Recognition

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer.

3.1.1 Revenue is generated primarily from sale of S. S. Products. Revenue is recognised at the point in time when the performance obligation is satisfied and control of the goods is transferred to the customer in accordance with the terms of customer contracts. In case of domestic customers, generally revenue recognition take place when goods are dispatched and in case of export customers when goods are shipped onboard based on bill of landing as per the terms of contract. Revenue is measured based on the transaction price, which is the consideration, adjusted for trade discounts, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.

A contract liability is the obligation to transfer goods to the customer for which the Company has received consideration from the customer. Contract liabilities are recognised as revenue when the Company performs under the contract.

3.1.2 Sale of Services

Revenue is recognized from rendering of services when the performance obligation is satisfied and the services are rendered in accordance with the terms of customer contracts. Revenue is measured based on the transaction price, which is the consideration, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.

A contract liability is the obligation to render services to the customer for which the Company has received consideration from the customer. Contract liabilities are recognised as revenue when the Company performs under the contract.

3.1.3 Export Incentive

Export incentives are accounted on accrual basis at the time of export of goods, if the entitlement can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.

3.1.4 Other Income

(a) Interest Income

Interest income is recognized using effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to the gross carrying amount of the financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.

(b) Dividend income

Dividend are recognised in the Statement of Profit and Loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.

(c) Gain or loss on derecognition of Financial Assets

Gain or Loss on derecognition of financial asset is determined as the difference between the sale price (net of selling costs) and carrying value of financial asset.

(d) All other Incomes are recognised and accounted for on accrual basis

3.2 Property, Plant and Equipment

Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

The cost comprises the purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.

All other expenses on existing fixed assets, including day- to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

For transition to Ind AS, the carrying value of Property Plant and Equipment under previous GAAP as on 1^st April, 2020 is regarded as its cost. The carrying value was original cost less accumulated depreciation and cumulative impairment.

Property, Plant and Equipment not ready for the intended use on the date of the Balance Sheet are disclosed as "Capital work-in-progress”.

Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset at the time of disposal and are recognized in the statement of profit and loss when the asset is derecognized.

Depreciation on Tangible Assets is calculated on written down value method basis using the ratio arrived as per the useful life prescribed under Schedule II to the Companies Act, 2013.

In respect of Property, Plant and Equipment purchased during the year, depreciation is provided on a pro-rata basis from the date on which such asset is ready to use.

The residual value, useful live and method of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Intangible Assets

Expenditure on research is recognized as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognized as an expense when it is incurred. Costs incurred on individual development projects are recognized as intangible assets from the date when it meets the criteria of the Intangible Assets.

Intangible Assets are amortized over a period of five years as per straight line method.

3.3 Financial Instruments

3.3.1 Initial recognition

The company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument.

All financial assets and liabilities are recognized at fair value on initial recognition.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to or deducted from the fair value of financial assets or financial liabilities on initial recognition.

Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Regular way purchase and sale of financial assets are accounted for at trade date.

3.3.2 Subsequent Measurement

(a) Non-derivative financial instruments

(i) Financial assets measured at amortized cost

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii) Financial assets measured at amortized cost

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(iii) Financial assets measured at fair value through profit or loss (FVTPL)

A Financial Asset which is not classified in any of the above categories are measured at FVTPL. Financial assets are reclassified subsequent to their recognition, if the

Company changes its business model for managing those financial assets. Changes in business model are made and applied prospectively from the reclassification date which is the first day of immediately next reporting period following the changes in business model in accordance with principles laid down under Ind AS 109 - Financial Instruments.

(iv) Financial liabilities

Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Interest bearing bank loans, overdrafts and issued debt are initially measured at fair value and are subsequently measured at amortized cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognized over the term of the borrowings in the statement of profit and loss.

(b) Equity instruments

An equity instrument is a contract that evidences residual interest in the assets of the company after deducting all of its liabilities. Incremental costs directly attributable to the issuance of equity instruments are recognized as a deduction from equity instrument net of any tax effects.

(c) Derivative financial instruments and hedge accounting

In the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks which arise from its exposure to foreign exchange and interest rate fluctuations. The instruments are confined principally to forward foreign exchange contracts, cross currency swaps, interest rate swaps and collars. The instruments are employed as hedges of transactions included in the financial statements or for highly probable forecast transactions/firm contractual commitments. These derivatives contracts do not generally extend beyond six months, Except for certain currency swaps and interest rate derivatives.

Derivatives are initially accounted for and measured at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period through profit and Loss Statement.

Effective Interest rate method

The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.

3.3.3 De-recognition

The company derecognizes 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. A financial liability is derecognized when obligation specified in the contract is discharged or cancelled or expires.

3.3.4 Off-setting

Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the company currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

3.4 Fair Value Measurement

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 assumes 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.

A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefit 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 is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - inputs are other than quoted prices included within level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived prices)

Level 3 - inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumption that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

3.5 Income Tax

The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

3.5.1 Current Tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, wherever appropriate, on the basis of amounts expected to be paid to the tax authorities.

Current tax is recognized in the Statement of Profit and Loss, except to the extent that it relates to items recognized in Other Comprehensive Income or directly in equity. In this case, the tax is also recognized in Other Comprehensive Income or directly in equity, respectively.

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

Current tax assets and current tax liabilities are offset, where company has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

3.5.2 Deferred Tax

Deferred tax is recognized in profit or loss, except when it relates to items that are recognized in other comprehensive income or directly in equity, in which case, the deferred tax is also recognized in other comprehensive income or directly in equity, respectively.

Deferred tax liabilities are recognized for all taxable temporary differences, except to the extent that the deferred tax liability arises from initial recognition of goodwill; or initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit or loss.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and carry forward of unused tax credits to the extent that it is probable that taxable profit will be available against which those temporary differences, losses and tax credit can be utilized, except when deferred tax asset on deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit or loss.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rules and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset, where company has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

3.6 Impairment

3.6.1 Financial assets

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost.

At each reporting date, the Company assesses whether financial assets carried at amortized cost is credit impaired. A financial asset is ''credit -impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. Under the simplified approach, the Company is not required to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime expected credit losses together with appropriate management estimates for credit loss at each reporting date, right from its initial recognition.

The Company uses a provision matrix to determine impairment loss allowance on the group of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

3.6.2 Financial assets - investment in subsidiary and associates

The company assesses at each reporting date whether there is an indication that an asset may be impaired. Such indication include, though are not limited to, significant or sustained decline in revenues or earnings and material adverse changes in the economic environment.

If any indication exists, the company estimates the asset''s recoverable amount based on value in use.

To calculate value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market rates and the risk specific to the asset

Where the carrying amount of an asset exceeds its value in use amount, the asset is considered impaired and is written down to its recoverable amount. The impairment loss is recognized in statement of profit and loss.

3.6.3 Non financial assets

The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists the company estimates the asset''s recoverable amount.

An asset''s recoverable amount is the higher of an assets net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The impairment loss is recognized in the statement of profit and loss.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

3.7 Borrowing Costs

Borrowing cost includes interest and other costs that company has incurred in connection with the borrowing of funds.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset.

All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.

Investment income earned on temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

3.8 Employee Benefits

Short term employee benefits for salary and wages including accumulated leave that are expected to be settled wholly within 12 months after the end of the reporting period in which employees render the related service are recognized as an expense in the statement of profit and loss.

The company measures the expected cost of absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. As per Company''s policy, no leave is expected to be carried forward beyond 12 months from the reporting date.

Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service.

The company operates one defined benefit plan for its employees, viz., gratuity plan. The costs of providing benefits under the plan are determined on the basis of actuarial valuation at each year-end. Actuarial valuation is carried out using the projected unit credit method made at the end of each reporting date. Re-measurement of the net defined benefit liability (asset) comprise of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability / (asset)). Re-measurement are recognized in other comprehensive income and will not be reclassified to profit or loss in a subsequent period.