ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Essex Marine Ltd.

Note -3 SIGNIFICANT ACCOUNTING POLICIES

3.1 Classification of Assets and Liabilities

All assets and liabilities have been classified as current or non-current 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 manufacturing activity and the time between
the acquisition of assets for processing and their realization in cash & bank balances, the
Company has ascertained its operating cycle for the purpose of current - non-current
classification of assets and liabilities as 12 months for its products.

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

(a) An asset shall be classified as current when it satisfies any of the following criteria:

• It is expected to be realized in, or is intended for sale or consumption in, normal
operating cycle of the company;

• It is held primarily for the purpose of being traded;

• It is expected to be realized within twelve months after the reporting date; or

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

(b) Current assets include the current portion of non-current assets.

(c) All assets other than current assets shall be classified as non-current.

(d) A liability shall be classified as current when it satisfies any of the following criteria:

• It is expected to be settled in the normal operating cycle of the company;

• It is held primarily for the purpose of being traded;

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

• The company does not have an unconditional right to defer settlement of the liability
for at least twelve months after the reporting date. Term 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.

(e) Current liabilities include current portion of non-current liabilities.

(f) All liabilities other than current liabilities shall be classified as non-current.

3.2 Going Concern Accounting Assumption:

The enterprise is normally viewed as a going concern, that is, as continuing in operation
for the foreseeable future. lt is assumed that the enterprise has neither the intention nor the
necessity of liquidation or of curtailing materially the scale of the operations.

3.3 Property, Plant and Equipment

Items of property, plant and equipment are measured at cost, less accumulated depreciation
and accumulated impairment losses, if any.

The cost of an item of property, plant and equipment comprises: (a) its purchase price,
including import duties and non-refundable purchase taxes, after deducting trade discounts
and rebates; (b) any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended by
management; (c) the initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located, the obligation for which an entity incurs either
when the item is acquired or as a consequence of having used the item during a particular
period for purposes other than to produce inventories during that period.

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 the asset. Any gain or
loss arising on the disposal and retirement of an item of property, plant and equipment is
determined as the difference between the sale proceeds and the carrying amount of the
asset is recognized in Statement of profit and loss.

Subsequent cost

Subsequent costs are included in the asset''s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that the future economic benefits associated
with expenditure will flow to the Company and the cost of the item can be measured
reliably. All other subsequent cost are charged to Statement of profit and loss at the time
of incurrence.

3.4 Intangible Assets:

lntangible Asset is carried in the books, if it is an identifiable non-monetary asset, without
physical substance, held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes.

An intangible asset is recognized if, and only if:

a) lt is probable that the future economic benefits that are attributed to the asset will flow
to the company; and

b) cost of the asset can be measured reliably.

3.5 Depreciation Policy:

Depreciation is provided on a pro-rata basis on the straight-line method based on estimated
useful life prescribed in Part - C under Schedule II to the Companies Act, 2013.The
estimated useful life of assets is as follows:

Buildings 60 Years

Plant and Machineries and Electric Installations* 30 Years

Furniture and Fittings 10 Years

Computers and Mobile Phones 3 Years

Office Equipments 5 Years

Vehicles 8 Years

*Useful life of Plant and Machinery has been considered 30 years as against 15 years, and
Electric Installations has also been considered 30 years as against 10 years as prescribed
in Shedule II of the Companies Act, 2013.

The residual value shall not be higher than that prescribed in Part C of Second Schedule.
Spares capitalised are being depreciated over the useful / remaining useful life of the plant
and machinery with which such spares can be used.

3.6 Impairment of Assets:

At each reporting date, the Company reviews the carrying amounts of its assets to
determine whether there is any indication of impairment. If any such indication of
impairment exists, then the asset''s recoverable amount is estimated. For impairment
testing, assets are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets
or cash generating units (‘CGU’).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair
value less costs to sell. Value in use is based on the estimated future cash flows, discounted
to their present value using a discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset or CGU. An impairment loss is
recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable
amount.

Impairment losses are recognized in the Statement of profit and loss. They are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU and then to
reduce the carrying amounts of the other assets in the CGU on a pro-rata basis.

For other assets, an impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount. Such a reversal is made only to the
extent that the asset''s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortization, if no impairment loss had been
recognized.

3.7 Investments:

Investments, which are readily realizable and intended to be held for not more than one
year from the date on which such investments are made, are classified as current
investments. All other investments are classified as long-term investments. On initial
recognition, all investments are measured at cost. The cost comprises purchase price and
directly attributable acquisition charges such as brokerage, fees and duties.

Current investments are carried in the financial statements at lower of cost and fair value
determined on an individual investment basis. Long-term investments are carried at cost.
However, provision for diminution in value is made to recognize a decline other than
temporary in the value of the investments. On disposal of an investment, the difference
between its carrying amount and net disposal proceeds is charged or credited to the
statement of profit and loss.

3.8 Retirement and other employee benefits

Short term Employment benefits

Employee benefits payable wholly within twelve months of receiving employee 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 recognised as an expense as the related service is
rendered by employees.

Post Employment Benefits
Defined Contribution Plan

Retirement benefits in the form of contribution to Provident fund are defined contribution
plans. The contributions are charged to the statement of profit and loss as and when due
monthly and are paid to the Government administered Provident Fund towards which the
Company has no further obligation beyond its monthly contribution. Superannuation
benefit scheme is not existing in the Company.

Defined benefit plans:

The Company operates defined benefit plan viz., gratuity. The costs of providing benefits
under this plan are determined on the basis of actuarial valuation at each year-end.
Actuarial valuation is carried out for the plan using the projected unit credit method.
Defined benefit costs are comprised of:

a) service cost (including current service cost, past service cost, as well as gains and losses
on curtailments and settlements);

b) Net interest expense or income; and

c) Re-measurement.

The Company presents the first two components of defined benefit costs in profit or loss
in the line item ‘Employee benefits expense’. Curtailment gains and losses are accounted
for as past service costs. Re-measurement of net defined benefit liability/ asset pertaining
to gratuity comprise actuarial gains/ losses (i.e. changes in the present value resulting from
experience adjustments and effects of changes in actuarial assumptions) and is reflected
immediately in the balance sheet with a charge or credit recognised in Statement of Profit
& Loss in the period in which they occur.

3.9 Foreign Currency Transactions:

Foreign currency transactions and balances:

(i) Initial recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the
foreign currency amount the exchange rate between the reporting currency and the foreign
currency at the date of the transaction.

(ii) Conversion

Foreign currency monetary items are retranslated using the exchange rate prevailing at the
reporting date. Non-monetary items, which are measured in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate at the date of the
transaction. Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the exchange rate at the
date when such value was determined.

(iii) Exchange differences

The company accounts for exchange differences arising on translation/ settlement of
foreign currency monetary items. The exchange differences are recognized as income or
as expenses in the period in which they arise.

3.10 Revenue Recognition:

Revenue is recognized to the extent that it is probable that the economic benefits will flow
to the company and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognized:

Sale of Goods:

Revenue from sale of goods is recognized when all the significant risks and rewards of
ownership of the goods have been passed to the buyer, usually on delivery of the goods.
Income from Services:

Revenue from service contracts is recognised on rendering of service to customers.
Interest:

Interest income is recognized on a time proportion basis taking into account the amount
outstanding and the applicable interest rate. Interest income is included under the head
“other income” in the statement of profit and loss.