ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Omnitech Engineering Ltd.

3. Material accounting policies

3.1 Property, plant and equipment (''PPE'')

a) Recognition and measurement

Property, plant and equipment are stated at cost
of acquisition or construction less accumulated
depreciation and any accumulated impairment

losses. The cost of fixed assets comprises of its
purchase price, non-refundable taxes & levies,
freight and other incidental expenses related to
the acquisition and installation of the respective
assets. Borrowing cost attributable to financing of
acquisition or construction of the qualifying fixed
assets is capitalized to respective assets when the
time taken to put the assets to use is substantial.

When major items of property, plant and
equipment like tooling or a separate identifiable
machinery spare part, have different useful lives,
they are accounted for as separate items to
respective asset block. The cost of replacement of
any property, plant and equipment is recognized
in the carrying amount of the item if it is probable
that the future economic benefit associated with
the item will flow to the Company and its cost can
be measured reliably.

Pre-operative expenditure comprising of
revenue expenses incurred in connection with
project implementation during the period up
to commencement of commercial production
are treated as part of the project costs and are
capitalized. Such expenses are capitalized only if
the project to which they relate, involve substantial
expansion of capacity or upgradation.

An item of property, plant and equipment is
derecognized upon disposal or when no future
economic benefits are expected to arise from its
use. Difference between the sales proceeds and
the carrying amount of the asset is recognized in
Statement of Profit and Loss.

b) Depreciation

Depreciation on property, plant and equipment
is provided using written down value method
based on useful life of the assets estimated by
the management, which are in line with the useful
lives as prescribed in Part C of Schedule II of the
Act. The estimated useful lives, residual values
and depreciation method are reviewed at each
financial year-end and changes in estimates, if any
are accounted for on a prospective basis.

The Company, based on technical assessment
made by management, depreciates tooling
assets over estimated useful life of 3 years
which is different from the useful life prescribed
in Schedule II to the Companies Act, 2013. The
management believes that these estimated useful
lives are realistic and reflect fair approximation of
the period over which the tooling assets are likely
to be used. Accordingly, for these assets, the useful
lives estimated by the Company are different from

c) Expenditure during construction period:

Capital work-in-progress (CWIP) includes cost
of PPE under installation/ under construction,
net of accumulated impairment loss, if any, as
at the balance sheet date. Expenditure/ income
during construction period (including financing
cost related to borrowed funds for construction
or acquisition of qualifying PPE) is included
under Capital Work-in-Progress, and the same is
allocated to the respective PPE on the completion
of their construction.

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

Advances given towards acquisition or
construction of PPE outstanding at each reporting
date are disclosed as Capital advances under
"Other non-current Assets".

3.2 Intangible Assets

Intangible assets are stated at cost, less accumulated
amortization and impairment losses, if any.

Intangible assets not ready for the intended use on the
date of the balance sheet are disclosed as intangible
assets under development.

In respect of intangible assets acquired / purchased
during the year, amortization is provided on a pro-rata
basis from the date on which such asset is ready to use.

Intangible assets are amortized using written down value
method over the estimated useful life as prescribed in
Part C of Schedule II of the Act is given below.

3.3 Financial Instruments

A. Financial Assets

i. Initial recognition and measurement:

Financial assets and financial liabilities are
initially recognised when the Company

becomes a party to the contractual provisions
of the instrument. A financial asset or financial
liability is initially measured at fair value plus,
for an item not at fair value through profit
and loss (FVTPL), transaction costs that are
directly attributable to its acquisition or issue.

ii. Classification and Subsequent measurement:

For purposes of subsequent measurement,
financial assets are classified in following
categories:

a) at amortized cost; or

b) at fair value through other comprehensive
income; or

c) at fair value through profit or loss.

The classification depends on the entity''s
business model for managing the financial
assets and the contractual terms of the cash
flows.

• Amortized Cost

Assets that are held for collection of
contractual cash flows where those
cash flows represent solely payments
of principal and interest are measured
at amortized cost. Interest income
from these financial assets is included
in finance income using the effective
interest rate method (EIR).

• Fair value through other comprehensive
income (FVOCI)

Assets that are held for collection of
contractual cash flows and for selling
the financial assets, where the assets''
cash flows represent solely payments of
principal and interest, are measured at
fair value through other comprehensive
income (FVOCI). Movements in the
carrying amount are taken through OCI,
except for the recognition of impairment
gains or losses, interest revenue and
foreign exchange gains and losses which
are recognized in Statement of Profit
and Loss. When the financial asset is
derecognized, the cumulative gain or
loss previously recognized in OCI is
reclassified from equity to Statement of
Profit and Loss and recognized in other
gains/ (losses). Interest income from these
financial assets is included in other income
using the effective interest rate method.

• Fair value through profit or loss (FVTPL)

Assets that do not meet the criteria for
amortized cost or FVOCI are measured
at fair value through profit or loss.
Interest income from these financial
assets is included in other income.

Financial assets are not reclassified
subsequent to their initial recognition,
except if and in the period the Company
changes its business model for
managing financial assets. A financial
asset is measured at amortised cost if it
meets both of the following conditions
and is not designated as at FVTPL:

- the asset is held within a business
model whose objective is to hold
assets 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.

All financial assets not classified and
measured at amortised cost or FVOCI
as described above are measured
at FVTPL. On initial recognition, the
Company may irrevocably designate
a financial asset that otherwise meets
the requirements to be measured at
amortised cost or at FVOCI as at FVTPL
if doing so eliminates or significantly
reduces an accounting mismatch that
would otherwise arise.

Financial assets at FVTPL: These assets
are subsequently measured at fair value.
Net gains and losses, including any
interest income, are recognised in profit
or loss.

Financial assets at amortised cost: These
assets are subsequently measured
at amortised cost using the effective
interest method. The amortised cost is
reduced by impairment losses. Interest
income, foreign exchange gains and
losses and impairment are recognised
in profit or loss. Any gain or loss on
derecognition is recognised in profit or
loss.

iii. Derecognition of financial assets:

A financial asset (or, where applicable, a part of
a financial asset or part of a Company of similar
financial assets) is primarily derecognized (i.e.
removed from the Company''s balance sheet)
when:

• The rights to receive cash flows from the
asset have expired, or

• The Company has transferred its rights
to receive cash flows from the asset

When the Company has transferred an
asset, the Company evaluates whether
it has transferred substantially all risks
and rewards of ownership of the financial
asset. In such cases, the financial asset is
derecognized. Where the Company has
retained substantially all risks and rewards of
ownership of the financial asset, the financial
asset is not derecognized.

Where the Company has neither transferred
a financial asset nor retains asset is
derecognized if the Company has not retained
control over the financial asset. Where the
Company has retained control of the financial
asset, the asset is continued to be recognized
to the extent of continuing involvement in the
financial asset.

iv. Impairment of financial assets:

At each balance sheet date, the Company
assesses whether a financial asset is to be
impaired. Ind AS 109 requires the Company
to apply expected credit loss model for
recognition and measurement of impairment
loss. In determining the allowances for
doubtful trade receivables, the Company
has used a practical expedient by computing
the expected credit loss allowance for trade
receivables based on a provision matrix. The
provision matrix takes into account historical
credit loss experience and is adjusted for
forward looking information. The impairment
loss is based on the ageing of the receivables
that are due and allowance rates used in the
provision matrix. For all other financial assets,
expected credit losses are measured at an
amount equal to the 12-months expected
credit losses or at an amount equal to the
life time expected credit losses if the credit
risk on the financial asset has increased
significantly since initial recognition.

B. Financial Liabilities

i. Initial recognition and measurement:

Financial liabilities are classified, at initial
recognition, as financial liabilities at fair
value through profit or loss and at amortized
cost, as appropriate. All financial liabilities
are recognized initially at fair value and, in
the case of borrowings and payables, net of
directly attributable transaction costs.

ii. Subsequent measurement:

The measurement of financial liabilities
depends on their classification, as described
below. This is the category most relevant
to the Company. After initial recognition,
interest-bearing borrowings are subsequently
measured at amortised cost using the EIR
method. Gains and losses are recognised
in profit or loss when the liabilities are
derecognised as well as through the EIR
amortisation process. Amortised cost
is calculated by taking into account any
discount or premium on acquisition and fees
or costs that are an integral part of the EIR.
The EIR amortisation is included as finance
costs in the statement of profit and loss.

iii. Derecognition:

The Company derecognises a financial
liability when its contractual obligations are
discharged or cancelled, or expired. The
Company also derecognises a financial
liability when its terms are modified and the
cash flows under the modified terms are
substantially different. In this case, a new
financial liability based on the modified terms
is recognised at fair value. The difference
between the carrying amount of the financial
liability extinguished and the new financial
liability with modified terms is recognised in
profit or loss.

Offsetting of financial instruments:

Financial assets and liabilities are offset and the
net amount is reported in the balance sheet where
there is a legally enforceable right to offset the
recognized amounts and there is an intention to
settle on a net basis or realize the asset and settle
the liability simultaneously. The legally enforceable
right must not be contingent on future events
and must be enforceable in the normal course of
business and in the event of default, insolvency or
bankruptcy of the Company or the counterparty.

Written - off:

The gross carrying amount of a financial asset is
written off (either partially or in full) when there
is information indicating that the debtor is in
severe financial difficulty and there is no realistic
prospect of recovery. This is generally the case
when the Company determines that the debtor
does not have assets or sources of income that
could generate sufficient cash flows to repay the
amounts subject to the writeoff. However, financial
assets that are written off could still be subject to
enforcement activities in order to comply with the
Company''s procedures for recovery of amounts
due.

C. Derivative financial instruments

The Company enters into derivative financial
instruments to manage its foreign exchange rate
risk. Derivatives are initially recognized at fair value
on the date a derivative contract is entered into and
are subsequently re-measured to their fair value
at the end of each reporting period. The resulting
gain or loss is recognized in the statement of profit
and loss immediately.

3.4 Employee benefits

A. Short-term employee benefits

A liability is recognised for benefits accruing
to employees in respect of wages and salaries,
including nonmonetary benefits that are expected
to be settled wholly within 12 months after the
end of the period in which the employees render
the related service are recognised in respect of
employees'' services up to the end of the reporting
period and are measured on an undiscounted basis
at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented
as current employee benefit obligations in the
balance sheet.

B. Other long-term employee benefit obligations

Liabilities recognised in respect of other long-term
employee benefits 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.

C. Defined contribution plans

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

D. Defined benefit plans

The Company operates an unfunded defined
benefit gratuity plan in India. The Company''s net
obligation in respect of gratuity, which is defined
benefit plan, is calculated using the projected
unit credit method and the same is carried out
by qualified actuary. The current service cost and
interest on the net defined benefit liability / (asset)
is recognized in the statement of profit and loss.
Past service cost is immediately recognized in the
statement of profit and loss. Actuarial gains and
losses net of deferred taxes arising from experience
adjustment and changes in actuarial assumptions
are recognized in other comprehensive income in
the period in which they arise.

Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset. The
Company recognizes the following changes in the
net defined benefit obligation as an expense in the
Statement of Profit and Loss:

i) Service costs comprising current service
costs, past-service costs, gains and losses
on curtailments and non-routine settlements;
and

ii) Net interest expense or income

3.5 Revenue recognition
Sale of goods

Revenue is recognized upon transfer of control of
promised goods to customers in an amount that

reflects the consideration which the Company expects
to receive in exchange for those goods. Contracts for
the sale of goods provide customers with a customary
right of return in case of defects, quality issues etc. The
rights of return give rise to variable consideration.

Revenue from the sale of goods is recognized at
the point in time when control is transferred to the
customer, which is determined based on contracts with
the customers.

Revenue is measured based on the transaction price,
which is the consideration, adjusted for discounts and
estimated returns as specified in the contracts with
the customers. Revenue excludes taxes collected from
customers on behalf of the government.

Sales return is variable consideration that is recognized
and recorded based on historical experience, market
conditions and provided for in the year of sale as
reduction from revenue. The methodology and
assumptions used to estimate returns are monitored
and adjusted regularly in line with trade practices,
historical trends, past experience, projected market
conditions and certain factual data in relation to actual
returns received in terms of delivery of short quantities
and rejection on account of quality issue.

Sale of Services

The Company renders job work services and tooling
income that are provided separately. The Company
recognizes revenue from sale of services at a point in
time, when products are sent to the customer after
completion.

Other operating revenue - export incentives

Export incentives are recognized as income when right
to receive credit as per the terms of the scheme is
established in respect of the exports made and where
there is no significant uncertainty regarding the ultimate
collection of the relevant export proceeds.

Other income

Interest Income is recognized on 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.

Profit on sale/redemption of investments is recognized
as and when the investments are sold or redeemed.
Profit is determined as the difference between the sale/
redemption proceeds and the carrying amount of the
investments. Such income is included under the head
''Other Income'' in the Statement of Profit and Loss.

3.6 Income Taxes

A. Current income tax

Current income tax assets and liabilities are
measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are
those that are enacted or substantively enacted,
at the reporting date in the country where the
Company operates and generates taxable income.

Current income tax relating to items recognized
outside profit and loss is recognized outside profit
and loss (either in other comprehensive income or
in equity).

Current tax assets and liabilities are offset only if
there is a legally enforceable right to set off the

recognized amounts, and it is intended to realize
the asset and settle the liability on a net basis or
simultaneously. Advance taxes and provisions
for current income taxes are presented in the
balance sheet after off-setting advance tax paid
and income tax provision arising in the same tax
jurisdiction and where the relevant tax paying units
intends to settle the asset and liability on a net
basis.

B. Deferred taxes

Deferred income taxes reflect the impact of
temporary differences between tax base of assets
and liabilities and their carrying amounts. Deferred
tax is measured based on the tax rates and the
tax laws enacted or substantively enacted at the
reporting date.

Deferred tax liabilities are recognized for all
taxable temporary differences, except deferred tax
liability arising from initial recognition of goodwill
or an asset or liability in a transaction that is not
a business combination and, affects neither
accounting nor taxable profit/ loss at the time of
transaction. Deferred tax assets are recognized
for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax
losses, except deferred tax assets arising from
initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination
and, affects neither accounting nor taxable profit/
loss at the time of transaction. Deferred tax assets
are recognized only to the extent that sufficient
future taxable income will be available against
which such deferred tax assets can be realized.

The carrying amount of deferred tax asset is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available against which such
deferred tax assets can be realized.

Deferred tax assets and deferred tax liabilities are
offset, if a legally enforceable right exists to set off
current tax assets against current tax liabilities and
the deferred tax assets and deferred tax liabilities
relate to the same taxable entity and the same
taxation authority. Deferred tax relating to items
recognized outside the statement of profit and
loss is recognized in correlation to the underlying
transaction either in OCI or directly in equity.

3.7 Leases

The Company assesses at contract inception whether a

contract is, or contains, a lease. That is, if the contract

conveys the right to control the use of an identified

asset for a period of time in exchange for consideration.

Company as a lessee

The Company applies a single recognition and
measurement approach for all leases, except for short
term leases. The Company recognizes lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.

i) Right to use assets

The Company recognizes right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and accumulated impairment losses,
and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made
at or before the commencement date less any
lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful
lives of the assets. If ownership of the leased
asset transfers to the Company at the end of the
lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using
the estimated useful life of the asset. The right-of-
use assets are also subject to impairment.

ii) Lease liabilities

At the commencement date of the lease, the
Company recognizes lease liabilities measured at
the present value of lease payments to be made
over the lease term. The lease payments include
fixed payments (including in substance fixed
payments) less any lease incentives receivable,
variable lease payments that depend on an index
or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments
also include the exercise price of a purchase
option reasonably certain to be exercised by
the Company and payments of penalties for
terminating the lease, if the lease term reflects
the Company exercising the option to terminate.
Variable lease payments that do not depend on an
index or a rate are recognized as expenses (unless
they are incurred to produce inventories) in the
period in which the event or condition that triggers
the payment occurs.

In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
at the lease commencement date because the
interest rate implicit in the lease is not readily
determinable. After the commencement date, the
amount of lease liabilities is increased to reflect

the accretion of interest and reduced for the
lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change
in the lease payments (e.g., changes to future
payments resulting from a change in an index or
rate used to determine such lease payments) or a
change in the assessment of an option to purchase
the underlying asset.

iii) Short term leases

The Company applies the short-term lease
recognition exemption to its properties (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). Lease payments on
short-term leases are recognized as expense in
profit and loss.

3.8 Earnings per share

Basic earnings per share is computed by dividing
profit or loss attributable to equity shareholders of the
Company by the weighted average number of equity
shares outstanding during the year. The Company did
not have any potentially dilutive securities in any of the
years presented.

3.9 Impairment of non-financial assets

Property, plant and equipment and intangible assets
with finite life are evaluated for recoverability whenever
there is any indication that their carrying amounts may
not be recoverable. If any such indication exists, the
recoverable amount (i.e. higher of the fair value less
cost to sell and the value-in-use) is determined on an
individual asset basis unless the asset does not generate
cash flows that are largely independent of those from
other assets. In such cases, the recoverable amount is
determined for the cash generating unit (CGU) to which
the asset belongs.

If the recoverable amount of an asset (or CGU) is
estimated to be less than it carrying amount, the
carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized
in the statement of profit and loss to such extent. When
an impairment loss subsequently reverses, the carrying
amount of the asset (or a CGU) is increased to the
revised estimate of its recoverable amount, such that
the increase in the carrying amount does not exceed
the carrying amount that would have been determined
had no impairment loss been recognized for the asset
(or CGU) in prior years. A reversal of an impairment loss
is recognized immediately in statement of profit and
loss.