ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Regaal Resources Ltd.

3 SUMMARY OF MATERIAL ACCOUNTING
POLICIES

3.1 INVENTORIES

Raw materials, packaging materials and stores
and spare parts are valued at lower of cost and net
realizable value. However, material and other items
held for use in production of inventories are not written
down below cost if the finished products in which
they will be incorporated are expected to be sold at
or above cost.

Cost includes purchase price, (excluding those
subsequently recoverable by the enterprise from the
concerned revenue authorities), freight inwards and
other expenditure incurred in bringing such inventories
to their present location and condition.

Finished Goods are valued at lower of cost and net
realisable value. Cost includes cost of direct materials
and direct labour and a proportion of manufacturing
overhead based on the normal operating capacity.
Cost is determined on weighted average basis.

Scrap and other items are valued at net realisable value.

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

3.2 CASH AND CASH EQUIVALENTS

Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and short-term
deposits with an original maturity of three months
or less, which are subject to an insignificant risk of
change in value.

For the purpose of the statement of cash flows,
cash and cash equivalents includes cash on hand,
term deposits and other short-term highly liquid
investments, net of bank overdrafts as they are
considered an integral part of the Company''s cash
management. Bank overdrafts are shown within short
term borrowings in the balance sheet.

3.3 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 for each
jurisdiction adjusted by changes in deferred tax assets

and liabilities attributable to temporary differences
and to unused tax losses. Current and deferred tax is
recognized in the statement of profit & 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.

3.3.1 Current Tax:

Current tax liabilities (or assets) for the current and
prior periods are measured at the amount expected
to be paid to (recovered from) the taxation authorities
using the tax rates (and tax laws) that have been
enacted or substantively enacted, at the end of the
reporting period.

3.3.2 Deferred Tax

• Deferred Tax assets and liabilities is 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 tax rates (and tax laws) that have
been enacted or substantively enacted by the end
of the reporting period.

• Deferred tax is recognized in respect of temporary
differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the corresponding amounts used
for taxation purposes (i.e., tax base). Deferred tax
is also recognized for carry forward of unused tax
losses and unused tax credits.

• Deferred tax assets are recognized to the extent
that it is probable that taxable profit will be
available against which the deductible temporary
differences, and the carry forward of unused tax
credits and unused tax losses can be utilized.

• The carrying amount of deferred tax assets is
reviewed at the end of each reporting period.
The Company reduces the carrying amount of
a deferred tax asset to the extent that it is no
longer probable that sufficient taxable profit
will be available to allow the benefit of part or
that entire deferred tax asset to be utilized. Any
such reduction is reversed to the extent that it
becomes probable that sufficient taxable profit
will be available.

• Deferred tax relating to items recognized outside
the Statement of Profit and Loss is recognized
either in other comprehensive income or in equity.
Deferred tax items are recognized in correlation
to the underlying transaction either in OCI or
directly in equity.

• Deferred tax assets and liabilities are offset
when there is a legally enforceable right to set off
current tax assets against current tax liabilities
and when they relate to income taxes levied by the
same taxation authority and the Company intends
to settle its current tax assets and liabilities on a
net basis.

3.4 PROPERTY, PLANT AND EQUIPMENT

3.4.1 Tangible Assets

3.4.1.1 Recognition and Measurement:

• Property, plant and equipment held for use in the
production or/and supply of goods or services,
or for administrative purposes, are stated in the
balance sheet at cost, less any accumulated
depreciation and accumulated impairment losses
(if any), except for freehold land which are carried
at fair value on transition date as deemed cost.

• Cost of an item of property, plant and equipment
acquired comprises its purchase price, including
import duties and non-refundable purchase taxes,
after deducting any trade discounts and rebates,
any directly attributable costs of bringing the
assets to its working condition and location for its
intended use and present value of any estimated
cost of dismantling and removing the item and
restoring the site on which it is located.

• If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.

• Profit or loss arising on the disposal of property,
plant and equipment are recognized in the
Statement of Profit and Loss.

On transition to Ind AS, the Company has elected to

fair value of its freehold land and use that fair value as

deemed cost of such freehold land.

3.4.1.2 Subsequent Measurement:

• Subsequent costs are included in the asset''s
carrying amount, only when it is probable that
future economic benefits associated with the cost
incurred 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 derecognized when replaced.

• Major Inspection/ Repairs/ Overhauling expenses
are recognized in the carrying amount of the item
of property, plant and equipment as a replacement
if the recognition criteria are satisfied. Any

Unamortized part of the previously recognized
expenses of similar nature is derecognized.

3.4.1.3 Depreciation and Amortization:

• Depreciation on Property, Plant & Equipment is
provided on straight line method in terms of life
span of assets prescribed in Schedule II of the
Companies Act, 2013 or as reassessed by the
Company based on the technical evaluation.

• Depreciation on additions (disposals) during the
year is provided on a pro-rata basis i.e., from
(up to) the date on which asset is ready for use
(disposed of).

• Depreciation method, useful lives and residual
values are reviewed at each financial year-end
and adjusted if appropriate.

3.4.1.4 Derecognition of Assets

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 or retirement of an item of property,
plant and equipment is determined as the difference
between net disposal proceeds and the carrying
amount of the asset and is recognized in the statement
of profit and loss.

3.4.1.5 Capital Work in Progress

Capital work-in-progress is stated at cost which
includes expenses incurred during construction
period, interest on amount borrowed for acquisition
of qualifying assets and other expenses incurred in
connection with project implementation in so far
as such expenses relate to the period prior to the
commencement of commercial production.

3.5 LEASES

3.5.1 Determining whether an arrangement contains a
lease

The determination of whether an arrangement is
(or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of
the arrangement is dependent on the use of a specific
asset or assets and the arrangement convey a right
to use the asset or assets, even if that right is not
explicitly specified in an arrangement.

3.5.2 Company as lessor

• Finance Lease

Leases which effectively transfer to the lessee
substantially all the risks and benefits incidental

to ownership of the leased item are classified
and accounted for as finance lease. Lease
rental receipts are apportioned between the
finance income and capital repayment based on
the implicit rate of return. Contingent rents are
recognized as revenue in the period in which they
are earned.

• Operating Lease

Leases in which the Company does not transfer
substantially all the risks and rewards of
ownership of an asset are classified as operating
leases. Rental income from operating leases is
recognized on a straight-line basis over the term
of the relevant lease except where scheduled
increase in rent compensates the Company with
expected inflationary costs.

3.5.3 Company as lessee

The Company''s lease asset classes primarily consist
of leases for Buildings. The Company assesses
whether a contract is or contains a lease, at inception
of a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether:

(i) the contract involves the use of an identified asset;

(ii) the Company has substantially all of the economic
benefits from use of the asset through the period
of the lease and;

(iii) the Company has the right to direct the use of
the asset.

At the date of commencement of the lease, the
Company recognises a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
twelve months or less (short term leases) and leases
of low value assets. For these short term and leases
of low value assets, the Company recognises the lease
payments as an operating expense on a straight-line
basis over the term of the lease.

The lease liability is initially measured at the present
value of the future lease payments. The lease
payments are discounted using the interest rate
implicit in the lease or, if not readily determinable,
using the incremental borrowing rates. The lease
liability is subsequently re-measured by increasing
the carrying amount to reflect interest on the lease

liability, reducing the carrying amount to reflect the
lease payments made.

A lease liability is re-measured upon the occurrence of
certain events such as a change in the lease term or
a change in an index or rate used to determine lease
payments. The re-measurement normally also adjusts
the leased assets.

Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.

The right-of-use assets are initially recognised at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation
and impairment losses, if any. Right-of-use assets
are depreciated from the commencement date on a
straight-line basis over the shorter of the lease term
and useful life of the underlying asset.

3.6 REVENUE RECOGNITION

Revenue from contracts with customers is recognized
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 (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts and
schemes offered by the Company as part of the
contract. This variable consideration is estimated
based on the expected value of outflow. Revenue (net
of variable consideration) is recognized only to the
extent that it is highly probable that the amount will
not be subject to significant reversal when uncertainty
relating to its recognition is resolved.

3.7 OTHER INCOME
Interest Income

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

Rental Income

Rental income is accounted on straight line basis
over the lease term and is included in revenue in
the statement of profit and loss. The company has
determined that it does not need criteria for recognition

of lease rental income on a basis other than straight
line basis.

Export incentives

Export entitlements is recognized when the right
to receive credit as per the terms of schemes is
established in respect of the exports made by the
company and when there is no significant uncertainty
regarding the ultimate collection of the relevant
export proceeds.

Insurance claim receivable

Insurance and other claims are accounted on the basis
of claims admitted/ expected to be admitted and to
the extent that there is no uncertainty in receiving
the claims.

3.8 EMPLOYEE BENEFITS

3.8.1 Short Term Benefits

Short term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related services are provided. Liabilities for wages
and salaries, including non-monetary benefits that
are expected to be settled wholly within twelve
months after the end of the period in which the
employees render the related service are recognized
in respect of employees'' services up to the end of the
reporting period.

3.8.2 Other Long Term Employee Benefits

The liabilities for leave that are not expected to be
settled wholly within twelve months are measured as
the present value of the expected future payments to
be made in respect of services provided by employees
up to the end of the reporting period using the projected
unit credit method. The benefits are discounted using
the government securities (G-Sec) at the end of the
reporting period that have terms approximating to
the terms of related obligation. Remeasurements as
the result of experience adjustment and changes in
actuarial assumptions are recognized in statement of
profit and loss.

3.8.3 Post-Employment Benefits

The Company operates the following post¬
employment schemes:

• Defined Contribution Plan

Defined contribution plans such as Provident Fund
etc. are charged to the statement of profit and
loss as and when incurred and paid to Authority.

• Defined Benefit Plans

The liability or asset recognized in the Balance
Sheet in respect of defined benefit plans is the

present value of the defined benefit obligation at
the end of the reporting period less the fair value
of plan assets. The Company''s net obligation in
respect of defined benefit plans is calculated
separately for each plan by estimating the amount
of future benefit that employees have earned in
the current and prior periods. The defined benefit
obligation is calculated annually by Actuaries
using the projected unit credit method.

The liability recognized for defined benefit
plans is the present value of the defined benefit
obligation at the reporting date less the fair value
of plan assets, together with adjustments for
unrecognized actuarial gains or losses and past
service costs. The net interest cost is calculated
by applying the discount rate to the net balance of
the defined benefit obligation and the fair value of
plan assets. The benefits are discounted using the
government securities (G-Sec) at the end of the
reporting period that have terms approximating
to the terms of related obligation.

Remeasurements of the net defined benefit
obligation, which comprise actuarial gains and
losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling,
are recognized in other comprehensive
income. Remeasurements recognized in other
comprehensive income are reflected immediately
in retained earnings and will not be reclassified to
the statement of profit and loss.

3.9 BORROWING COSTS

• Borrowing Costs consists of interest and other
costs that an entity incurs in connection with
the borrowings of funds. Borrowing costs
also includes foreign exchange difference to
the extent regarded as an adjustment to the
borrowing costs.

• Borrowing costs directly attributable to the
acquisition or construction of a qualifying asset
are capitalized as a part of the cost of that asset
that necessarily takes a substantial period of time
to complete and prepare the asset for its intended
use or sale.

• Transaction costs in respect of long-term
borrowing are amortized over the tenure of
respective loans using Effective Interest Rate
(EIR) method. All other borrowing costs are
recognized in the statement of profit and loss in
the period in which they are incurred.

3.10 GOVERNMENT GRANTS

Government grants are recognized at their fair
value, where there is reasonable assurance
that the grant will be received and all attached
conditions will be complied with. When the grant
relates to an expense item, it is recognized as
income on a systematic basis over the periods
that the related costs, for which it is intended to
compensate, are expensed.

The grant relating to the acquisition/ construction
of an item of property, plant and equipment, the
same is presented by deducting the grant from
the carrying amount of the asset.

3.11 FINANCIAL INSTRUMENTS

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability
or equity instrument of another entity.

3.11.1 Financial Assets

• Recognition and Initial Measurement:

All financial assets are initially recognized when
the company becomes a party to the contractual
provisions of the instruments. A financial asset
is initially measured at fair value plus, in the
case of financial assets not recorded at fair
value through profit or loss, transaction costs
that are attributable to the acquisition of the
financial asset.

• Classification and Subsequent Measurement:

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

- Measured at Amortized Cost;

- Measured at Fair Value Through Other
Comprehensive Income (FVTOCI);

- Measured at Fair Value Through Profit or
Loss (FVTPL); and

- Equity Instruments designated at Fair Value
through Other Comprehensive Income
(FVTOCI).

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.

- Measured at Amortized Cost: A debt
instrument is measured at the amortized
cost if both the following conditions are met:

- The asset is held within a business model
whose objective is achieved by both
collecting 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
(SPPI) on the principal amount outstanding.

After initial measurement, such financial assets
are subsequently measured at amortized cost
using the effective interest rate (EIR) method.
Amortized 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 amortization is included in finance
income in the statement of profit or loss. The
losses arising from impairment are recognized in
the profit or loss. This category generally applies
to trade receivables, cash and bank balances,
loans and other financial assets of the company.

- Measured at FVTOCI: A debt instrument is
measured at the FVTOCI if both the following
conditions are met:

- The objective of the business model is
achieved by both collecting contractual cash
flows and selling the financial assets; and

- The asset''s contractual cash flows
represent SPPI.

Debt instruments meeting these criteria are
measured initially at fair value plus transaction
costs. They are subsequently measured at
fair value with any gains or losses arising
on remeasurement recognized in other
comprehensive income, except for impairment
gains or losses and foreign exchange gains or
losses. Interest calculated using the effective
interest method is recognized in the statement
of profit and loss in investment income.

- Measured at FVTPL: FVTPL is a residual
category for debt instruments. Any debt
instrument, which does not meet the criteria
for categorization as at amortized cost or as
FVTOCI, is classified as FVTPL. In addition,
the company may elect to designate a
debt instrument, which otherwise meets
amortized cost or FVTOCI criteria, as at
FVTPL. Debt instruments included within the
FVTPL category are measured at fair value
with all changes recognized in the statement
of profit and loss. Equity instruments

which are, held for trading are classified as
at FVTPL.

- Equity Instruments designated at FVTOCI:
For equity instruments, which has not been
classified as FVTPL as above, the company
may make an irrevocable election to present
in other comprehensive income subsequent
changes in the fair value. The company
makes such election on an instrument-by¬
instrument basis. The classification is made
on initial recognition and is irrevocable. In
case the company decides to classify an
equity instrument as at FVTOCI, then all fair
value changes on the instrument, excluding
dividends, are recognized in the OCI. There
is no recycling of the amounts from OCI to
P&L, even on sale of investment.

• Derecognition:

The Company derecognizes a financial asset on
trade date only when the contractual rights to
the cash flows from the asset expire, or when it
transfers the financial asset and substantially all
the risks and rewards of ownership of the asset
to another entity.

• Impairment of Financial Assets:

The Company assesses at each date of balance
sheet whether a financial asset or a group of
financial assets is impaired. Ind AS - 109 requires
expected credit losses to be measured through
a loss allowance. The company recognizes
impairment loss for trade receivables that do
not constitute a financing transaction using
expected credit loss model, which involves use
of a provision matrix constructed on the basis
of historical credit loss experience. For all other
financial assets, expected credit losses are
measured at an amount equal to the 12 month
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.

3.11.2 Financial Liabilities

• Recognition and Initial Measurement:

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

• Subsequent Measurement:

Financial liabilities are measured subsequently
at amortized cost or FVTPL. A financial liability
is classified as FVTPL if it is classified as held-
for-trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net
gains and losses, including any interest expense,
are recognized in profit or loss. Other financial
liabilities are subsequently measured at
amortized cost using the effective interest rate
method. Interest expense and foreign exchange
gains and losses are recognized in profit or
loss. Any gain or loss on derecognition is also
recognized in profit or loss.

• Financial Guarantee Contracts:

Financial guarantee contracts issued by the
company are those contracts that require a
payment to be made to reimburse the holder for a
loss it incurs because the specified debtor fails to
make a payment when due in accordance with the
terms of a debt instrument. Financial guarantee
contracts are recognized initially as a liability at
fair value, adjusted for transaction costs that
are directly attributable to the issuance of the
guarantee. Subsequently, the liability is measured
at the higher of the amount of loss allowance
determined as per impairment requirement
of Ind AS 109 and the amount recognized less
cumulative amortization.

• Derecognition:

A financial liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires.

3.11.3 Foreign Currency transactions

Foreign currency (other than the functional currency)
transactions are translated into the functional
currency using the prevailing rate of exchanges at the
dates of transactions. Monetary assets and liabilities
denominated in foreign currencies are translated
into the functional currency at the rate of exchanges
prevailing at the reporting date.

Foreign exchange gains and losses resulting from
the settlement of such transactions and from the
translation of monetary assets and liabilities are
generally recognize in the statement of profit and loss
in which they arise except for exchange differences
on foreign currency borrowing relating to assets
under construction for future productive use, which
are included in the cost of those qualifying assets
when they are regarded as adjustment to interest cost

on those foreign currency borrowing, the balance is
presented in the statement of profit and loss within
finance costs.

Non-monetary items are not retranslated at period end
and are measured at historical cost (translated using
the exchange rate at the transaction date).

3.11.4 Offsetting financial instruments

Financial assets and liabilities are offset and the net
amount is reported in the balance sheet when 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 counterparty.

3.12 Earnings Per Share

Basic Earnings per share (EPS) amounts are calculated
by dividing the profit for the year attributable to
equity holders by the weighted average number of
equity shares outstanding during the year. Diluted
EPS amounts are calculated by dividing the profit
attributable to equity holders adjusted for the effects
of potential equity shares by the weighted average
number of equity shares outstanding during the year
plus the weighted average number of equity shares
that would be issued on conversion of all the dilutive
potential equity shares into equity shares.

3.13 Impairment of Non-Financial Assets

The Company assesses, at each reporting date,
whether there is an indication that an asset may be
impaired. An asset is treated as impaired when the
carrying cost of the asset exceeds its recoverable
value being higher of value in use and net selling
price. Value in use is computed at net present value
of cash flow expected over the balance useful lives of
the assets. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which
are largely independent of the cash inflows from
other assets or group of assets (Cash Generating
Units - CGU).

An impairment loss is recognized as an expense in
the Statement of Profit and Loss in the year in which
an asset is identified as impaired. The impairment
loss recognized in earlier accounting period is
reversed if there has been an improvement in
recoverable amount.