ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Wakefit Innovations Ltd.

2. MATERIAL ACCOUNTING POLICIES

2.1 Basis of preparation

A. Statement of Compliance

These financial statements have been prepared
to comply in all material respects with the Indian
Accounting Standards (“Ind AS”) as specified
under Section 133 of the Act read with the
Companies (Indian Accounting Standards) Rules,
2015 (as amended from time to time), presentation
requirements of Division II of Schedule III to the Act,
as applicable to the financial statements and other
relevant provisions of the Act.

The financial statements have been prepared on a
going concern basis and is approved for issue by
the Company''s Board of Directors on May 21, 2026.

B. Functional and presentation currency

These financial statements have been prepared in
Indian Rupee p) which is the functional currency of
the Company. All amounts disclosed in the financial
statements have been rounded off to the nearest
million with two decimals, unless otherwise stated.

Transactions and balances with values below the
rounding off norm adopted by the Company have
been reflected as “0” in the relevant notes to the
financial statements.

2.2 Basis of measurement

The financial statements have been prepared in
accordance with the Ind AS under the historical
cost convention and on an accrual basis, except for
the following assets and liabilities which have been
measured at fair value:

a) Financial instruments classified as fair value
through profit or loss;

b) Share based payments and

c) Defined benefit and other long term
employee benefits

The material accounting policies used in preparation
of these financial statements have been discussed
in the respective notes.

2.3 Use of estimates, assumptions and judgements

The preparation of financial statements in
conformity with Ind AS requires management to
make estimates, assumptions and judgements
that affect the application of accounting policies
and the reported amounts of assets, liabilities,
the disclosure of contingent assets and liabilities
on the date of the financial statements and the
reported amounts of revenues and expenses for
the year reported. Actual results could differ from
those estimates.

Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period
in which the estimates are revised, and future
periods are affected.

Judgements

Information about judgements made in applying
accounting policies that have the most significant
effects on the amounts recognised in the financial
statements is included in the following notes:

• Leases - lease tenure for Ind AS 116
measurement - Note 2.13.

• Deferred tax- Note 2.17.

Estimates

Information about assumptions and estimation
uncertainties at the reporting date that have
a significant risk of resulting in a material
adjustment to the carrying amounts of assets and
liabilities within the next year is included in the
following notes;

• Useful lives of property, plant and equipment
and intangible assets (refer note 2.7 and note
2.8 respectively)

• Measurement of Lease liabilities and Right of
Use Assets (refer note 2.13)

• Share based payments: key assumptions used
in valuation (refer note 2.11)

• Measurement of defined benefit obligation:
key actuarial assumptions (refer note 2.11)

• Provision for Inventories (refer note 2.16)

• Provision for warranties (refer note 2.19)

• Refund liabilities (refer note 2.5)

• Recognition of deferred tax assets for
carried forward tax losses and other items
(refer note 2.17)

2.4 Current and non-current classification

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

Assets

An asset is classified as current when it satisfies
any of the following criteria:

• it expects to realize the asset, or intends to sell
or consume it, in its normal operating cycle;

• it holds the asset primarily for the
purpose of trading;

• it expects to realize the asset within twelve
months after the reporting period; or

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

Current assets include the current portion of
non-current assets.

All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies
any of the following criteria:

• it is expected to be settled in the Company''s
normal operating cycle;

• it holds the liability primarily for the
purpose of trading;

• the liability is due to be settled within twelve
months after the reporting period; or

• it does not have an unconditional right to
defer settlement of the liability for at least
twelve months after the reporting period.
Terms 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.

All other liabilities are classified as non-current.

The operating cycle is the time between the
acquisition of assets for processing and their
realisationin cash or cash equivalents.The Company''s
normal operating cycle is twelve months.

2.5 Revenue recognition

The Company generates revenue from sale of
products to the customers. Revenue is recognised
when control of goods and services is transferred to
the customer upon the satisfaction of performance
obligation under the contract at a transaction
price that reflects the consideration to which the
Company expects to be entitled in exchange for
those goods or services. In relation to revenue from
contracts with customers, amounts are generally
collected in advance.

(i) Revenue from sale of products

Revenue from the sale of products is
recognised at a point in time when control of
the product being sold is transferred to the
customer and there is no unfulfilled obligation
that could affect the customer''s acceptance
of the products. The performance obligation
is completed upon delivery of products
to the customer.

Revenue is measured on the contract price
net of any taxes collected from customers
and variable consideration on account of
various discounts and schemes offered by the

Company. The transaction price is an amount of
consideration to which the Company expects
to be entitled in exchange for transferring
promised goods.

For contracts that permit the customer to return
an item, revenue is recognised to the extent
that it is highly probable that a significant
reversal in the amount of cumulative revenue
recognised will not occur. Therefore, the
amount of revenue recognised is adjusted for
expected returns, which are estimated based
on the historical data. In these circumstances,
a refund liability and a right to recover returned
goods asset are recognised.

(ii) Assets and liabilities arising from right to
return

The Company has contracts with customers
which entitles them the unconditional right to
return for a specified period as per the policy.

Right to return assets

A right of return gives an entity a contractual
right to recover the products from a customer
(right to return asset), if the customer exercises
its option to return the products and obtain a
refund or replacement. The asset is measured
at the carrying amount of the inventory, less
any expected costs to recover the products,
including any potential decreases in the value
of the returned products.

The Company has presented its right to return
under “Inventory”.

The refund liability, to the extent that the
Company offers it in the form of a cash refund,
is presented under “Other current financial
liabilities”. The refund liability offered in the form
of a replacement or exchange of another good
is presented under “Other current liabilities”.

(iii) Other Operating revenue (Sale of scrap
and others)

Revenue from sale of scrap in the course
of ordinary activities is measured at the
transaction price.

Revenue from contracts for sale of services
is recognised when services are rendered
at a point in time, and when the related
costs are incurred.

Variable Consideration

If the consideration in a contract includes a variable
amount (discounts and incentives), an estimate is
made for the amount of consideration to which the
Company will be entitled in exchange for transferring
the goods/services to the customer and such
discounts and incentives are estimated at contract
inception and constrained until it is highly probable
that a significant revenue reversal in the amount
of cumulative revenue recognized will not occur
when the associated uncertainty with the variable
consideration is subsequently resolved. The rights
of return give rise to variable consideration.

Customer loyalty points

The Company has a loyalty points programme, which
allows customers to accumulate points that can be
redeemed for subsequent purchase. The loyalty
points give rise to a separate performance obligation
as they provide a material right to the customer.

A portion of the transaction price is allocated to
the loyalty points awarded to customers based on
relative stand-alone selling price and recognized as
a contract liability until the points are redeemed.
Revenue is recognized upon redemption of points
by the customer.

When estimating the stand-alone selling price of the
loyalty points, the likelihood that the customer will
redeem the points is considered. Estimates of the
points that will be redeemed on each reporting date
are updated and any adjustments to the contract
liability balance is charged against revenue.

Contract balances:

Trade receivables

A trade receivable is recognized if an amount
of consideration is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due). Refer to accounting policies
of financial assets for initial recognition and
subsequent measurement of financial assets.

Contract assets

A contract asset is the right to consideration in
exchange for goods or services transferred to
the customer, where that right is conditioned
on something other than the passage of time.
If the Company performs by transferring goods or
services to a customer before the customer pays
consideration or before payment is due, a contract

asset is recognized for the earned consideration
that is conditional. Contract assets are subject to
impairment assessment.

Contract liabilities

A contract liability is recognized if a payment is
received, or a payment is due (whichever is earlier)
from the customer before the Company transfers
the related goods or services. Contract liabilities are
recognized as revenue when the Company performs
under the contract (i.e., transfers control of the
related goods or services to the customer).

2.6 Other Income
Interest income:

Interest income is recognized using the effective
interest method or time proportion method, based
on rates implicit in the transaction.

Dividend income on investments is recognised in the
statement of profit and loss when the Company''s
right to receive dividend is established.

Profit on sale of mutual funds and fair value impact
on mark-to-market contracts are recognised
on transaction completion and or on reporting
date as applicable.

2.7 Property, plant, and equipment

(i) Recognition and measurement

The cost of an item of property, plant and
equipment shall be recognised as an asset if,
and only if it is probable that future economic
benefits associated with the item will flow to
the Company and the cost of the item can be
measured reliably.

Items of property, plant and equipment
(including capital-work-in progress) are
measured at cost, which includes capitalised
borrowing costs, less accumulated depreciation
and any accumulated impairment losses.

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

The cost of a self-constructed item of
property, plant and equipment comprises the
cost of materials and direct labour, any other
costs directly attributable to bringing the item
to working condition for its intended use, and
estimated costs of dismantling and removing
the item and restoring the site on which it is
located (site restoration costs).

The present value of the expected cost for the
decommissioning of an asset after its use is
included in the cost of the respective asset if
the recognition criteria for a provision are met.

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.

A property, plant and equipment is eliminated
from the financial statements on disposal /
write off or when no further benefit is expected
from its use and disposal. Any gain or loss
on disposal of an item of property, plant and
equipment is recognised in the statement of
profit and loss.

(ii) Transition to Ind AS

The cost of property, plant and equipment at
April 1, 2021, the Company''s date of transition
to Ind AS, was determined with reference
to its carrying value recognised as per the
previous GAAP (deemed cost) as at the date of
transition to Ind AS.

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only
if it is probable that the future economic
benefits associated with the expenditure will
flow to the Company and the cost of the item
can be measured reliably. All other expenses
on existing property, plant, and equipment,
including day-to-day repair and maintenance
expenditure are charged to the statement of
profit and loss for the period during which such
expenses are incurred.

(iv) Capital advances and Capital work in
progress

Advances paid towards the acquisition of
property, plant and equipment outstanding at

each balance sheet date is classified as capital
advances under other non-current assets.
The costs of property, plant, and equipment,
which are not ready for their intended use
on such date, are disclosed as capital work
in progress. The capital work-in-progress is
carried at cost, comprising direct cost, related
incidental expenses, and attributable interest.
No depreciation is charged on the capital
work in progress until the asset is ready for
the intended use.

(v) Depreciation

Depreciable amount for assets is the cost
of asset less its estimated residual value.
Depreciation on property, plant and equipment
is calculated on a straight-line basis using
the rates arrived at based on the useful lives
estimated by the management. Based on an
internal technical evaluation, management
believes that useful life as given below, which
are different from those prescribed in Part C
of schedule II of the Act, best represents the
period over which management expects to
use these assets.

Lease hold improvements are depreciated
over a period of 3 years or lease term
whichever is lower.

Depreciation is calculated on a pro-rata
basis for assets purchased/sold during the
year. The residual value, appropriateness of
depreciation period and depreciation method
is reviewed by the management each financial
year, with the effect of any changes in estimate
being accounted for on a prospective basis.

2.8 Intangible assets and amortisation

Intangible assets acquired separately are measured
initially at cost. An intangible asset is recognised

only if it is probable that future economic benefits
attributable to the asset will flow to the Company
and the cost of the asset can be measured reliably.
After initial recognition, intangible assets are
recorded at cost less accumulated amortisation
and impairment cost, if any.

Amortisation is recognised on a straight-line basis
over the estimated useful lives of the intangible
assets. Computer software is amortised on a
straight-line method over a period of three years.
The amortisation period and method used for
amortisation are reviewed at each period end.
All intangible assets are assessed for impairment
whenever there is an indication for impairment that
an intangible asset may be impaired.

An intangible asset is derecognised on disposal, or
when no future economic benefits are expected
from use or disposal. Any gain or loss on disposal of
an intangible asset is recognised in the statement
of profit and loss.

Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in the
statement of profit and loss.

The cost of intangible assets as at April 1, 2021,
the Company''s date of transition to Ind AS, was
determined with reference to its carrying value
recognised as per the previous GAAP (deemed
cost), as at the date of transition to Ind AS.

2.9 Measurement of Fair Values

Certain accounting policies and disclosures of the
Company require the measurement of fair values,
for both financial and non-financial assets and
liabilities. The Company has an established control
framework with respect to the measurement of fair
values. The Company regularly reviews significant
unobservable inputs and valuation adjustments.
Fair values are categorized into different levels in a
fair value hierarchy based on the inputs used in the
valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices
included in Level 1 that are observable for the

asset or liability, either directly (i.e., as prices)
or indirectly (i.e., derived from prices).

• Level 3: inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).

When measuring the fair value of an asset or a
liability, the Company uses observable market data
as far as possible. If the inputs used to measure
the fair value of an asset or a liability fall into
different levels of the fair value hierarchy, then
the fair value measurement is categorized in its
entirety in the same level of the fair value hierarchy
as the lowest level input that is significant to the
entire measurement.

The Company recognizes transfers between
levels of the fair value hierarchy at the end of the
reporting period during which the change has
occurred. (Refer note 37).

2.10 Impairment

Won- financial assets

At each reporting date, the Company reviews the
carrying amounts of its non-financial assets (other
than deferred tax assets) to determine whether
there is any indication of impairment. If any such
indication exists, then the asset''s recoverable
amount is estimated.

For the purpose of impairment testing, the
recoverable amount (i.e., the 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. Value in use is based on the estimated
future cash flows, discounted to their present value
using a pre-tax discount rate that reflect current
market assessments of time value of money and
the risk specific to the CGU.

An impairment loss is recognised in the statement
of profit and loss and is measured by the amount
by which the carrying value of the assets exceeds
the estimated recoverable amount of the asset.
An impairment loss is reversed in the statement
of profit and loss if there has been a change in
the estimates used to determine the recoverable

amount. The carrying amount of the asset is
increased to its revised recoverable amount, provided
that this amount does not exceed the carrying
amount that would have been determined (net of
any accumulated amortisation or depreciation) had
no impairment loss been recognized for the asset
in prior years.

Financial assets

In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement
and recognition of impairment loss. The Company
follows ‘simplified approach'' for recognition of
impairment loss allowance on trade receivables.

The Company considers a financial asset to be
in default when:

• the debtor is unlikely to pay its credit
obligations to the Company in full; or

• the ageing is more than 12 months past due.

The application of simplified approach does not
require the Company to track changes in credit
risk. Rather, it recognizes impairment loss allowance
based on lifetime ECLs at each reporting date, right
from its initial recognition.

For recognition of impairment loss on other financial
assets i.e., investments, bank balances/deposits,
etc., and risk exposure, the Company determines
whether there has been a significant increase in the
credit risk since initial recognition. If credit risk has
not increased significantly, 12-month ECL is used to
provide for impairment loss. However, if credit risk
has increased significantly, lifetime ECL is used.

If in subsequent period, credit quality of the
instrument improves such that there is no
longer a significant increase in credit risk since
initial recognition, then the Company reverts to
recognizing impairment loss allowance based
on 12-month ECL.

ECL is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that the
Company expects to receive (i.e., all shortfalls),
discounted at the original EIR.

The Company recognises loss allowances for
expected credit losses on financial assets recorded
at amortised cost. At each reporting date the

Company assesses whether financial assets
carried at amortised cost are 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.

Evidence that a financial asset is credit-impaired
included the following observable data:

• significant financial difficulties of the
borrower or issuer;

• the restructuring of a loan or advance by the
Company on terms that the Company would
not consider otherwise; and

• the disappearance of an active market for a
security because of financial difficulties.

When determining whether the credit risk of a
financial asset has increased significantly since
initial recognition and when estimating ECLs, the
Company considers reasonable and supportable
information that is relevant and available without
undue cost or effort. This includes both quantitative
and qualitative information and analysis, based
on the Company''s historical experience and
informed credit assessment, that includes
forward-looking information.

Presentation of allowance for ECL in the balance
sheet

Loss allowances for financial assets measured
at amortised cost are deducted from the gross
carrying amount of the assets.

2.11 Employee benefits

(i) Short term employee benefits

Employee benefits payable wholly within
twelve months of receiving employee services
are classified as short-term employee benefits
and are measured on undiscounted basis.
These benefits include salaries and wages,
bonus etc., which are to be paid in exchange for
the employee services and are recognised as
an expense in the statement of profit and loss
in the period in which the employee renders
the related service.

(ii) Defined contribution plans

A defined contribution plan is a
post-employment benefit plan where the

Company''s legal or constructive obligation
is limited to the amount that it contributes
to a separate legal entity. The employee''s
provident fund scheme and employees state
insurance scheme are defined contribution
plans. The Company''s contribution paid/
payable under these schemes is recognised as
an expense in the statement of profit and loss
during the year in which the employee renders
the related service. Prepaid contributions
are recognised as an asset to the extent
that a cash refund or a reduction in future
payments is available.

(iii) Defined benefit plans

A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. The Company has an obligation towards
gratuity, which is a defined benefit retirement
plan. The Company''s net obligation in respect
of gratuity is calculated by estimating the
amount of future benefit that employees have
earned in the current and prior periods and
discounting that amount.

The calculation of defined benefit obligations
is performed annually by a qualified actuary
using the projected unit credit method.
The Company recognizes the net obligation of a
defined benefit plan as liability in the statement
of assets and liabilities. Actuarial gains and
losses through re-measurements of the net
defined benefit liability/ (asset) are recognized
in other comprehensive income. In accordance
with Ind AS, re-measurement gains and losses
on defined benefit plans recognised in OCI
are not to be subsequently reclassified to the
statement of profit and loss.

Net interest is calculated by applying the
discount rate to the net defined benefit
liability or asset. The Company recognises the
following changes in the net defined benefit
obligation as an expense in the statement of
profit and loss:

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

• Net interest expense or income

(iv) Other long-term employee benefits-
Compensated absences

Benefits under the Company''s compensated
absences constitute other long-term employee
benefits, recognised as an expense in the
statement of profit and loss for the period in
which the employee has rendered services.
Estimated benefits on account of these
benefits is provided for based on the actuarial
valuation using the projected unit credit
method at the year end. Remeasurements are
recognised in profit or loss in the period in
which they arise.

The Company presents the entire compensated
absences balance as a current liability in the
statement of assets and liabilities since, the
Company does not have an unconditional right
to defer its settlement for twelve months after
the reporting date.

(v) Share based payments

Employees of the Company receive
remuneration in the form of share-based
payments, whereby employees render services
as consideration for equity instruments
(equity-settled transactions). The Company
measures compensation cost relating to
employee stock options plans using the fair
valuation method in accordance with Ind AS
102 “Share-Based Payment”.

The cost of equity-settled transactions is
determined by the fair value at the date when
the grant is made using the Black Scholes
model and the cost is recognized, together
with a corresponding increase in share based
payment reserve in equity, over the period
in which the performance and/or service
conditions are fulfilled in a graded vesting
manner. The cumulative expense recognized for
equity-settled transactions at each reporting
date until the vesting date reflects the extent
to which the vesting period has expired and
the Company''s best estimate of the number of
equity instruments that will ultimately vest.

In case of cancellation or settlement of grant of
equity instruments during the vesting period
(other than a grant cancelled by forfeiture
when the vesting conditions are not satisfied),
the Company shall account for the cancellation

or settlement as an acceleration of vesting
and shall therefore recognise immediately
the amount that otherwise would have been
recognised for services received over the
remainder of the vesting period.

Any payment made to the employee on the
cancellation or settlement of the grant shall be
accounted for as the repurchase of an equity
interest, i.e., as a deduction from equity, except
to the extent that the payment exceeds the
fair value of the equity instruments granted,
measured at the repurchase date. Any such
excess shall be recognised as an expense in
the statement of profit and loss.

2.12 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.

Financial assets

(a) Recognition and initial measurement

Trade receivables are initially recognised when
they are originated. All other financial assets
and financial liabilities are initially recognised
when the Company becomes a party to the
contractual provisions of the instrument.

A financial asset (unless it is a trade receivable
without a significant financing component)
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. A trade receivable without a significant
financing component is initially measured at
the transaction price.

(b) Classification and subsequent measurement

On initial recognition, a financial asset is
classified as measured at:

• Amortised cost;

• Fair value through other comprehensive
income - debt instruments (FVOCI);

• Fair value through other comprehensive
income - equity instruments; or (FVOCI)

• Fair value through profit and loss (FVTPL).

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,
in which case all affected financial assets
are reclassified on the first day of the first
reporting period following the change in the
business model.

A financial asset is measured at amortised cost
if it meets both 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
assets give rise on a specified dates to
cash flows that are solely payments of
principal and interest on the principal
amounts outstanding.

A debt instrument is measured at FVOCI if it
meets both of the following conditions and is
not designated as FVTPL:

• the asset is held within a business model
whose objective is achieved by both
collecting contractual cash flow and
selling financial assets; and

• the contractual terms of the financial
assets give rise on a specified date to
cash flows that are solely payments of
principal and interest on the principal
amounts outstanding.

On initial recognition of an equity investment
that is not held for trading, the Company
may irrevocably elect to present subsequent
changes in the investment''s fair value in OCI
(designated as FVOCI- equity investment).
This election is made on an investment-to-
investment basis.

All financial assets not classified as amortised
cost or FVOCI as described above are measured
at FVTPL. This includes all derivative financial
assets. 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: Business model
assessment

Financial assets that are held for trading or are
managed and whose performance is evaluated
on a fair value basis are measured at FVTPL.

Financial assets: Assessments whether
contractual cash flows are solely payments of
principal and interest.

For the purpose of this assessment, ‘principal''
is defined as the fair value of the financial asset
on initial recognition. ‘Interest'' is defined as
consideration for the time value of money and
for the credit risk associated with the principal
amount outstanding during the particular
period of time and for the other basic lending
risks and costs.

In assessing whether the contractual cash flows
are solely payments of principal and interest,
the Company considers the contractual term
that could change the timing or amount of
contractual cash flows such that it would not
meet this condition. In making this assessment,
the Company considers:

• contingent events that would change the
amount or timing of cash flows;

• terms that may adjust the contractual
coupon rate, including variable
interest rate features;

• prepayment and extension features; and

• terms that limit the Company claim to cash
flows from specified assets.

(c) Subsequent measurement

Financial assets at FVTPL- Subsequently
measured at fair value. Net gains and losses,
including any interest or dividend income are
recognized in the statement of profit and loss.

Financial assets at amortised cost-

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 recognized in the
statement of profit and loss. Any gain or loss on
derecognition is recognized in the statement
of profit and loss.

Debt instruments at FVOCI - Subsequently
measured at fair value. Interest income
under the effective interest method, foreign
exchange gains and losses and impairment
are recognized in the statement of profit and
loss. Other net gains and losses are recognized
in OCI. On derecognition, gains and losses
accumulated in OCI are reclassified to the
statement of profit and loss.

Equity instruments at FVOCI- Subsequently
measured at fair value. Dividends are recognized
as income in the statement of profit and
loss unless the dividend clearly represents a
recovery of part of the cost of the investment.
Other net gains and losses are recognized in
OCI and are not reclassified to the statement
of profit and loss.

(d) Derecognition

The Company derecognises a financial
asset when:

• the contractual rights to the cash flows
from the financial asset expire; or

• it transfers the rights to receive the
contractual cash flows in a transaction
in which either:

• substantially all of the risks and rewards
of ownership of the financial asset are
transferred; or

• the Company neither transfers nor retains
substantially all of the risks and rewards of
ownership and it does not retain control of
the financial asset.

(e) Offsetting

Financial assets and financial liabilities are
offset, and the net amount presented in the
balance sheet when, and only when, the
Company currently has a legally enforceable
right to set off the amounts and it intends
either to settle them on a net basis or to realize
the asset and settle the liability simultaneously.

(f) Recognition of Interest income or expense

Interest income or expense is recognised using
the effective interest rate.

The ‘effective interest rate'' is the rate that
exactly discounts the estimated future cash
payments or receipts over the expected life of
the financial instrument to:

• The gross carrying amount of the
financial asset; or

• The amortised cost of the financial liability.

Financial liabilities

a) Recognition and initial measurement

Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss or amortised cost.
All financial liabilities are initially measured
at fair value plus or minus, for an item not at
FVTPL, transaction costs that are directly
attributable to its issue.

All financial liabilities are recognised initially
at fair value and, in the case of borrowings
and payables, net of directly attributable
transaction costs. The Company''s financial
liabilities include trade and other payables,
lease liabilities and borrowings.

b) Subsequent measurement

Financial liabilities are classified as measured
at amortised cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified
as held-for-trading, 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 recognised in
profit or loss.

Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and foreign
exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition
is also recognised in profit or loss.

c) Derecognition

A financial liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially

modified, such an exchange or modification
is treated as the derecognition of the original
liability and the recognition of a new liability.
The difference in the respective carrying
amounts is recognized in the statement of
profit and loss.

d) Offsetting

Financial assets and financial liabilities are
offset, and the net amount presented in the
balance sheet when, and only when, the
Company currently has a legally enforceable
right to set off the amounts and it intends
either to settle them on a net basis or to realize
the asset and settle the liability simultaneously.

2.13 Leases

At inception of a contract, the Company assesses
whether a contract is, or contains, a lease. 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 where the Company has the right to
control the use of identified assets, the Company
assesses whether the:

(i) the contract involves the use of
identified assets,

(ii) whether the Company has the right to obtain
substantially all the economic benefits from the
use of assets throughout the period of use and

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

Company as a lessee

The Company recognises a right-of-use asset and
a lease liability at the lease commencement date.
The right-of-use (“ROU”) asset is initially measured
at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made
at or before the commencement date, plus any
initial direct costs incurred and an estimate of cost
to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it
is located, less any lease incentives received.

The right-of-use asset is subsequently
depreciated using the straight line method from
the commencement date to the earlier of the end

of the useful life of the right-of-use asset or the
end of the lease term. The right-of-use assets is
periodically assessed for impairment.

The lease liability is initially measured at the present
value of future lease payments, discounted using
the implicit rate of interest or if that rate cannot
be readily determined, the Company''s incremental
borrowing rate. Generally, the Company uses the
incremental borrowing rate.

The lease liability is measured at amortised cost
using the effective interest method. It is remeasured
when there is change in future lease payments
arising from a change in index or rate, or if there
is change in the Company''s estimate of amount
expected to be payable under residual guaranteed
value, or if the Company changes its assessment
of whether it will exercise a purchase, extension or
termination option.

The Company has elected not to recognise right-of-
use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less and
leases of low-value assets. The Company recognises
the lease payments associated with these leases
as an expense over the lease term.

2.14 Borrowing costs

Borrowing costs consist of interest and other
costs that the Company incurs 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/inventoried
as part of the cost of the respective asset.
All other borrowing costs are charged to the
statement of profit and loss in the period in which
they are incurred.

2.15 Share issue expenses

Incremental costs directly attributable to the issue
of shares are adjusted with the securities premium.

2.16 Inventories

Inventories are measured at the lower of cost and
net realisable value.

The cost of inventories includes costs of purchase,
costs of conversion and other costs incurred in
bringing the inventories to their present location
and condition. The cost of finished goods and
work in progress includes an appropriate share of
production overheads.

The methods of determination of cost of various
categories of inventories are as follows:

Net realisable 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. The comparison
of cost and net realizable value is made on
item-by-item basis.

The net realisable value of work-in-progress is
determined with reference to the selling prices
of related finished goods in the ordinary course
of business, less estimated cost of completion
and estimated costs necessary to make the sale.
Raw materials, packing materials and other supplies
held for use in production of inventories are not
written below cost except in cases where material
prices have declined, and it is estimated that the
cost of the finished products will exceed their net
realisable value.

Due allowance is estimated and provided by the
management for slow moving / non-moving items
of inventories, wherever necessary, based on the
past experience and such allowances are adjusted
against the carrying value of inventory.

Sale of raw materials

Sale of raw materials are considered as a recovery
of cost of materials and adjusted against cost of
materials consumed.

2.17 Income Taxes

Income tax expense comprises current tax and
deferred tax. It is recognised in profit or loss
except to the extent that it relates to a business
combination, or items recognised directly in equity
or in other comprehensive income.

(i) Current Tax

Current tax comprises the expected tax
payable or receivable on the taxable income
or loss for the year and any adjustment to the
tax payable or receivable in respect of previous
years. The amount of current tax payable
or receivable is the best estimate of the tax
amount expected to be paid or received that
reflects uncertainty related to income taxes, if
any. It is measured using tax rates enacted or
substantively enacted at the reporting date.

Current tax assets and liabilities are offset only
if there is a legally enforceable right to set off
the recognised amounts, and it is intended to
realise the asset and settle the liability on a net
basis or simultaneously.

(ii) Deferred Tax

Deferred tax is recognized on temporary
differences at the balance sheet date between
the tax bases of assets and liabilities and
their carrying amounts for financial reporting
purposes, except when the deferred income
tax arises from the 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 or loss
at the time of the transaction and does not
give rise to equal taxable and deductible
temporary differences.

Deferred tax assets are recognized for all
deductible temporary differences, carry
forward of unused tax credits and unused tax
losses, 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 each balance sheet date and
reduced to the extent that it is no longer
probable that sufficient taxable profit will be
available to allow all or part of the deferred tax
asset to be utilized.

Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
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 at the balance sheet date.

Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset
current tax liabilities and assets, and they
relate to income taxes levied by the same tax
authority on the same taxable entity.

Deferred tax relating to items recognized
outside profit or loss is recognized outside
profit or loss (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.