XII. Provisions, Contingent liabilities and Contingent Assets

Provisions are recognised when the Company has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of resources will be required to settle the
obligation and the amount can be reliably estimated. Provisions are not recognised for future
operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. A present obligation
that arises from past events where it is neither probable that an outflow of resources will be
required to settle nor a reliable estimate of the amount cannot be made, is disclosed as a
contingent liability. Contingent liabilities are also disclosed when there is a possible obligation
arising from past events, the existence of which will be confirmed only by the occurrence or non
- occurrence of one or more uncertain future events not wholly within the control of the
Company. Contingent assets are not recognised in financial statements since this may result in
the recognition of income that may never be realised. However, when the realisation of income
is virtually certain, then the related asset is not a contingent asset and is recognised.

XHI. Foreign currency translation

Items included in the financial statements of each of the Company’s entities are measured using
the currency of the primary economic environment in which the entity operates (‘the functional
currency’). The financial statements are presented in Indian rupee (INR), which is Garg Furnace
Limited functional and presentation currency.

Foreign currency translations are translated into the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are generally recognized in profit or loss.

XIV. Revenue recognition

The Company has adopted Indian Accounting Standard 115 (Ind AS 115) - ‘Revenue from
contracts with customers’.

Revenue from sale of products is recognized upon transfer of control to customers. Revenue is
measured at the amount of consideration which the Company expects to be entitled to in
exchange for transferring distinct goods to a customer as specified in a contract, excluding
amounts collected on behalf of third parties (for example, taxes and duties collected on behalf of
the Government). A receivable is recognized upon satisfaction of performance obligations as per
the Contracts.

"To determine whether to recognise revenue, the Company follows a 5-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied."

Use of significant Judgements in Revenue Recognition

Judgement is required to determine the transaction price for the contract. The transaction price
could be either a fixed amount of consideration or variable consideration with elements such as
volume discounts, price concessions, incentives etc. The estimated amount of variable
consideration is adjusted in the transaction price only to the extent that is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur and is
reassessed at the end of each reporting period.

The Company assesses its revenue arrangements against specific recognition criteria's like
exposure to the significant risks and rewards associated with the sale of goods. When deciding
the most appropriate basis for presenting revenue or costs of revenue, both the legal form and
substance of the agreement between the Company and its customers are reviewed to determine
each party's respective role in the transaction.

Other Operating Revenue

Dividend income is recognized when the right to receive payment is established.

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

Claims receivables on account of insurance are accounted for to the extent the Company is
reasonably certain of their ultimate collection.

XV. Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from
'profit before tax' as reported in the statement of profit and loss because of items of income or

expense that are taxable or deductible in other years and items that are never taxable or
deductible. The Company's current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences and incurred tax
losses to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.

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

The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the period

Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the income taxes
are also recognised in other comprehensive income or directly in equity respectively.

XVI. Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents include
cash in hand, demand deposits held with banks, other short-term highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value, and bank overdrafts.

XVII. Financial instruments

Financial assets and financial liabilities are recognized when a Company becomes a party to the
contractual provisions of the instruments.

Initial Recognition:

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair value through profit or loss and
ancillary costs related to borrowings) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in Statement of Profit and Loss.

Classification and Subsequent Measurement: Financial Assets

The Company classifies financial assets as subsequently measured at amortised cost, fair value
through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) on
the basis of following:

• The entity’s business model for managing the financial assets and

• The contractual cash flow characteristics of the financial asset.

Amortised Cost:

A financial asset shall be classified and measured at amortised cost if both of the following conditions
are met:

• The financial asset is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.

Fair Value through OCI:

A financial asset shall be classified and measured at fair value through OCI if both of the following
conditions are met:

• The financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets 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.

Fair Value through Profit or Loss:

A financial asset shall be classified and measured at fair value through profit or loss unless it is
measured at amortized cost or at fair value through OCI.

All recognized financial assets are subsequently measured in their entirety at either amortized cost or
fair value, depending on the classification of the financial assets.

Classification and Subsequent Measurement: Financial liabilities:

Financial liabilities are classified as either financial liabilities at FVTPL or ‘other financial liabilities’.

Financial Liabilities at FVTPL:

Financial liabilities are classified as at FVTPL when the financial liability is held for trading or are
designated upon initial recognition as FVTPL:

Gains or Losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Impairment of financial assets:

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of
each reporting period. The Company assesses on a forward looking basis the expected credit losses
associated with its assets. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.

In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 -
Financial Instruments for recognition of impairment loss allowance. The application of simplified
approach does not require the Company to track changes in credit risk. The Company calculates the
expected credit losses on trade receivables using a provision matrix on the basis of its historical credit
loss experience.

Derecognition of financial instruments:

The Company derecognizes a financial asset 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 party. If the Company neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred asset, the Company
recognizes its retained interest in the asset and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Company continues to recognise the financial asset and also recognizes a collateralized
borrowing for the proceeds received.

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

XVm. Offsetting 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 recognised amounts and there is an
intention to settle on a net basis or realise the asset and settle the liability simultaneously.

XIX. Employee benefits

(i) Short term obligations

Liabilities for wages and salaries, short term compensated absence and ex-gratia including non¬
monetary 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 at the amounts expected to be
paid when the liabilities are settled. The liabilities are presented as current employee benefits
obligations in the balance sheet.

(h) Post-employment obligations

The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans
is the present value of the defined benefit obligations at the end of the reporting period less the
fair value of plan assets (if any). The defined benefit obligation is calculated annually as per
Valuation report given by Actuary on the basis of Guidance issued by The Actuarial Society of
India.

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. This cost is included in employee benefit
expenses in Ihe statement of profit or loss.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognised in the period in which they occur, directly in other comprehensive
income. They are included in retained earnings in the statement of changes in equity and in the
balance sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or
curtailments are recognised immediately in profit or loss as past service cost.

(in) Defined contribution plans

The Company pays provident fund contributions to publicly administered provident funds as per
local regulations. The Company has not further payment obligations once the contributions have
been paid. The contributions are accounted for as defined contribution plans and the
contributions are recognised as employee benefit expense when they are due.

XX. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker [CODM]. The managing committee is considered to be the
‘Chief Operating Decision Maker* (CODM) as defined in IND AS 108. The Operating Segment
is the level at which discrete financial information is available. The CODM allocates resources
and assess performance at this level. In the context of Ind AS 108 on 'Segment Reporting', the
results are considered to constitute a single reportable entity/ business segment for which the
operating results are regularly reviewed by the company's Chief Operating Decision Maker.

XXI. Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in profit or loss over the period of the
borrowings using effective interest method. Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the extent that it is probable that some or all of the
facility will be drawn down. To the extent there is no evidence that it is probable that some or all
of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services
and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Company has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period. Where there is a
breach of a material provision of a long-term loan arrangement on or before the end of the
reporting period with the effect that the liability becomes payable on demand on the reporting
date, the entity does not classify the liability as current, if the lender agreed, after the reporting
period and before the approval of the financial statements for issue, not to demand payment as a
consequence of the breach.

XXII. Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing: The profit attributable to owners of the
Company by the weighted average number of equity shares outstanding during the financial
year, adjusted for bonus elements in equity shares issued during the year and excluding treasury
shares

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:

• The after income tax effect of interest and other financing costs associated with dilutive potential
equity shares, and

• The weighted average number of additional equity shares that would been outstanding assuming
the conversion of all dilutive potential equity shares.

XXm. Assets Held for Sale;

Non-current assets or disposal groups comprising of assets and liabilities are classified as ‘held
for sale’ when all of the following criteria’s are met: (i) decision has been made to sell, (ii) the
assets are available for immediate sale in its present condition, (iii) the assets are being actively
marketed and (iv) sale has been agreed or is expected to be concluded within 12 months of the
Balance Sheet date.

Subsequently, such non-current assets and disposal groups classified as held for sale are
measured at the lower of its carrying value and fair value less costs to sell. Non-current assets
held for sale are not depreciated or amortised.

In view of the management, the current assets (financial & other) have a value on realization in
the ordinary course of business at least equal to the amount at which they are stated in the
balance sheet.

XXIV. Events occurring after balance sheet date

There are no major events which have occurred after the balance sheet date requiring disclosure
in the financial statements.