AGS Transact Technologies Limited

Annexure V - Basis of preparation and Significant Accounting Policies

Notes to the Revised Restated Consolidated Financial Information

All financial assets / liabilities are required to be measured at fair value on initial recognition. In case of financial
assets / liabilities which are required to subsequently be measured at amortised cost, interest is accrued using the
effective interest method.

Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.

At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other
consideration required by the arrangement into those for the lease and those for other elements on the basis of their
relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments
reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset;
subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised
using the Group’s incremental borrowing rate. In case of operating lease, all payments under the arrangement are
treated as lease payments.

Fair value of financial instruments

¢ Derivatives are carried at fair value. Derivatives includes foreign currency forward contracts. Fair value of
foreign currency forward contracts are determined using the fair value reports provided by respective bankers.

Further information about the assumptions made in measuring fair values is included in the following note:
~ Impairment test of financial assets: key assumptions underlying recoverable amounts.
¢ Certain unquoted investments are carried at fair value. The fair value of these instruments is measured using

valuation techniques such as discounted cash flows and information from other comparable companies in the
market.

Taxes

Significant management judgment is required in determining provision for income tax, deferred income tax assets
and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is
based on estimates of taxable income in which the entity operates and the period over which deferred income tax
assets will be recovered.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be used.

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