assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.

Leases
As lessee

Leases entered into by us have been classified as operating leases as a significant portion of risks and rewards of
ownership are not transferred to us. Payments made are charged to our statement of profit or loss on a straight line
basis over the term of the lease.

As lessor

Rental income from operating lease is recognized on a straight-line basis over the term of the lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset
and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue
in the period in which they are earned.

Inventories

We determine the cost for items that are not interchangeable or that have been segregated for specific contracts
on an individual-item basis. The cost of other inventory items used is assigned by using the weighted average cost
formula. We use the same cost formula for all inventories of similar nature and use. The cost formula used is
applied on a consistent basis from period to period.

Inventories are initially recognized at the lower of cost and net realizable value. Cost of inventories includes
import duties, non-refundable taxes, transport and handling costs and any other directly attributable costs, less
trade discounts, rebates and similar items. Net realizable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and estimated selling expenses.

. Raw materials, components, stores and spares of inventory are measured at weighted average cost.
Materials and other items held for use in the 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. Work
in progress and finished goods are valued at cost or net realizable value whichever is lower. Cost includes
direct materials, labor and a portion of manufacturing overheads. Saleable scrap is valued at lowest of
net realized values in the last two months.

. Tools are valued at cost till they are issued for usage in production process. In respect of issued tools which
can be refurbished, depending upon its useful life, we amortize on a straight line basis over useful life.
Useful life determined for certain classes of tools is 2-3 years. Tools which are not refurbish-able are
charged off to our statement of profit and loss upon issue from stores to usage. Tools in use are carried
at cost less accumulated amortization.

 

Provisions

We recognize a provision when there is a present obligation to transfer economic benefits as a result of past events,
it is probable (more likely than not) that such a transfer will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made.

The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows, when the effect of the time value of money is material.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is certain that reimbursements will be received and the amount of
the receivable can be measured reliably.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the
entity. Contingent assets are disclosed in our financial statements by way of notes to accounts when an inflow of
economic benefits is probable.

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