2.16 Provisions and Contingencies

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the
Company expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually
certain.

The expense relating to a provision is presented in the statement of profit and loss net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time is recognised as a finance cost.

A provision for onerous contracts is recognised when the expected benefits to be derived by the
Company from a contract are lower than the unavoidable cost of meeting its obligations under the
contract. The provision is measured at the present value of the lower of the expected cost of terminating
the contract and the expected net cost of continuing with the contract. Before a provision is established,
the Company recognises any impairment loss on the assets associated with that contract.

A contingent liability is a possible obligation that arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized because it is not probable that an
outflow of resources will be required to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be recognized because it cannot be measured
reliably. The Company does not recognize a contingent liability but discloses its existence in the
standalone financial statements.

Provisions and contingent liability are reviewed at each balance sheet.

2.17 Borrowing costs

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing
of funds including interest expense calculated using the effective interest method, finance charges in
respect of assets acquired on finance lease. Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.

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 capitalised as
part of the cost of the asset until such time as the assets are substantially ready for the intended use or
sale. All other borrowing costs are expensed in the year in which they occur.

2.18 Related party transactions

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length
transactions. Outstanding balances at the period-end are unsecured and settlement occurs in cash or
credit as per the terms of the arrangement. Impairment assessment is undertaken each financial year
through examining the financial position of the related party and the market in which the related party
operates.

2.19 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

Initial recognition and measurement

All financial assets are recognised initially 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 Subsequent measurement of financial assets: All recognised financial assets are
subsequently measured in their entirety at either amortized cost or fair value, depending on the
classification financial assets.

Following are the categories of financial instrument:

a) Financial assets at amortized cost.

b) Financial assets at fair value through other comprehensive income (FVTOCI)

c) Financial assets at fair value through profit or loss (FVTPL)

a) Financial assets at amortized cost

Financial assets are subsequently measured at amortized cost using the effective interest rate method if
these financial assets are held within a business whose objective is to hold these 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.

b) Financial assets at fair value through other comprehensive income (FVTOCI) "

Debt financial assets measured at FVOCI:

Debt instruments are subsequently measured at fair value through other comprehensive income if it 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.

Equity Instruments designated at FVOCI:

On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument
basis to present the subsequent changes in fair value in other comprehensive income pertaining to
investments in equity instruments, other than equity investment which are held for trading.
Subsequently, they are measured at fair value with gains and losses arising from changes in fair value
recognised in other comprehensive income and accumulated in the ‘Reserve for equity instruments
through other comprehensive income’. The cumulative gain or loss is not reclassified to profit or loss
on disposal of the investments.

c) Financial assets at fair value through profit or loss (FVTPL)

Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects
on initial recognition to present subsequent changes in fair value in other comprehensive income for
investments in equity instruments which are not held for trading. Other financial assets such as unquoted
Mutual funds are measured at fair value through profit or loss unless it is measured at amortized cost or
at fair value through other comprehensive income on initial recognition.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognized (i.e., removed from the Company’s balance sheet) when:

a) the rights to receive cash flows from the asset have expired, or

b) the Company has transferred its rights to receive cash flows from the asset, and

i) the Company has transferred substantially all the risks and rewards of the asset, or

ii) the Company has neither transferred nor retained substantially all the risks and
rewards of the asset but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of
ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to
the extent of the Company’s continuing involvement. In that case, the Company also recognises an
associated liability. The transferred asset and the associated liability are measured on a basis that reflects
the rights and obligations that the Company has retained. Continuing involvement that takes the form
of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Company could be required to repay.

Impairment of financial assets

In accordance with Ind AS 109, the Company applies expected credit loss (‘ECL’) model for
measurement and recognition of impairment loss on the following financial assets and credit risk
exposure:

a) Financial assets that are debt instruments, and are measured at amortized cost e.g., loans,
deposits, trade receivables and bank balance.

b) Financial assets that are debt instruments and are measured at FVTOCI.

c) Financial guarantee contracts which are not measured as at FVTPL.

"The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade
receivables. The application of simplified approach does not require the Company to track changes in
credit risk. Rather, it recognises 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 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 a 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 entity reverts to recognising impairment loss allowance based on 12-
month ECL.

Lifetime ECL are the expected credit losses resulting from all possible default events over the expected
life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from
default events that are possible within 12 months after the reporting date. "

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 entity expects to receive (i.e., all cash shortfalls),
discounted at the original EIR. When estimating the cash flows, an entity is required to consider:

i) All contractual terms of the financial instrument (including prepayment, extension, call
and similar options) over the expected life of the financial instrument. However, in rare
cases when the expected life of the financial instrument cannot be estimated reliably,
then the entity is required to use the remaining contractual term of the financial
instrument.

ii) Cash flows from the sale of collateral held or other credit enhancements that are integral
to the contractual terms.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/
expense in the Statement of Profit and Loss. This amount is reflected under the head ‘other expenses’
in the Statement of Profit and Loss. In the balance sheet, ECL is presented as an allowance, i.e., as an
integral part of the measurement of those assets in the balance sheet. The allowance reduces the net
carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment
allowance from the gross carrying amount.

Offsetting:

Financial assets and financial liabilities are offset and the net amount is reported in the standalone
balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit
or loss, loans and borrowings, payables. All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings and payables, net of directly attributable transaction costs. The
Company’s financial liabilities include trade and other payables, loans and borrowings.

Subsequent measurement

"The measurement of financial liabilities depends on their classification, as described below:"
Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities designated upon initial
recognition as at fair value through profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated
as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities
designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized
in OCI. These gains/ losses are not subsequently transferred to P&L. However, the Company may
transfer the cumulative gain or loss within equity. All other changes in the fair value of such liability
are recognised in the statement of profit or loss. The Company has not designated any financial liability
as at fair value through profit and loss.

Gains or losses on liabilities held for trading are recognised in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated
as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities
designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized
in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Group may transfer
the cumulative gain or loss within equity. All other changes in the fair value of such liability are
recognised in the statement of profit or loss.

Loans and borrowings

"This is the category most relevant to the Company. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognized as well as through the EIR amortization
process. 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 as finance costs
in the statement of profit and loss.

This category generally applies to borrowings."

De-recognition

"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 de-recognition of the original liability and the recognition of
a new liability. The difference in the respective carrying amounts is recognised in the statement of profit
and loss.

"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

recognised 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 requirements of Ind AS 109 and the amount recognised
less cumulative amortization.

Reclassification of financial assets

The Company determines classification of financial assets and liabilities on initial recognition. After
initial recognition, no reclassification is made for financial assets which are equity instruments and
financial liabilities. For financial assets which are debt instruments, a reclassification is made only if
there is a change in the business model for managing those assets. Changes to the business model are
expected to be infrequent. The Company’s senior management determines change in the business model
as a result of external or internal changes which are significant to the Company’s operations. Such
changes are evident to external parties. A change in the business model occurs when the Company either
begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies
financial assets, it applies the reclassification prospectively from the reclassification date which is the
first day of the immediately next reporting period following the change in business model. The
Company does not restate any previously recognised gains, losses (including impairment gains or
losses) or interest.

For Gorantla & Co.,

Chartered Accountants For and on behalf of the Board of Directors of

Firm's Registration No. 016943S ACS Technologies Limited

Sri Ranga Gorantla

Partner Ashok Kumar Buddharaju Anitha Alokam

Membership No: 222450 Chairman and Managing Director Director

UDIN: DIN: 03389822 DIN: 07309591

A. Prabhakara Rao Sridhar Pentela

Place: Hyderabad Chief Financial Officer Company Secretary

Date: 30/05/2024 ACS: A55735