Mudra Financial Services Ltd. कंपली की लेखा नीति

Mar 31, 2024

2 Material Accounting Policies

2.1 Basis of preparation

The financial statements of the company have been prepared in accordance with Indian Accounting Standards (Ind AS)
notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities
which have been measured at fair value or revalued amount:

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)

- Contingent consideration, and

The financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest Thousand
Rupees, except when otherwise indicated.

The preparation of financial statements requires the use of certain critical accounting estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and the disclosed amount of contingent liabilities.
Areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the Company
are discussed in Note 3 - Significant accounting judgements, estimates and assumptions.

2.2 Presentation of financial statements

The financial statements of the company are presented as per Division III of the Schedule III to the Companies Act 2013.

Financial assets and financial liabilities are generally reported gross in the Balance Sheet. They are only offset and
reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts
without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:

a. The normal course of business

b. The event of default

c. The event of insolvency or bankruptcy of the Company and/or its counterparties

2.3 Statement of Compliance

These standalone financial statements of the Company have been prepared in accordance with Indian Accounting
Standards as per the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under Section
133 of the Companies Act, 2013 and the other relevant provisions of the Act.

2.4 Summary of material accounting policies

(a) Revenue from operations

(i) Interest income

- Income from lending Business

Interest Income on a financial asset at amortised cost is recognised on a time proportion basis taking into account the
amount outstanding and the effective interest rate (‘EIR’).

The EIR in case of a financial asset is computed:-

a. At the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
gross carrying amount of a financial asset.

b. By considering all the contractual terms of the financial instrument in estimating the cash flows.

c. Including all fees received between parties to the contract that are an integral part of the effective interest rate,transaction
costs and all other premiums or discounts.

Any subsequent changes in the estimation of the future cash flows is recognised in interest income with the corresponding
adjustment to the carrying amount of the assets.

Interest income on credit impaired assets is recognised by applying the effective interest rate to the net amortised cost
(net of provision) of the financial asset.

(ii) Fees and Commission Income

Fees and commissions are recognised when the Company satisfies the performance obligation, at fair value of the
consideration received or receivable based on a five-step model as set out below, unless included in the effective interest
calculation:

Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that
creates enforceable rights and obligations and sets out the criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a
customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company
expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected
on behalf of third parties.

Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than
one performance obligation, the Company allocates the transaction price to each performance obligation in an amount
that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each
performance obligation.

Step 5: Recognise revenue when (or as) the Company satisfies a performance obligation.

(iii) Dividend income

Dividend income is recognised:

a. When the right to receive the payment is established,

b. It is probable that the economic benefits associated with the dividend will flow to the entity and

c. The amount of the dividend can be measured reliably

Dividend Income is disclosed seperately in Statement of Profit and Loss and not as Fair Value Changes on Financial
Assets at FVTPL.

(iv) Net gain on Fair value changes

Any differences between the fair values of financial assets classified as fair value through the profit or loss held by the
Company on the balance sheet date is recognised as an unrealised gain / loss. In cases there is a net gain in the
aggregate, the same is recognised in “Net gains on fair value changes” under Revenue from operations and if there is a
net loss the same is disclosed under “Expenses” in the statement of Profit and Loss.

Similarly, any realised gain or loss on sale of financial instruments measured at FVTPL and debt instruments measured
at FVOCI is recognised in net gain / loss on fair value changes.

However, net gain / loss on derecognition of financial instruments classified as amortised cost is presented separately
under the respective head in the Statement of Profit and Loss.

(b) 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.

(i) Initial measurement of financial instruments

Financial assets and financial liability are initially measured at fair value. Transaction cost that are directly attributable to
the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities
recorded at fair value through profit & loss (FVTPL)), are added to or subtracted from the fair value of financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction cost directly attributable to the acquisition of financial
assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

(ii) Day 1 profit or loss

When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a
valuation technique using only inputs observable in market transactions, the Company recognises the difference between
the transaction price and fair value in net gain on fair value changes. In those cases where fair value is based on models
for which some of the inputs are not observable, the difference between the transaction price and the fair value is
deferred and is only recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.

(iii) Classification & measurement categories of financial assets and liabilities:

The Company classifies all of its financial assets based on the business model for managing the assets and the asset’s
contractual terms, measured at either:

Financial assets at amortised cost (AC)

A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold assets for
collecting contractual cash flows and contractual terms of the financial asset give rise on specified dates to cash flows
that are solely for the payments of principal and interest on the principal amount outstanding. The changes in carrying
value of financial assets is recognised in profit and loss account.

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

A financial asset is measured at FVTOCI if it is held within business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets and the contractual terms of the financial assets that give rise to cash
flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding.
The changes in fair value of financial assets is recognised in Other Comprehensive Income.

Financial Assets at fair value through profit & loss (FVTPL)

A financial asset which is not classified in any of above categories are measured at FVTPL. The Company measures all
financial assets classified as FVTPL at fair value at each reporting date. The changes in fair value of financial assets is
recognised in Profit and loss account.

(c) Financial assets and liabilities

(i) Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
income over the relevant period.““For the financial instrument other than purchased or originated credit-impaired financial
assets, the effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or
discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a
shorter period, to the gross carrying amount of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus
the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between
that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying
amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

(ii) Financial assets held for trading

The Company classifies financial assets as held for trading when they have been purchased or issued primarily for short¬
term profit making through trading activities or form part of a portfolio of financial instruments that are managed together,
for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading assets are recorded and
measured in the balance sheet at fair value. Changes in fair value are recognised in net gain on fair value changes.

(iii) Investment in Equity instruments

The Company subsequently measures all equity investments at FVTPL, unless the Company’s management has elected
to classify irrevocably some of its strategic equity investments to be measured at FVOCI, when such instruments meet
the definition of Equity under Ind AS 32 Financial Instruments Presentation and are not held for trading. Such classification
is determined on an instrument-by-instrument basis.

(iv) Financial Liabilities

All the financial liabilities are measured at amortised cost except loan commitments, financial guarantees.

(v) Financial liabilities and equity instruments

Financial instruments issued by the Company are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

(vi) Reclassification of financial assets and financial liabilities

The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Company acquires, disposes of, or terminates a business line. The company didn''t reclassify
any of its financial assets or liabilities in current period and previous period.

(d) Derecognition of financial assets and liabilities

(i) Derecognition of financial asset

A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is
derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognises
the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.

The Company has transferred the financial asset if and only if; either

- The Company has transferred the rights to receive cash flows from the financial asset or

- It retains the contractual rights to receive the cash flows of the financial asset but assumed a contractual obligation to
pay the cash flows in full without material delay to third party under ‘pass through’ arrangement.

A transfer only qualifies for derecognition if either:

- The Company has transferred substantially all the risks and rewards of the asset, or

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

The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in
its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional
restrictions on the transfer.

(ii) Derecognition of financial liabilities

A Financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where 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 a derecognition of the original
liability and the recognition of'' a new liability. The difference between the carrying value of the original financial liability and
the consideration paid, including modified contractual cash flow recognised as new financial liability, is recognised statement
of profit and loss.

Impairment of financial assets

The Company records allowance for expected credit losses for financial assets carried at amortised cost and all debt
financial assets not held at FVTPL, in this section all referred to as ‘Financial instruments’. Equity instruments are not
subject to impairment under Ind AS 109.“ECL is a probability-weighted estimate of credit losses. A credit loss is the
difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the
entity expects to receive discounted at the original effective interest rate. Because ECL consider the amount and timing
of payments, a credit loss arises even if the entity expects to be paid in full but later than when contractually due.

Simplified Approach

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 recognizes
impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company
uses a provision matrix to determine impairment loss allowance. However, if receivables contain a significant financing
component, the Company chooses as its accounting policy to measure the loss allowance by applying general approach
to measure ECL.

General Approach

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit
loss), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based
on the 12 months’ expected credit loss as outlined in Note 35.

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 the portion of Lifetime ECL that represent the ECLs that result from default events on
a financial instrument that are possible within the 12 months after the reporting date.

(e) Fair value measurement

The Company measures financial instruments at fair value at each balance sheet date using various valuation techniques.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.

The Company’s accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair
values (either on a recurring or non-recurring basis). Also, the fair values of financial instruments measured at amortized
cost are required to be disclosed in the said financial statements.

The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either
measured or disclosed at fair value in the financial statements, using a three level fair-value-hierarchy (which reflects the
significance of inputs used in the measurement).Accordingly, the Company uses valuation techniques that are appropriate
in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within
the fair value hierarchy described as follows:

Level 1 financial instruments :

Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or
liabilities that the Company has access to at the measurement date. The Company considers markets as active only if
there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when
there are binding and exercisable price quotes available on the balance sheet date.

Level 2 financial instruments :

Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable
market data available over the entire period of the instrument’s life. Such inputs include quoted prices for similar assets
or liabilities in active markets, quoted prices for identical instruments in inactive markets and observable inputs other
than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads. In addition, adjustments
may be required for the condition or location of the asset or the extent to which it relates to items that are comparable to
the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire
measurement, the Group will classify the instruments as Level 3.

Level 3 financial instruments :

Those that include one or more unobservable input that is significant to the measurement as whole.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Company periodically reviews its valuation techniques including the adopted methodologies and model calibrations.
Therefore, the Company applies various techniques to estimate the credit risk associated with its financial instruments
measured at fair value, which include a portfolio-based approach that estimates the expected net exposure per counterparty
over the full lifetime of the individual assets, in order to reflect the credit risk of the individual counterparties for non-
collateralised financial instruments.

The Company evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies
instruments when necessary based on the facts at the end of the reporting period.

(iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the 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
realise the assets and settle the liabilities simultaneously.

(f) Earnings per share :

Basic earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year
by the weighted average number of equity shares outstanding for the year.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity
shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit
after tax attributable to the equity shareholders for the year by weighted average number of equity shares considered for
deriving basic earnings per share and weighted average number of equity shares that could have been issued upon
conversion of all potential equity shares.

(g) Retirement and other employee benefit:

Gratuity:

The company provides for gratuity for employees who are in continuous service for a period of five years . The amount of
gratuity payable on retirement/ termination is the employees last drawn basic salary per month computed proportionately
for 15 days salary multiplied by number of years of service.

(h) Property, plant and equipment

All items of property, plant and equipment are measured at cost less accumulated depreciation and impairment loss if
any. The cost comprises the purchase price and incidental expenses directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by the management.

Changes in the expected useful life are accounted for by changing the amortization period or methodology, as appropriate,
and treated as changes in accounting estimates.

Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only
when 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. The carrying amount of any component accounted for as a separate asset is derecognized
when replaced. All other repairs and maintenance are recognized in profit or loss during the reporting period, as and
when they are incurred.

Asset is depreciated to their residual values over their estimated useful lives which is in line with the estimated useful life
as specified in Schedule II of the Companies Act, 2013

As per the requirement of Schedule II of the Companies Act, 2013, the Company has evaluated the useful lives of the
respective fixed assets which are as per the provisions of Part C of the Schedule II for calculating the depreciation. The
estimated useful lives of the fixed assets are as follows:

Nature of assets	Estimated useful lives
Office equipment	5 years
Computer Systems	3 years
Furniture & fixtures	10 years

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. The carrying amount of those components which have been separately
recognised as assets is derecognised at the time of replacement thereof. Any gain or loss arising on the disposal or
retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in profit or loss.

(i) Intangible assets:

An intangible asset is recognised only when its cost can be measured reliably, and it is probable that the expected future
economic benefits that are attributable to it will flow to the company.

Intangible assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less
accumulated amortization and impairment, if any.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are
amortised over the useful economic life. The amortization period and the amortization method for an intangible asset with
a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life, or the expected
pattern of consumption of future economic benefits embodied in the asset, are accounted for by changing the amortization
period or methodology, as appropriate, which are then treated as changes in accounting estimates. The amortization
expense on intangible assets with finite lives is presented as a separate line item in the statement of profit and loss.

Intangibles such as software are amortised over a period of 3 years based on its estimated useful life.

Gains or losses from derecognition of intangible assets are measured as the difference between the net disposal proceeds
and the carrying amount of the asset are recognised in the Statement of Profit and Loss when the asset is derecognised.

(j) Impairment of non-financial assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based
on internal/external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of cash generating unit which the asset belongs to is
less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication
that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed, and the impairment
is reversed subject to a maximum carrying value of the asset before impairment.