Accounting Policies of Earkart Ltd. Company

Mar 31, 2026

B. SIGNIFICANT ACCOUNTING POLICIES1. Basis of Preparation

These financial statements have been prepared to comply with Accounting Principles
generally accepted in India, the Indian GAAP including the Accounting Standards
specified under the Companies Act 2013 read with the Companies (Accounts) Rules,
2014 (as amended), Companies (Accounting Standards) Rules, 2021 and other relevant
provisions of the Companies Act, 2013. The Financial Statements are prepared on accrual
basis under the historical cost convention.

The company being listed on SME exchange as defined in Chapter XB of the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,
2009, is exempt from adopting the Indian Accounting Standards (Ind AS) vide proviso to
Rule 4(v) of the Companies (Indian Accounting Standards) Rules, 2015 read with
explanation 1 to the same proviso.

The accounting policies adopted in the preparation of the financial statements are
consistent with those followed in the previous year, unless otherwise stated.

The Company has prepared these financial statements on a going concern basis, based
on management''s assessment of the Company''s ability to continue its operations in the
foreseeable future.

All assets and liabilities have been classified as current or non-current as per the
Company''s normal operating cycle and other criteria set out in Schedule III to the
Companies Act, 2013.

2. Use of estimates

The preparation of financial statements in conformity with the applicable accounting
standards requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as at the balance sheet date, the reported
amounts of revenues and expenses during the reporting period, and the disclosure of
contingent liabilities as at the date of the financial statements.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised and
in any future periods affected.

Although these estimates are based on the management''s best knowledge of the current
events and actions, uncertainty about these assumptions and estimates could result in
outcome requiring a material adjustment to the carrying amount of assets or liability in
future period. Key areas requiring significant estimates include:

• Useful lives of Property, Plant & Equipment and Intangible Assets.

• Provision for doubtful debts.

• Provision for inventory obsolescence.

• Actuarial assumptions for employee benefits.

• Provisions for contingencies.

• Recognition and measurement of deferred tax assets and liabilities.

Accounting estimates could change from period to period. Actual results could differ
from those estimates. Appropriate changes in estimates are made as the management
becomes aware of changes in circumstances surrounding the estimates. Changes in
estimates are reflected in the financial statements in the period in which changes are
made and, if material, their effects are disclosed in the notes to the financial statements.

3. Cash and Bank Balances

Cash comprises cash in hand, balance in bank accounts maintained with banks and
demand deposits with banks. Cash equivalents are short-term balances (with an original
maturity of three months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are subject to
insignificant risk of changes in value.

Balances with banks include amounts held in current accounts, fixed deposits, and other
deposits with maturity periods exceeding three months, if any, which are disclosed
separately under "Other Bank Balances" as per Schedule III requirements.

4. Related Party Disclosures

Related parties are identified in accordance with Accounting Standard (AS) - 18, "Related
Party Disclosures".

Related parties include:

• Enterprises that directly or indirectly control, are controlled by, or are under
common control with the Company;

• Associates and joint ventures;

• Key Management Personnel (KMP) and their relatives; and

• Enterprises over which Key Management Personnel or their relatives are able to
exercise significant influence.

Transactions with related parties are carried out in the ordinary course of business and
at agreed terms.

Related party transactions including purchases, sales, rendering or receiving of services,
leasing arrangements, transfer of resources, borrowing and lending activities are
disclosed separately in the financial statements as required under AS-18.

Outstanding balances with related parties at the balance sheet date are disclosed
separately along with provisions for doubtful debts, if any.

5. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting
Policies

All items of income and expenditure recognized during the year are included in the
determination of net profit or loss for the period unless an Accounting Standard requires
or permits otherwise.

Prior Period Items

Prior period items are incomes or expenses which arise in the current period as a result
of errors or omissions in the preparation of financial statements of one or more prior
periods. Such items are separately disclosed in the Statement of Profit and Loss so that
their impact on the current year''s profit or loss can be perceived.

Extraordinary Items

Extraordinary items, if any, are disclosed separately in the Statement of Profit and Loss
at net of tax in a manner that their nature and amount can be clearly understood.

Changes in Accounting Policies

Accounting policies are changed only if: required by statute; required for compliance with
an Accounting Standard; or the change would result in a more appropriate presentation
of financial statements.

The impact of any change in accounting policy having a material effect is disclosed along
with the amount by which any item in the financial statements is affected, to the extent
ascertainable.

6. Revenue and Expenditure recognition

Revenue is recognised when it is earned and there is reasonable certainty of its
realisation, in accordance with the applicable accounting standards and the provisions of
the Companies Act, 2013. Revenue is measured at the fair value of the consideration
received or receivable, net of applicable taxes, duties, discounts, rebates, and returns.

Revenue from sale of goods is recognised when the significant risks and rewards of
ownership of the goods have been transferred to the buyer, no significant uncertainty
exists regarding the amount of consideration, and it is probable that economic benefits
associated with the transaction will flow to the Company.

Revenue from services is recognised as and when the services are rendered in
accordance with the terms of the contract.

Other income is recognised on accrual basis when no significant uncertainty as to
measurability or collectability exists.

7. Employee benefits

• Short term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in
exchange for the services rendered by employees including performance incentive and
compensated absences have been charged to Profit and loss account during the period
under consideration.

• Post-employment benefits

• Defined contribution plans

The company has made contributions under The Employees'' Provident Funds And
Miscellaneous Provisions Act, 1952 and Employees'' State Insurance Act, 1948 and
recognized as expense during the period under consideration during the period in which
the employee renders the related service. The said contributions were primarily made on
timely basis.

• Defined benefit plans

The liability in respect of defined benefit plans and other post-employment benefits is
calculated using the Projected Unit Credit Method and spread over the period during
which the benefit is expected to be derived from employees'' services. Actuarial gains and
losses in respect of post-employment and other long-term benefits are charged to the
Statement of Profit and Loss.

The company has made provision on account of Gratuity expense as per the Accounting
Standard 15- Employees Benefits prescribed under the Companies Act, 2013 and amount
is provided on the basis of Report on Actuarial valuation of the gratuity liability dated
14.04.2026 for the period from 01/04/2025 to 31 /03/2026, as per AS-15(R).

• Employee Separation Costs

Compensation to employees who have opted for retirement under the voluntary
retirement scheme of the Company is charged to the Statement of Profit and Loss in the
period of exercise of option by the employee.

No such items are charged in profit and loss account during the period under
consideration as not applicable.

8. Foreign Currency transactions

Transactions in foreign currencies are recorded at the exchange rates prevailing on the
date of the transaction. Monetary items denominated in foreign currency outstanding at
the balance sheet date are translated at the closing exchange rates prevailing on that
date.

Exchange differences arising on settlement of monetary items or on reporting such
monetary items at rates different from those at which they were initially recorded during
the period, or reported in previous financial statements, are recognised as income or
expense in the Statement of Profit and Loss in the period in which they arise.

Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated.

9. Taxes on income

Tax expense comprises of current tax and deferred tax. Current tax is measured at the
amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred
income tax reflects the current period timing differences between taxable income and
accounting income for the period and reversal of timing differences of earlier periods.
Deferred tax assets are recognized only to the extent that there is a reasonable certainty
that sufficient future income will be available except that deferred tax assets, in case there
are unabsorbed depreciation or losses, are recognized if there is virtual certainty that
sufficient future taxable income will be available to realize the same. Deferred tax assets
and liabilities are measured using the tax rates and tax law that have been enacted or
substantively enacted by the Balance Sheet date.

Minimum Alternative Tax (MAT) is calculated in accordance with the provisions of Income
Tax Act 1961, which gives rise to future economic benefits in the form of adjustment of
future income tax liability, is considered as asset in the balance sheet.

The Company is following ICDR requirement and Taxes has been recognized in the
financial statement as per above mentioned principle. For the relevant financial year, the
company has opted to pay income tax as per the provisions of section 115BAA of the
Income tax Act, 1961 and consequently, provisions of Minimum Alternative Tax (MAT) not
apply on company due to applicability of section 115BAA as per the provisions of the
Income tax Act, 1961. Accordingly, Deferred tax assets are measured using the said
applicable tax rate.