Key Accounting Policies of MRF

1) Property, Plant and Equipment (PPE)

For transition to IND AS, the Company has elected to continue with the carrying value of Property,
Plant and Equipment (‘PPE’) recognised as of the transition date, measured as per the Previous GAAP
and use that carrying value as its deemed cost of the PPE as on the transition date. Property, plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses
except for freehold land which is not depreciated.

2) Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. After initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. Software (not being an integral part of the related hardware) acquired for internal
use are treated as intangible assets.

3) Inventories

Inventories consisting of stores and spares, raw materials, Work in progress, Stock in Trade and
finished goods are valued at lower of cost and net realisable value. However, materials held for use
in production of inventories are not written down below cost, if the finished products are expected
to be sold at or above cost. The cost is computed on FIFO basis except for stores and spares which
are on daily moving Weighted Average Cost basis and is net of inputs tax credits under various tax
laws.

4) Cash Flows and Cash and Cash Equivalents

Statement of cash flows is prepared in accordance with the indirect method prescribed in the
relevant IND AS. For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand, cheques and drafts on hand, deposits held with Banks, other
short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value, and book overdrafts. However, Book overdrafts are to be shown within borrowings in current
liabilities in the balance sheet for the purpose of presentation.

5) Dividend Distribution to equity shareholders

The Company recognises a liability to make cash distributions to equity holders when the distribution
is authorized and the distribution is no longer at the discretion of the Company. A distribution is
authorized when it is approved by the shareholders. A corresponding amount is recognised directly
in other equity along with any tax thereon.

6) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duties collected on behalf of the
government. Revenue from sale of goods is recognised, when all significant risks and rewards are
transferred to the buyer, as per the terms of the contracts and no significant uncertainty exists
regarding the amount of the consideration that will be derived from the sale of goods. It includes
excise duty and excludes value added tax/sales.