137 | Annual Report | 2025-2026 Arohan Financial Services Limited Notes to financial statements for the year ended March 31, 2026 (cont’d) 3 Material accounting policies (cont’d) such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Business model assessment The Company determines the business model at a level that reflects how the financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset were held. Monitoring is part of the Company’s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and accordingly prospective change to the classification of those assets are made. Judgment is required by management in the estimation of the amount and timing of future cash flows when determining an impairment allowance for loans and advances. The Company makes judgments on management overlay considering internal and external factors. Impairment of loan portfolio Judgment is required by management in the estimation of the amount and timing of future cash flows when determining an impairment allowance for loans and advances. In estimating these cash flows, the Company makes judgments about the borrower’s financial situation including management overlay. Recent accounting pronouncements Classification of liabilities as current or non-current and non-current liabilities with Covenants - Amendments to Ind AS 1 The Ministry of Corporate Affairs notified amendments to paragraphs 69 to 76 of Ind AS 1 Presentation of Financial Statements to specify the requirements for classifying liabilities as current or non-current. The amendments clarify: > Extensive revisions to classification of liabilities as current or non-current, especially in context of loan covenants. > Right to defer settlement must exist at reporting date and have substance – management’s intent do not affect > Convertible debt may become current > Phased approach: a. For material covenants - periods beginning on/ after April 01, 2025: Relief continues i.e. if lender waives demand after reporting date but before financial statements are approved, liability may remain non-current. b. For covenants - periods beginning on/after April 01, 2026: Relief removed i.e. any breach making liability payable on demand at reporting date must be classified as current, even if lender waives demand after reporting date. (ii) Property, plant and equipment Recognition and initial measurement Property, plant and equipment are stated at their cost of acquisition. The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if 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 cost comprises purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
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