Accounting Policies of Loyal Textiles Mills Ltd. Company
Mar 31, 2023
1 General Information:
Loyal Textiles Mills Limited ( "the Company" ) is a listed company incorporated on 1956 in the state of Tamilnadu, India. The Company is engaged in manufacturing of yarn, woven fabric, knitted fabric and technical clothing. The Company has manufacturing plants at Kovilpatti, Sattur, Cuddalore, Sivagangai in Tamilnadu, Khammam in Telangana, and Nellore in Andhra Pradesh.
The Company is a public listed company and listed on The Bombay Stock Exchange and National Stock Exchange.
2 Significant Accounting Policies:
(a) Statement of Compliance:
These financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), and the provisions of the Companies Act ,2013 (''the Act'') (to the extent notified) The Ind AS are prescribed under Section 133 of the Act read with Rule3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
(b) Basis for Preparation and Presentation:
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
(c) Significant accounting judgements, estimates and assumptions
In the application of the Company''s accounting policies the Board of Directors of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
a. Useful lives of property, plant and equipment
The Company reviews the estimated useful lives of Property, Plant and Equipment at the end of each reporting period. During the current year, there has been no change in life considered for the assets except those specified in the exceptional items.
b. Provision for doubtful receivables
The Company makes provision for doubtful receivables based on a provision matrix which takes into account historical credit loss experience and adjusted for current estimates.
c. Estimation of net realisable value of inventories
Inventories are stated at the lower of cost and net realisable value. In estimating the net realisable
value of inventories the Company makes an estimate of future selling prices and costs necessary to make the sale.
d. Provision for employee benefits
The Company uses actuarial assumptions to determine the obligations for employee benefits at each reporting period. These assumptions include the discount rate, expected long-term rate of return on plan assets, rate of increase in compensation levels and mortality rates.
Significant judgments are required in determining the provision for income taxes, including the amount expected to be paid/ recovered for uncertain tax positions.
e. Fair value for Investment Property
The fair Value of the Investment property as disclosed in the Financial statements is the best judgement of the Management with available information include market knowledge, reputation, independence and whether professional standards are maintained.
Revenue is recognized to that extend it is probable that future economic benefits will flow to the entity and the amount of revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or receivable. Amount disclosed as revenue are net of returns, rebates, goods & services tax and value added taxes.
Revenue is recognised when a promise in a customer contract (performance obligation) has been satisfied by transferring control over the promised goods to the customer.
Control over a promised good refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, those goods. Control is usually transferred upon shipment, delivery to, upon receipt of goods by the customer, in accordance with the individual delivery and acceptance terms agreed with the customers.
The amount of revenue to be recognized (transaction price) is based on the consideration expected to be received in exchange for goods, excluding amounts collected on behalf ofthird parties such as Goods and Service Tax(GST) or other taxes directly linked to sales. Revenue from product sales are recorded net of allowances for estimated rebates, cash discounts and estimates of product returns, all of which are established at the time of sale.
If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on their relative stand-alone selling prices.
Revenue from sale of services is recognised when related services are rendered and related cost are incurred
3. Dividend and Interest Income
Dividend income on investments is recognized when the right to receive the payment is established and when no significant uncertainty as to the measurability or collectability exists.
Interest income from financial asset is recognized when it is probable that the economic benefit will flow to the company and the amount of income can be measured reliably. Interest income is accrued on time basis by reference to principal outstanding using the effective interest rate method (EIR), which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition
Export incentives are accounted in the year of exports based on eligibility and expected amount on realisation.
Incentives receivable from Government is accounted on certainty of receipt.
Insurance claims are recognized on the basis of claims admitted / expected to be admitted and when there is no significant uncertainty exists with regard to the amount to be recovered and it is reasonable to expect ultimate collection.
(e ) Cash And Cash Equivalents (For Purposes Of Cash Flow Statement)
Cash comprises cash in hand and balance 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.
Cash flows are reported using the indirect method, whereby profit / (loss) is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. In cash flow statement, cash and cash equivalents include cash in hand, balances with banks in current accounts and other short-term highly liquid investments with original maturities of three months or less.
Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:
In case of raw materials at weighted average cost plus direct expenses. The cost includes cost of purchase, non-refundable duties and taxes, and other costs incurred in bringing the inventories to their present location and condition.
In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase, non-refundable duties and taxes, and other costs incurred in bringing the inventories to their present location and condition.
In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
In case of finished goods at raw material cost plus conversion costs, packing cost, non recoverable indirect taxes (if applicable) and other overheads incurred to bring the goods to their present location and condition.
In case of by-products at estimated realizable value
Net realizable value is the estimated selling price in ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
(g) Property, Plant And Equipment:
Recognition and measurement
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses.
The Cost of an item of Property, plant and equipment comprises:
a. its purchase price including import duties and non- refundable purchase taxes after deducting trade discounts and rebates
b. any attributable expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
c. the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
The Company has elected to continue with the carrying value of all its PPE recognised as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as on transition date.
Depreciation is calculated on the cost of items of property, plant and equipment less their estimated residual values over the estimated useful lives using the straight-line method and is generally recognised in the Statement of profit and loss. Freehold land is not depreciated.
Depreciation on property, plant and equipment is charged over the estimated useful life of theasset or part of the asset (after considering double/triple shifts) as evaluated on technical assessment on straight-line method, in accordance with Part A of Schedule II to the Companies Act, 2013.
The estimated useful life of the property, plant and equipment followed by the Company for the current and the comparative period are as follows :
Buildings - 30 years
Plant and Equipment - 8 years
Furniture and Fixtures - 8 years
Vehicles - 8 years
Office Equipment - 5 years
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if necessary, for each reporting period. Based on technical assessment and consequent advice, the management believes that its estimate of useful life as given above best represent the period over which management expects to use the asset.
On property, plant and equipment added/ disposed off during the year, depreciation is charged on pro-rata basis for the period from/upto which the asset is ready for use/disposed off.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ''Capital work-in-progress''.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the statement of profit and loss as and when incurred.
The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Company''s accounting policy. They are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Recognition
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated on a straight-line basis over their estimated useful lives and it is included in the statement of profit and loss. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
The estimated useful life of intangible assets consisting computer software is 6 years
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes).
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 - Property, plant and equipments requirements for cost model. The cost includes the cost of replacing parts and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of the investment property are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
Company depreciates investment properties as per the useful life prescribed in Schedule II of the Companies Act, 2013.
Though the Company measures investment properties using the cost-based measurement, the fair value of investment property is disclosed in the notes. The fair Value of the Investment property as disclosed in the Financial statements is the best judgement of the Management with available information. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss in the period in which the property is derecognised.
(j) Borrowing Cost Definition:
Borrowing cost are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are considered as adjustment to interest costs) incurred in connection with the borrowings of funds.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
An entity shall cease capitalising borrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.
The Company assesses at contract inception whether a contract is or contains, a lease, i.e., if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for its use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Plant and machinery
⢠Buildings
⢠Land
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
(l) Impairment of tangible assets and Intangible Assets other than Goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest Company of cash generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of these instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as may be appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately as profit or loss.
All regular way purchases or sales of financial assets are recognised and derecognized on a trade date basis. Regular way purchases or sales of financial assets that require delivery of assets within the time frame established by regulations or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
Classification of financial assets
Financial instruments that meet the following conditions are subsequently measured at amortized cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
⢠the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
⢠the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in the Statement of Profit and Loss for FVTOCI debt instruments. For the purposes of recognizing foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortized cost. Thus, the exchange differences on the amortized cost are recognised as profit or loss and other changes in the fair value of FVTOCI financial assets are recognised in Other Comprehensive Income and accumulated under the heading of ''Reserve for debt instruments through Other Comprehensive Income''. When the investment is disposed off, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.
All other financial assets are subsequently measured at fair value.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in profit or loss and is included in the âOther incomeâ line item.
Investments in equity instruments at FVTOCI
On initial recognition, the Company can make an irrevocable election (on an instrument-byinstrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. This election is not permitted if the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. 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.
A financial asset is held for trading if:
⢠it has been acquired principally for the purpose of selling it in the near term; or
⢠on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
⢠it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
Dividends on these investments in equity instruments are recognised in profit or loss when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised as profit or loss are included in the ''Other income'' line item.
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.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognised when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. The Company recognizes a loss allowance for the expected credit losses on financial asset. In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 - Financial instruments for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
De-recognition of financial assets
The Company de-recognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between
the part it continues to recognize under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.
A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
Financial liabilities at fair value through profit and loss (FVTPL)
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
a. it has been incurred principally for the purpose of repurchasing it in the near term; or
b. on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
c. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies, may be designated as at FVTPL upon initial recognition if:
a. such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
b. the financial liability forms part of group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
c. it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the statement of profit and loss.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the ''Finance costs'' line item.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (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) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the
original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
(n) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in foreign exchange rates on foreign currency assets or liabilities and forecasted cash flows denominated in foreign currencies. The counterparty for these contracts is generally a bank.
Derivatives are recognized and measured at fair value. Attributable transaction costs are recognized in statement of profit and loss. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit and loss. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
(o) Government Grants, Subsidies And Export Incentives
Government grants and subsidies are recognised when there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant; they are then recognised in statement of profit and loss as other operating revenue / other income on a systematic basis.
Government grants relating to income are deferred and recognised in the statement of profit and loss over the period necessary to match them with the costs that they intended to compensate and presented in other operating revenue.
Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable.
(p) Foreign Currency Transactions and Translation
Transactions in foreign currencies are translated into the functional currency at the exchange rates at the dates of the transactions or an average rate if the average rate approximates the actual rate at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions are recognised in the statement of profit and loss.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Nonmonetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non monetary assets and liabilities that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences arising on translation are recognised in the statement of profit and loss.
Employee benefits include Provident Fund, Employees State Insurance Scheme, Gratuity Fund and compensated absences.
Short term employee benefit obligations:
Short term employee benefits including accumulated compensated absences as at the Balance Sheet date are recognised as an expense as per Company''s schemes based on expected obligation on an undiscounted basis.
Defined contribution plan Provident Fund & Employee State Insurance
The Company''s contribution to Provident Fund and Employees State Insurance Scheme are considered as defined contribution plans and are recognized as an expense when employees have rendered service entitling them to the contributions.
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Post employment benefit comprise of Gratuity which are accounted for as follows:
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations
being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Operating segments are those components of the business whose operating results are regularly reviewed by the chief operating decision making body in the company to make decisions for performance assessment and resource allocation. The reporting of segment information is the same as provided to the management for the purpose of the performance assessment and resource allocation to the segments.
The operating segments are the segments for which separate financial information is available. The Accounting policies adopted for segment reporting are in line with the accounting policy of the company.
The Company has identified two reportable operating segments viz., manufacturing and trading activities.
Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segments.
Pricing for Inter Segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.
Revenue, expenses, assets and liabilities which relate to the company as a whole and are not allocable to segment on reasonable basis are reported under unallocated revenue / expenses / assets / liabilities.
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events including a bonus issue, bonus element in a rights issue to existing shareholders, share split and
reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are considered for the effects of all dilutive potential equity shares.
Income tax expense represents current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination or to an item recognised directly in equity or in other comprehensive income.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Current income tax assets/liabilities for current year is recognized at the amount expected to be paid to and/ or recoverable from the tax authorities.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based
on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income-tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income-tax. Accordingly, MAT Credit is recognised as asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
(u) Provisions, Contingent Liabilities, and Contingent Assets:
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Expected future operating losses are not provided for.
Contingent Liabilities:
Whenever there is possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because (a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; or (b) the amount of the obligation cannot be measured with sufficient reliability are considered as contingent liability.
The Company does not recognise contingent assets. These are assessed continually to ensure that the developments are appropriately disclosed in these standalone financial statements.
(v) Non-Current Asset held for Sale
The Company classifies non current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset is available for immediate sale in its present condition. Actions required to complete the sale/ distribution should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale and the sale expected within one year from the date of classification.
For these purposes, sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets is available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, its sale is highly probable; and it will genuinely be sold, not abandoned. The Company treats sale of the asset to be highly probable when:
1. The appropriate level of management is committed to a plan to sell the asset,
2. An active programme to locate a buyer and complete the plan has been initiated (if applicable),
3. The sale is expected to qualify for recognition as a completed sale within one year from the date of classification, and
4. Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
(w) Investments in Subsidiary and Joint Venture IND AS 27
Investments in subsidiaries and Joint ventures are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of investment is assessed and written down immediately to its recoverable amount.
Mar 31, 2018
1 Significant Accounting Policies:
Statement of Compliance:
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (âthe Actâ) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
Basis for Preparation and Presentation:
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 and other relevant provisions of the Act.
For all periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notifed under section 133 of Companies Act, 2013, read with paragraph 7 of the Companies (Accounts) Rule, 2014 (Indian GAAP). These financial statements for the year ended 31 March 2018 are the first the Company has prepared in accordance with Ind AS. Note no. 3 explains the manner in which the Company has adopted Ind AS.
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: -
Derivative financial instruments -
Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments) The accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
(a) Inventories:
Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:
- Raw materials, stores & Spares are valued at weighted average basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
- Stock-in-process is valued at Cost and Finished goods are Valued at Cost and Net Realisable value as Applicable - Cost includes applicable production overheads.
- Traded goods are valued at lower of Cost and Net Realizable Value (as on 31-03-2018 traded goods stock is NIL).
The stock of saleable waste is valued at net Realisable value.
Net Realisable Value (NRV) is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated selling expenses necessary to make the sale.
Obsolete/non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.
(b) Cash flow statement:
The cash flow statement is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 âStatement of Cash flowsâ using the indirect method for operating activities, whereby net profit before tax is adjusted for the effects of transactions of noncash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.
(c) Use of Estimates and Judgements:
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as 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. Differences between actual results and estimates are recognised in the period in which the results are known/ materialised, and if material, their effects are disclosed in the Notes to the Financial Statements.
(d) Revenue Recognition:
Revenue is recognized at the fair value of the consideration received or receivable. The company recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.
Sales are recognized when goods are despatched and are recorded excluding Value added tax, Sales Tax, Goods and Service Tax and recoveries as applicable. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.
Service / Process Charge is accounted on completed service contract method. Revenue from the sale of services is recognised on the basis of the stage of completion, right to receive the amount is clearly established and there is no uncertainty about its realisation. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.
Interest income from financial asset is recognized when it is probable that the economic benefit will flow to the company and the amount of income can be measured reliably. Interest income is accrued on time basis by reference to principal outstanding using the effective interest rate method (EIR).
Dividend income on investments is recognized when the right to receive the payment is established and when no significant uncertainty as to the measurability or collectability exists.
Rental income from operating lease on investment properties is recognized on a straight-line basis over the term of the relevant lease, if the escalation is not a compensation for increase in cost inflation index.
Incentives receivable from Government is accounted on certainty of receipt.
Insurance claims are recognized on the basis of claims admitted / expected to be admitted and when there is no signifi cant uncertainty exists with regard to the amount to be recovered and it is reasonable to expect ultimate collection.
Duty draw back claims and other export benefits are accounted on completion of exports, on complying with the rules of the scheme governing it based on eligibility and expected amount on realization.
(e) Property, Plant And Equipment:
i) Land including lease-hold land is stated at cost except for a portion revalued. Other Fixed Assets including leased out assets are stated at cost less accumulated depreciation and impairment loss, if any. The cost includes borrowing cost and in respect of imported machinery the cost includes the value portion of customs duty credit availed as granted by the government under export incentive schemes. Exchange fluctuations are considered to cost up to commencement. Assets under erection/construction are stated at value incurred.
On transition to Ind AS, the Company has elected to consider carrying amount of all items of property, plant and equipments measured as per Indian GAAP as recognized in the f nancial statements as at the date of transition, as deemed cost at the date of transition. Deemed cost is the differential between the cost of the asset less the depreciation at the given date. The company has recognized the deemed cost by this method on April 2016.
ii) Depreciation on Property, Plant and Equipment is provided over their useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013 on Straight Line method basis.
iii) Depreciation in respect of additions/sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.
iv) The estimated useful lives, residual values and the depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
v) The increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery, wherever applicable, beyond the date of commissioning is taken to Statement of Profit and Loss. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.
(f) Intangible Assets:
Intangible assets are stated at cost less accumulated amount of amortization. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifable intangible asset is based on a number of factors including the effects of obsolescence, etc. The amortization method and useful lives are reviewed periodically at end of each financial year.
(g) Foreign Currency Transactions:
i) Functional and Presentation currency:
Items included in the financial statements of the company are measured using the currency of the primary economic environment in which these entities operate, (i.e., the âfunctional currencyâ). The functional currency of the company is Indian rupee. These financial statements are presented in Indian rupee.
ii) Transaction and balances:
The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. The foreign currency monetary items are translated using the closing rate at the end of each reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction. Exchange differences arising on translation/ settlement are recognized as income or expense in the period in which they arise.
The Company enters into forward exchange contract to hedge its risk associated with Foreign currency fluctuations. The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. In case of monetary items which are covered by forward exchange contract, the difference between the year end rate and rate on the date of the contract is recognized as exchange difference. Any profi t or loss arising on cancellation of a forward exchange contract is recognized as income or expense for that year.
(h) 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 Recognition and measurement:
On initial recognition, all the financial assets and liabilities are recognized at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability other than financial asset or financial liability that are measured at fair value through profit or loss. Transaction costs of financial assets and liabilities carried at fair value through the Profit and Loss are immediately recognized in the Statement of Prof t and Loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
ii) Subsequent measurement
a. Non-derivative financial instruments :
(i) Financial assets carried at amortised cost: A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset 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.
(ii) Financial assets at fair value through other comprehensive income (FVTOCI): A financial asset is 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.
(iii) Financial assets at fair value through profit or loss (FVTPL): A financial asset is measured at fair value through profit and loss unless it is measured at amortized cost or at fair value through other comprehensive income.
(iv) Investments in subsidiaries, joint ventures and associates: The Company has adopted to measure investments in subsidiaries, joint ventures and associates at cost in accordance with Ind AS 27 and carrying amount as per previous GAAP at the date of transition has been considered as deemed cost in accordance with Ind AS 101.
(v) Financial liabilities: The financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments:
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets / liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
c. Derecognition of financial instruments:
A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability is derecognized when the obligation specified in the contract is discharged or cancelled or expired.
d. Fair value measurement of financial instruments:
The fair value of financial instruments is determined using the valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Based on the three level fair value hierarchy, the methods used to determine the fair value of financial assets and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external valuer. In case of financial instruments where the carrying amount approximates fair value due to the short maturity of those instruments, carrying amount is considered as fair value.
(i) Employee Benefits:
i) Short term benefits: The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment. Long term compensated absences are provided for based on actuarial valuation.
ii) Post-employment benefits:
Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Statement of Profit and Loss of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year. Remeasurement comprising actuarial gains and losses, the effect of changes to the asset ceiling if applicable and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with the charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
iii) Other long term benefits: Deferred employee benefits / deferred compensation and termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement Scheme are charged to the Statement of Prof t and Loss in the year incurred. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred.
(j) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
(k) Segment Reporting:
Operating segments are those components of the business whose operating results are regularly reviewed by the chief operating decision making body in the company to make decisions for performance assessment and resource allocation. The reporting of segment information is the same as provided to the management for the purpose of the performance assessment and resource allocation to the segments.
The operating segments are the segments for which separate financial information is available. The Accounting policies adopted for segment reporting are in line with the accounting policy of the company.
The Company has identified two reportable operating segments viz., manufacturing and trading activities.
Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segments.
Pricing for Inter Segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.
Revenue, expenses, assets and liabilities which relate to the company as a whole and are not allocable to segment on reasonable basis are reported under unallocated revenue / expenses / assets / liabilities.
(l) Leases:
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All other leases are operating leases.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
(m) Earnings Per Share:
The basic earnings per share are computed by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
Diluted EPS is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic EPS and also weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares, as appropriate
(n) Income Taxes:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is recognised as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal tax in the future and it is highly probable that future economic benefits associated with it will flow to the Company during the specified period and that can be measured reliably.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Where there is deferred tax assets arising from carry forward of unused tax losses and unused tax created, they are recognised to the extent of deferred tax liability.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(o) Impairment of Assets:
(i) Financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in statement of profit or loss.
(ii) Non-financial assets:
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
(p) Provisions, Contingent Liabilities, and Contingent Assets:
Provisions:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and 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.
Provisions are discounted, if the effect of the time value of money is material, using pre-tax rates that reflects the risks specific to the liability. When discounting is used, an increase in the provisions due to the passage of time is recognised as finance cost. These provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Necessary provision for doubtful debts, claims, etc., are made, if realisation of money is doubtful in the judgement of the management.
Contingent Liabilities:
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. Contingent liabilities are disclosed separately.
Show cause notices issued by various Government authorities are considered for evaluation of contingent liabilities only when converted into demand.
Contingent Assets:
Where an inflow of economic benefits is probable, the Company discloses a brief description of the nature of the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial effect.
Contingent assets are disclosed but not recognised in the financial statements.
(q) Cash and Cash Equivalents:
The Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with a maturity period of three months or less from the balance sheet date, highly liquid investments that are readily convertible into cash, which are subject to an insignif cant risk of changes in value.
(r) Government Grants:
The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in the statement of prof t and loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.
(s) Investment Property:
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes).
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 - Property, plant and equipments requirements for cost model. The cost includes the cost of replacing parts and borrowing costs for long-term construction projects if the recognition criteria are met. When signifi cant parts of the investment property are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
Company depreciates investment property as per the useful life prescribed in Schedule II of the Companies Act, 2013.
Though the Company measures investment property using the cost-based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation applying a valuation model. External valuers are involved, wherever necessary with the approval of Company''s board of directors. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss in the period in which the property is derecognised.
(t) Intangible Assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives which are generally in accordance with those specified in Schedule II to Companies Act, 2013.
3. Explanation of Transition to Ind AS First time adoption of Ind AS
This financial statement is the first financial statement that has been prepared in accordance with Indian Accounting Standards (Ind AS) together with the comparative period data as at and for the year ended 31st March 2017, as described in the summary of significant accounting policies. The transition to Ind AS has been carried out in accordance with Ind AS 101 ââFirst time adoption of Indian Accounting Standardsâ with 1st April 2016 as the transition date. This note explains the exemptions availed by the company on fi rst time adoption of Ind AS and the principal adjustments made by the Company in restating its Indian GAAP financial statements as at 1st April 2016 and financial statements as at and for the year ended 31st March 2017 in accordance with Ind AS 101.
Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has, accordingly, applied following exemptions:
a) The Company has elected to consider carrying amount of all items of property, plant and equipments measured as per Indian GAAP as recognized in the financial statements as at the date of transition, as deemed cost at the date of transition. The effect of consequential changes arising on the application of other Ind AS has been adjusted to the deemed cost of Property, Plant & Equipment.
b) The Company has adopted to measure investments in subsidiaries, joint ventures and associates at cost in accordance with Ind AS 27 and therefore has measured such investments in its separate opening Ind AS balance sheet at carrying amount as per Indian GAAP at the date of transition in accordance with Ind AS 101.
c) The Company has availed the exemption of fair value measurement of financial assets or liabilities at initial recognition and accordingly will apply fair value measurement of financial assets or liabilities at initial recognition prospectively to transactions entered into on or after 1st April 2016.
d) The estimates at 1st April 2016 and at 31st March, 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items under Indian GAAP did not require estimation:
- Fair values of Financial Assets & Financial Liabilities
- Impairment of financial assets based on expected credit loss modal
- Discount rates
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions as at 1st April, 2016 and 31st March, 2017.
Notes to the reconciliation of equity as at 1st April 2016 and 31st March 2017 and Total comprehensive income for the year ended 31st March 2017
1. Leasehold Land: Under Indian GAAP, land on lease was not covered under âLeasesâ and therefore it was shown as Tangible assets. Under Ind AS, land on lease is considered as operating lease. Therefore, the net block of leasehold land obtained from SIPCOT Cuddalore (as on 31st March,2017 Rs.161.89 lakhs, as on 1st April, 2016 Rs. 163.56 lakhs) has been reclassified as Other Non - Current Assets (as on 31st March,2017 Rs.160.22 lakhs, as on 1st April, 2016 Rs.161.89 lakhs) and Other Current Assets (as on 31st March,2017 Rs.1.67 lakhs, as on 1st April, 2016 Rs.1.67 lakhs) as âPrepayments of Leasehold Landâ. Further, the amortization of leasehold payment for the year ended 31st March,2017 amounting to Rs.1.67 lakhs has been reclassified from Depreciation & Amortization expenses to âOther Expensesâ. However, the same does not have any impact on total equity as at 31st March, 2017.
2. Fair Value of Investments: Under Indian GAAP, investments in equity instruments, mutual funds and debt securities were classified as long term investments or current investments based on the intended holding period and realisability. Long term investments were carried at cost less provision for other than temporary diminution in the value of investments. Current investments were carried at lower of cost and fair value. Ind AS requires such investments to be measured at fair value except investments in subsidiaries, associates and joint venture for which exemption has been availed. Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognised in FVOCI - Equity Instruments as at the date of transition and subsequently in the Other Comprehensive Income for the year ended March 31, 2017. This increased other reserves by Rs.19.83 lakhs as at March 31, 2017 (decreased other reserves by Rs.13.75 lakhs as at April 1, 2016).
3. Proposed Dividend: Under Indian GAAP, proposed dividend (including Dividend Distribution Tax) is recognized as a liability in the period to which it relates, irrespective of when it is declared. Under Ind AS, proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the Company, the declaration of dividend occurs after period end. Therefore, the liability for the year ended 31st March 2016 recorded as proposed dividend as on 1st April, 2016 along with dividend distribution tax amounting to Rs.579.69 Lakhs has been de-recognised with a corresponding adjustment in the retained earnings.
4. Defined Benefit Obligation: Under Ind AS, remeasurements i.e. actuarial gains and losses are to be recognized in âOther comprehensive incomeâ and are not to be reclassified to profit and loss in a subsequent period. Under the Indian GAAP, these remeasurements were forming part of the prof t or loss. Therefore, actuarial gain/ loss amounting to Rs.223.51 Lakhs for the financial year 2016-17 has been recognized in OCI (net of tax Rs.77.35 Lakhs) which was earlier recognised as Employee benef ts expense. However, the same has no impact on the total equity as at 31st March, 2017.
5. Bill discounted against debtors: Under Indian GAAP, bills discounted against debtors were shown as contingent liability. However, the same falls under the category of âFinancial instrumentsâ under Ind AS. Therefore, the bills discounted amounting to Rs.8228.15 Lakhs and Rs.8585.63 Lakhs as on 31st March 2017 and 1st April 2016 respectively have been shown under âShort term borrowingsâ with a corresponding adjustment / Disclosure in âTrade receivablesâ. However, the same has no impact on the total equity as at 31st March, 2017 and 1st April, 2016.
6. Deferred tax: Under Indian GAAP, deferred tax was recognized for the temporary timing differences which focus on differences between taxable profits and accounting prof ts for the period. Ind AS requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an Asset or Liability in the Balance Sheet and its tax base. Further, the application of Ind AS has resulted in recognition of deferred tax on certain temporary differences which was not required under Indian GAAP. Accordingly, deferred tax adjustments have been recognised in correlation to the underlying transactions in retained earnings/OCI in accordance with Ind AS. This has resulted decrease in retained earnings of Rs.77.35 Lakhs as at 31st March 2017.
7. Statement of cash flows: The transition from Indian GAAP to Ind AS has not had a material impact on statement of cash flows.
Mar 31, 2015
A) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with
accounting standards as prescribed under section 133 of the Companies
Act, 2013 read with Rule 7 of the Companies (Accounts ) Rules, 2014,
the provisions of Companies Act, 2013 to the extent notified and
guidelines issued by Securities and Exchange Board of India ( SEBI).
The disclosure and other requirements under the Micro, Small and Medium
Enterprises Development Act, 2006 have been considered.
B) USE OF ESTIMATES
The preparation of financial statements requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statements and the reported amount of
income and expenses during the year.
C) REVENUE RECOGNITION
i) Sales are recognised when goods are despatched and are recorded
excluding Sales Tax and recoveries. There is no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
ii) Rental Income / Interest income / Service / Process Charge is
accounted on accrual basis.
iii) Dividend income on investments and claims are accounted for, when
the right to receive the payment is established.
Dividends from foreign company is accounted on receipt.
D) DUTY DRAW BACK CLAIMS
i) Duty draw back claims and other export benefits are accounted on
completion of exports, on complying with the rules of the scheme
governing it. No obligation is attached to this assistance.
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Focus market /
product licences for which no obligation is attached, is recognised
under income approach method.
E) EXPENDITURE
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of Inputs are accounted net of
duty concessions availed.
F) FIXED ASSETS AND DEPRECIATION
i) Land including lease is stated at cost except for a portion
revalued. Other Fixed Assets including leased out assets are stated at
cost less depreciation. The cost includes borrowing cost and in respect
of imported machinery the cost includes the value portion of customs
duty credit availed as granted by the government under export incentive
schemes. The Capital subsidy from government is accounted when the
right to receive is established and is deducted from the gross value of
the respective assets. Assets under erection / construction are stated
at value incurred.
ii) Depreciation on Tangible Assets is provided over their useful lives
as prescribed under Part C of Schedule II of the Companies Act, 2013 on
Straight Line method basis except the following which have been
provided on written down value basis:- 1. All the assets in Garment
Division
2. All the assets except Plant and Machinery in Loyal Division
3. Furniture and Fittings, Vehicles in Shri Vishala Textile Mills
Division
4. Building in Wind Mill Division
iii) Depreciation in respect of additions / sales has been provided
pro-rata from the date of commissioning or till the date of sale as
rounded off to the nearest month.
iv) The increase / decrease in long term liability due to fluctuation
in foreign currency in respect of imported Plant and Machinery beyond
the date of commissioning is taken to Profit and Loss Statement.
Depreciation has been provided from the date of commissioning. The
assets identified as obsolete and held for disposal are stated at their
estimated net realisable values.
G) FOREIGN CURRENCY TRANSACTIONS
i) Foreign Currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on
Foreign Currency Transactions covered by specific forward contracts are
recognised over the period of the contract.
ii) Foreign Exchange assets and liabilities are converted at the year
end exchange rates. However non-monetary assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the Profit and Loss Statement.
H) EMPLOYEE BENEFITS
i) Short term benefits :
The gross amounts are recognized as expense and to the extent unpaid it
is recognized as liability.
Short term compensated absences are provided for based on internal
assessment.
Long term compensated absences are provided for based on actuarial
valuation.
ii) Post employment benefits :
Provident fund and other funds, being defend contribution schemes, the
contributions are charged to the Profit and Loss Statement of the year
when the contributions, for the covered employees, to the respective
government administered funds are due. Gratuity, being a defend benefit
plan, the defend benefit obligations are provided for on the basis of
an actuarial valuation made at the end of each financial year.
iii) Other long term benefits :
Deferred employee benefits / deferred compensation and termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement Scheme are charged to the Profit
and Loss Statement in the year incurred. Actuarial gains / losses are
immediately taken to the Profit and Loss Statement and are not
deferred.
I) INVENTORIES
a) Inventories are valued at lower of cost or net realisable value,
cost being ascertained on the following basis:
i) Stores and spares, raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods - Cost includes applicable
production overheads.
iii) Traded goods - at lower of Cost and Net Realisable Value.
b) Obsolete / non-moving Inventories are provided for to the extent of
requirement and are stated at net realisable value.
J) INVESTMENTS
Investments being long term are valued at Cost. Provision for permanent
diminution in value is made, when considered necessary.
K) TAXES ON INCOME
Current Tax is determined on the basis of taxable income for the year.
Deferred tax is recognised for all timing differences, subject to the
consideration of prudence.
L) CASH FLOW STATEMENT
Cash flow is reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M) IMPAIRMENT OF FIXED ASSETS
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the company's fixed
assets including leased out assets. Impairment loss is recognised as
and when required.
N) EARNINGS PER SHARE:
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O) PROVISIONS AND CONTINGENT LIABILITIES
The company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P) SEGMENT REPORTING SEGMENT INFORMATION
a) The company has identified five reportable business segments as
primary segments viz : yarn, yarn for trading, cloth, cloth trading and
garments.
b) The secondary segment information is identified on the basis of
geographical segments viz. Europe, Asia, U.S.A. and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting .
i) Revenue and Expenses have been identified to a segment on the actual
basis / on turnover basis of the segment.
ii) Pricing for Inter Segment transfers has been made, considering the
normal internal business reporting system of the company at estimated
realisable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
Q) LEASES
i) The determination of whether an agreement is, or contains, a lease
is based on the substance of agreement at the date of inception.
ii) Operating leases - assets leased out under operating leases are
capitalised. Lease rental income is recognised on an accrual basis.
iii) In respect of operating lease, the depreciation is recognised in
the Profit and Loss Statement.
iv) Initial direct costs, if any, incurred specifically to earn revenue
from operating lease, is recognised as expense in the Profit and Loss
Statement.
R) RESEARCH AND DEVELOPMENT COSTS
Revenue expenditure pertaining to research is charged to the Profit and
Loss Statement. Development costs of products are charged to the Profit
and Loss Statement unless a product's technological feasibility has
been established, in which case such expenditure is capitalised.
S) BORROWING COSTS
Borrowing costs attributable to the acquisition, construction or
production of qualifying assets are added to the cost of those assets,
up the date when the assets are ready for their intended use. All other
borrowing costs are recognised in the Profit and Loss Statement in the
period in which they are incurred.
Mar 31, 2014
A) The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with the
applicable accounting standards specified in Companies (Accounting
Standard) Rule 2006, the provisions of Companies Act 1956. The
disclosure and other requirements under the Micro, Small and Medium
Enterprises Development Act, 2006 have been considered.
B) Revenue recognition:
(i) Sales are recognised when goods are despatched and are recorded
excluding Sales Tax and recoveries. There is no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
(ii) Rental Income / Interest income / Service / Process Charge is
accounted on accrual basis.
(iii) Dividend income on investments/claims are accounted for, when the
right to receive the payment is established. Dividends from foreign
company is accounted on receipt.
C) Duty Draw Back claims:
i) Duty draw back claims, other Export benefits are accounted on
completion of exports, on complying with the rules of the scheme
governing it. No obligation is attached to this assistance.
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Focus market /
product licences for which no obligation is attached, is recognised
under income approach method.
D) Expenditure:
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of inputs are accounted net of
duty concessions availed.
E) Use of estimates:
The preparation of financial statement requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statement and the reported amount of
income and expenses during the year.
F) Fixed Assets and Depreciation:
i) Land including lease is stated at cost except for a portion
revalued. Other Fixed Assets are stated at cost less depreciation. The
cost include borrowing cost and in respect of imported machinery the
cost include the value portion of customs duty credit availed as
granted by the government under export incentive schemes. The Capital
subsidy from government is accounted when the right to receive is
established and is deducted from the gross value of the respective
assets. Assets under erection/construction are stated at value
incurred.
ii) Depreciation in respect of all assets at Loyal division excepting
Plant and Machinery (On SLM basis) has been provided on written down
value basis at the rates specified in Schedule XIV to the Companis Act
1956.
iii) Depreciation in respect of all assets at Valli Division,
Processing Division and Plant and Machinery of Loyal division (except
as stated specifically elsewhere), SCTM division has been provided at
the rates specified in Schedule XIV to the Companies Act, 1956 on
straight line basis. Depreciation in respect of all assets at Garment
division has been provided on written down value basis at the rates
specified in Schedule XIV. Rate of depreciation is determined on
certain assets as per the internal assessment on the useful life of
such assets.
iv) Depreciation in respect of all assets (except Furniture & Vehicles,
which has been provided on WDV basis) at Shri Vishala Textile Mills
division has been provided on SLM basis at the rates specified in
Schedule XIV of the Companies Act, 1956.
v Depreciation in respect of additions/sales has been provided pro-rata
from the date of commissioning or till the date of sale as rounded off
to the nearest month.
vi) The increase / decrease in long term liability due to fluctuation
in foreign currency in respect of imported Plant and Machinery beyond
the date of commissioning is taken to Profit and Loss account.
Depreciation has been provided from the date of commissioning. The
assets identified as obsolete and held for disposal are stated at their
estimated net realisable values.
G. Foreign Currency Transactions:
i) Foreign Currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on
Foreign Currency Transactions covered by specific forward contracts are
recognised over the period of the contract.
ii) Foreign Exchange assets and liabilities are converted at the year
end exchange rates. However non monetary assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the profit and loss statement.
H. Retirement benefits:
a) Short term benefits:
The gross amounts are recognized as expense and to the extent unpaid it
is recognized as liability.
Short term compensated absences are provided for based on internal
assessment.
Long term compensated absences are provided for based on actuarial
valuation.
b) Post employment benefits:
Provident fund and other funds, being defined contribution schemes, the
contributions are charged to the Profit and Loss Account of the year
when the contributions, for the covered employees, to the respective
government administered funds are due. Gratuity, being a defined
benefit plan, the defined benefit obligations are provided for on the
basis of an actuarial valuation made at the end of each financial year.
c) Other long term benefits:
Deferred employee benefits/deferred compensation and Termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement scheme are charged to the Profit
and Loss Account in the year incurred. Actuarial gains/losses are
immediately taken to the Profit and Loss account and are not deferred.
I) Valuation of Inventories:
a) Inventories are valued at lower of cost or net realisable value,
cost being ascertained on the following basis:
i) Stores and spares, raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods - cost includes applicable
production overheads.
iii) Traded goods - at lower of Cost or net realisable value.
b) Obsolete/non-moving Inventories are provided for to the extent of
requirement and are stated at net realisable value.
J. Investments:
Investments being long term are valued at Cost. Provision for permanent
diminution in value is made, when considered necessary.
K. Taxes on Income :
Current Tax is determined on the basis of taxable income for the year.
Deferred tax is recognised for all timing differences, subject to the
consideration of prudence.
L. Cash Flow Statement:
Cashflow is reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M. Impairment of Fixed Assets:
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the Company''s fixed
assets. Impairment loss is recognised as and when required.
N. Earnings per share:
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O. Provisions and contingent liabilities:
The company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P. SEGMENT REPORTING:
SEGMENT INFORMATION:
a) The company has identified four reportable business segments as
primary segments viz : yarn, yarn for trading, cloth and garments.
b) The secondary segment information are identified on the basis of
geographical segments viz. Europe, Asia, U.S.A and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting.
i) Revenue and Expenses have been identified to a segment on the actual
basis / on turnover basis of the segment.
ii) Pricing for Inter segment transfers has been made, considering the
normal internal business reporting system of the company at estimated
realisable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
Q. Accounting for Leases :
a) The determination of whether an agreement is , or contains , a lease
is based on the substance of agreement at the date of inception.
b) Operating leases - assets leased out under operating leases are
capitalised, Lease rental income is recognised on an accrual basis.
c) In respect of operating lease, the depreciation is recognised in the
Profit and Loss Statement.
d) Initial direct costs, if any, incurred specifically to earn revenue
from operating lease, is recognised as expenses in the Profit and Loss
Statement.
Mar 31, 2013
A) The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with the
applicable accounting standards specified in Companies (Accounting
Standard) Rule 2006, the provisions of Companies Act 1956. The
disclosure and other requirements under the Micro, Small and Medium
Enterprises Development Act, 2006 have been considered.
B) Revenue recognition:
ii) Sales are recognised when goods are despatched and are recorded
excluding Sales Tax and recoveries. There i s no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
(ii) Rental Income / Interest income / Service / Process Charge is
accounted on accrual basis.
(iii) Dividend income on investments/claims are accounted for, when the
right to receive the payment is established. Dividends from foreign
company is accounted on receipt.
C) Duty Draw Back claims:
ii) Duty draw back claims, other Export benefits are accounted on
completion of exports, on complying with the rules of the scheme
governing it. No obligation is attached to this assistance.
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Target plus licences
for which no obligation is attached, is recognised under income
approach method.
D) Expenditure:
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of inputs are accounted net of
duty concessions availed.
E) Use of estimates:
The preparation of financial statement requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statement and the reported amount of
income and expenses during the year.
F) Fixed Assets and Depreciation:
i)Land including lease is stated at cost except for a portion revalued.
Other Fixed Assets are stated at cost less depreciation. The cost
include borrowing cost and in respect of imported machinery the cost
include the value portion of customs duty credit availed as granted by
the government under export incentive schemes. The Capital subsidy from
government is accounted when the right to receive is established and is
deducted from the gross value of the respective assets. Assets under
erection/construction are stated at value incurred.
ii) Depreciation in respect of all assets at Loyal division excepting
Plant and Machinery (On SLM basis) has been provided on written down
value basis at the rates specified in Schedule XIV to the Companis Act
1956.
iii) Depreciation in respect of all assets at Valli Division,
Processing Division and Plant and Machinery of Loyal division (except
as stated specifically elsewhere), SCTM division has been provided at
the rates specified in Schedule XIV to the Companies Act, 1956 on
straight line basis. Depreciation in respect of all assets at Garment
division has been provided on written down value basis at the rates
specified in Schedule XIV. Rate of depreciation is determind on certain
assets as per the internal assessment on the useful life of such
assets.
iiv) Depreciation in respect of all assets (except Furniture &
Vehicles, which has been provided on WDV basis) at Shri Vishala Textile
Mills division has been provided on SLM basis at the rates specified in
Schedule XIV of the Companies Act, 1956.
v) Depreciation in respect of additions/sales has been provided
pro-rata from the date of commissioning or till the date of sale as
rounded off to the nearest month.
vi) The increase / decrease in long term liability due to fluctuation
in foreign currency in respect of imported Plant and Machinery beyond
the date of commissioning is taken to Profit and Loss account.
Depreciation has been provided from the date of commissioning. The
assets identified as obsolete and held for disposal are stated at their
estimated net realisable values.
G. Foreign Currency Transactions:
ii) Foreign Currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on Foreign
Currency Transactions covered by specific forward contracts are
recognised over the period of the contract.
ii) Foreign Exchange assets and liabilities are converted at the year
end exchange rates. However non-monetary assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the profit and loss account.
H. Retirement benefits:
a) Short term benefits:
The gross amounts are recognized as expense and to the extent unpaid it
is recognized as liability. Short term compensated absences are
provided for based on internal assessment. Long term compensated
absences are provided for based on actuarial valuation.
b) Post employment benefits:
Provident fund and other funds, being defined contribution schemes, the
contributions are charged to the Profit and Loss Account of the year
when the contributions, for the covered employees, to the respective
government administered funds are due. Gratuity, being a defined
benefit plan, the defined benefit obligations are provided for on the
basis of an actuarial valuation made at the end of each financial year.
c) Other long term benefits:
Deferred employee benefits/deferred compensation and Termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement scheme are charged to the Profit
and Loss Account in the year incurred. Actuarial gains/lossess are
immediately taken to the Profit and Loss account and are not deferred.
I) Valuation of Inventories:
a) Inventories are valued at lower of cost or net realisable value,
cost being ascertained on the following basis: I i) Stores and spares,
raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods - cost includes applicable
production overheads. iii) Traded goods - at lower of Cost or net
realisable value.
b) Obsolete/non-moving Inventories are provided for to the extent of
requirement and are stated at net realisable value.
J. Investments being long term are valued at Cost. Provision for
permanent dimunition in value is made, when considered necessary.
K. Taxes on Income - Current Tax is determined on the basis of taxable
income for the year. Deferred tax is recognised for all timing
differences, subject to the consideration of prudence.
L. Cash Flow Statement:
Cashflow is reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M. Impairment of Fixed Assets:
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the company''s fixed
assets. Impairment loss is recognised as and when required.
N. Earnings per share:
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O. Provisions and contingent liabilities:
The company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P. SEGMENT REPORTING:
SEGMENT INFORMATION:
a) The company has identified four reportable business segments as
primary segments viz : yarn, yarn for trading, cloth and garments.
b) The secondary segment information are identified on the basis of
geographical segments viz. Europe, Asia, U.S.A and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting.
I i) Revenue and Expenses have been identified to a segment on the
basis actual / on turnover basis of the segment. ii) Pricing for Inter
segment transfers has been made, considering the normal internal
business reporting system of the company at estimated realisable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
Mar 31, 2012
A) The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with the
applicable accounting standards specified in Companies (Accounting
Standard) Rule 2006, the provisions of Companies Act 1956. The
disclosure and other requirements under the Micro, Small and Medium
Enterprises Development Act, 2006 have been considered.
B) Revenue recognition:
i) Sales are recognized when goods are dispatched and are recorded
excluding Sales Tax and recoveries. There is no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
ii) Rental Income / Interest income / Service / Process Charge is
accounted on accrual basis.
iii) Dividend income on investments / claims are accounted for, when
the right to receive the payment is established.
C) Duty Draw Back claims:
i) Duty draw back claims are accounted on completion of exports, on
complying with the rules of the scheme governing it. No obligation is
attached to this assistance.
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Target plus licences
for which no obligation is attached, is recognised under income
approach method.
D) Expenditure:
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of Inputs are accounted net of
duty concessions availed.
E) Use of estimates:
The preparation of financial statement requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statement and the reported amount of
income and expenses during the year.
F) Fixed Assets and Depreciation :
i) Land including lease is stated at cost except for a portion
revalued. Other Fixed Assets are stated at cost less depreciation. The
cost include borrowing cost and in respect of imported machinery the
cost include the value portion of customs duty credit availed as
granted by the government under export incentive schemes. The Capital
subsidy from government is accounted when the right to receive is
established and is deducted from the gross value of the respective
assets .Assets under erection / construction are stated at value
incurred.
ii) Depreciation in respect of all assets at Loyal division excepting
Plant and Machinery(On SLM basis) has been provided on written Down
value basis at the rates specified in Schedule XIV to the Companies Act
1956.
iii) Depreciation in respect of all assets at Valli Division,
Processing Division and Plant and Machinery of Loyal division (except
as stated specifically elsewhere), SCTM division has been provided at
the rates specified in schedule XIV to the Companies Act, 1956 on
Straight line basis. Depreciation in respect of all assets at Garment
division has been provided on written down value basis at the rates
specified in schedule XIV. Rate of depreciation is determined on
certain assets as per the internal assessment on the useful life of
such assets.
iv) Depreciation in respect of all assets (except Furniture & Vehicles,
which has been provided on WDV basis) at Shri Vishala Textile Mills
division has been provided on SLM basis at the rates specified in
Schedule XIV of the Companies Act, 1956.
v) Depreciation in respect of additions / sales has been provided
pro-rata from the date of commissioning or till the date of sale as
rounded off to the nearest month.
vi) Consequent to the amendment to schedule VI as per notification No.
G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term
liability due to fluctuation in foreign currency in respect of imported
Plant and Machinery beyond the date of commissioning is taken to Profit
and Loss account. Depreciation has been provided from the date of
commissioning. The assets identified as obsolete and held for disposal
are stated at their estimated net realizable values.
G. Foreign Currency Transactions :
i) Foreign currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on Foreign
Currency Transactions covered by specific forward contracts are
recognized over the period of the contract.
ii) Foreign Exchange assets and liabilities are converted at the year
end exchange rates. However non-monitory assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the profit and loss account.
H. Retirement benefits:
a) Short term benefits :
The gross amounts are recognized as expense and to the extent unpaid it
is recognized as liability. Short term compensated absences are
provided for based on internal assessment.
Long term compensated absences are provided for based on actuarial
valuation.
b) Post employment benefits :
Provident fund and other funds, being defined contribution schemes, the
contributions are charged to the Profit and Loss Account of the year
when the contributions, for the covered employees, to the respective
government administered funds are due. Gratuity, being a defined benefit
plan, the defined benefit obligations are provided for on the basis of
an actuarial valuation made at the end of each financial year.
c) Other long term benefits :
Deferred employee benefits/deferred compensation and Termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement scheme are charged to the Profit
and Loss Account in the year incurred. Actuarial gains/losses are
immediately taken to the Profit and Loss account and are not deferred.
I. Valuation of inventories :
a) Inventories are valued at lower of cost or net realizable value,
cost being ascertained on the following basis:
i) Stores and spares, raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods-Cost includes applicable
production overheads.
iii) Traded goods - Cost at present location and condition.
b) Obsolete / non-moving Inventories are provided for to the extent of
requirement and are stated at net realizable value.
J. Investments being long term are valued at Cost. Provision for
permanent diminution in value is made, when considered necessary.
K. Taxes on Income - Current Tax is determined on the basis of taxable
income for the year. Deferred tax is recognized for all timing
differences, subject to the consideration of prudence.
L. Cash Flow Statement :
Cash flow is reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M. Impairment of Fixed Assets :
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the company's fixed
assets. Impairment loss is recognized as and when required.
N. Earnings per share :
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O. Provisions and contingent liabilities :
The Company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P. SEGMENT REPORTING :
SEGMENT INFORMATION :
a) The company has identified three reportable business segments as
primary segments viz: yarn, cloth and garments.
b) The secondary segment information are identified on the basis of
geographical segments viz. Europe, Asia,U.S.A and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting.
i) Revenue and Expenses have been identified to a segment on the basis
of relationship to operating activities of the segment. Expenses
incurred on behalf of other segments are not directly identifiable to
each reportable segment have been allocated to each segment on the
basis of associated revenues of each segment.
ii) Pricing for Inter segment transfers has been made, considering the
normal internal business reporting system of the company at estimated
realizable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
Mar 31, 2011
A) The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with the
applicable accounting standard specified in Companies (Accounting
Standard) Rule 2006, the provisions of Companies Act 1956. The
disclosure and other requirements under the Micro, Small and Medium
Enterprises Development Act, 2006 have been considered.
B) Revenue recognition:
i) Sales are recognised when goods are despatched and are recorded
excluding Sales Tax and recoveries. There is no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
ii) Rental Income / Interest income is accounted on accrual basis.
iii) Dividend income on investments / claims are accounted for, when
the right to receive the payment is established.
C) Expenditure:
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of Inputs are accounted net of
duty concessions availed.
D) Duty Draw Back claims:
i) Duty draw back claims are accounted on completion of exports, on
complying with the rules of the scheme governing it. No obligation is
attached to this assistance
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Target plus licences
for which no obligation is attached, is recognised under income
approach method.
E) Use of estimates:
The preparation of financial statement requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statement and the reported amount of
income and expenses during the year.
F) Fixed Assets and Depreciation :
i) Land including lease is stated at cost except for a portion
revalued. Other Fixed Assets are stated at cost less depreciation.The
cost include borrowing cost and in respect of imported machinery, the
cost include the value portion of customs duty credit availed as
granted by the government under export incentive schemes. The Capital
subsidy from government is accounted when the right to receive is
established and is deducted from the gross value of the respective
assets .Assets under erection / construction are stated at value
incurred.
ii) Depreciation in respect of all assets at Loyal division excepting
Plant and Machinery has been provided on Written Down value basis at
the rates specified in schedule XIV to the Companies Act 1956.
iii) Depreciation in respect of all assets at Valli Division,
Processing Division and Plant and Machinery of Loyal division (except
as stated specifically elsewhere) SCTM division has been provided at
the rates specified in schedule XIV to the Companies Act, 1956 on
straight line basis. Depreciation in respect of all assets at Garment
division has been provided on written down value basis at the rates
specified in schedule XIV. Rate of depreciation is determined on
certain assets as per the internal assessment on the useful life of
such assets.
iv) Depreciation in respect of additions / sales has been provided
pro-rata from the date of commissioning or till the date of sale as
rounded off to the nearest month.
v) Consequent to the amendment to schedule VI as per notification No.
G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term
liability due to fluctuation in foreign currency in respect of imported
Plant and Machinery beyond the date of commissioning is taken to Profit
and Loss account. Depreciation has been provided from the date of
commissioning. The assets identified as obsolete and held for disposal
are stated at their estimated net realisable values.
G. Foreign Currency Transactions :
i) Foreign currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on Foreign
Currency Transactions covered by specific forward contracts are
recognised over the period of the contract.
ii) Foreign exchange assets and liabilities are converted at the year
end exchange rates. However non-monetory assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the profit and loss account.
H. Retirement benefits:
a) Short term benefits
The gross amounts are recognized as expense and to the extent unpaid it
is recognized as liability. Short term compensated absences are
provided for based on internal assessment. Long term compensated
absences are provided for based on actuarial valuation.
b) Post employment benefits
Provident fund and other funds, being defined contribution schemes, the
contributions are charged to the Profit and Loss Account of the year
when the contributions, for the covered employees, to the respective
government administered funds are due.
Gratuity, being a defined benefit plan, the defined benefit obligations
are provided for on the basis of an actuarial valuation made at the end
of each financial year.
c) Other long term benefits
Deferred employee benefits/deferred compensation and termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement scheme are charged to the Profit
and Loss account in the year incurred. Actuarial gains/losses are
immediately taken to the Profit and Loss account and are not deferred.
I. Valuation of inventories
a) Inventories are valued at lower of cost or net realisable value,
cost being ascertained on the following basis.
i) Stores and spares, raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods cost includes applicable
production overheads.
iii) Traded goods - Cost at present location and condition.
b) Obsolete / non-moving Inventories are provided for to the extent of
requirement and are stated at net realisable value.
J. Investment being long term are valued at Cost. Provision for
permanent dimunition in value is made, when considered necessary.
K. Taxes on Income - Current Tax is determined on the basis of taxable
income for the year. Deferred tax is recognised for all timing
differences, subject to the consideration of prudence.
L. Cash Flow Statement
i) Cashflow are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accurals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M. Impairment of Fixed Assets :
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the company's fixed
assets. Impairment loss is recognised as and when required.
N. Earnings per share :
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O. Provisions and contingent liabilities :
The Company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P. SEGMENT REPORTING:
SEGMENT INFORMATION :
a) The company has identified three reportable business segments as
primary segments viz:yarn, cloth and garments.
b) The secondary segment information are identified on the basis of
geographical segments viz. Europe, Asia and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting.
i) Revenue and expenses have been identified to a segment on the basis
of relationship to operating activities of the segment. Expenses
incurred on behalf of other segments and not directly identifiable to
each reportable segment have been allocated to each segment on the
basis of associated revenues of each segment.
ii) Pricing for Inter segment transfers has been made, considering the
normal internal business reporting system of the company at estimated
realisable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
Q. ACCOUNTING FOR AMALGAMATION :
The company has, in the matter of accounting for amalgamation, adopted
pooling of interest method for recording assets, liabilities and
reserves of the transfer or company at their exisiting carrying value
as recommended by the companies Accounting Standard Rules, 2006 (AS 14)
Mar 31, 2010
A) The accounts have been prepared to comply with, in all material
aspects, the generally accepted accounting principles, under the
historical cost convention, on accrual basis and in line with the
applicable accounting standard specified in Companies (Accounting
Standard) Rule 2006, the provisions of Companies Act 1956. The
disclosure and other requirements under the Micro Small and Medium
Enterprises Development Act, 2006 have been considered.
B) Revenue recognition:
i) Sales are recognised when goods are despatched and are recorded
excluding Sales Tax and recoveries. There is no Excise Duty collection
on sales as the Company has opted out of the duty payment scheme.
ii) Rental Income / Interest income is accounted on accrual basis.
iii) Dividend income on investments / claims are accounted for, when
the right to receive the payment is established.
C) Expenditure:
Expenses are accounted for on accrual basis and provision is made for
all losses and known liabilities. Cost of Inputs are accounted net of
duty concessions availed.
D) Duty Draw Back claims:
i) Duty draw back claims are accounted on completion of exports, on
complying with the rules of the scheme governing it. No obligation is
attached to this assistance
ii) Sale of import entitlements are accounted on completion of
transfer.
iii) Duty portion of capital goods availed against Target plus licences
for which no obligation is attached, is recognised under income
approach method.
E) Use of estimates:
The preparation of financial statement requires the management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosures relating to contingent liabilities as
at the date of the financial statement and the reported amount of
income and expenses during the year.
F) Fixed Assets and Depreciation :
i) Land including lease is stated at cost except for a portion
revalued. Other Fixed Assets are stated at cost less depreciation.The
cost include borrowing cost and in respect of imported machinery, the
cost include the value portion of customs duty credit availed as
granted by the government under export incentive schemes. The Capital
subsidy from government is accounted when the right to receive is
established and is deducted from the gross value of the respective
assets and shown in the fixed assets schedule. Assets under erection
are stated at value incurred.
ii) Depreciation in respect of all assets at Loyal division excepting
Plant and Machinery has been provided on Written Down value basis at
the rates specified in schedule XIV to the Companies Act 1956.
iii) Depreciation in respect of all assets at Valli Division,
Processing Division and Plant and Machinery of Loyal division (except
as stated specifically elsewhere) has been provided at the rates
specified in schedule XIV to the Companies Act, 1956 on straight line
basis. Depreciation in respect of all assets at Garment division has
been provided on written down value basis at the rates specified in
schedule XIV. Rate of depreciation is determined on
iv) Depreciation in respect of additions / sales has been provided
pro-rata from the date of commissioning or till the date of sale as
rounded off to the nearest month.
v) Consequent to the amendment to schedule VI as per notification No.
G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term
liability due to fluctuation in foreign currency in respect of imported
Plant and Machinery beyond the date of commissioning is taken to Profit
and Loss account. Depreciation has been provided from the date of
commissioning. The assets identified as obsolete and held for disposal
are stated at their estimated net realisable values.
G. Foreign Currency Transactions :
i) Foreign currency transactions are recorded at the negotiated rates
prevailing on the dates of transactions. Exchange difference on Foreign
Currency Transactions covered by specific forward contracts are
recognised over the period of the contract.
ii) Foreign exchange assets and liabilities are converted at the year
end exchange rates. However non-monetory assets ie., investments are
stated at the rate prevailing on the date of transaction.
iii) Exchange differences arising on foreign currency transactions are
included in the profit and loss account.
H. Retirement benefits:
a) Short term benefits The gross amounts are recognized as expense and
to the extent unpaid it is recognized as liability. Short term
compensated absences are provided for based on internal assessment.
Long term compensated absences are provided for based on actuarial
valuation
b) Post employment benefits
Provident fund and other funds, being defined contribution schemes, the
contributions are charged to the Profit and Loss Account of the year
when the contributions, for the covered employees, to the respective
government administered funds are due.
Gratuity, being a defined benefit plan, the defined benefit obligations
are provided for on the basis of an actuarial valuation made at the end
of each financial year.
c) Other long term benefits
Deferred employee benefits/deferred compensation and termination
benefits are recognized as an expense as and when incurred. Payments
made under the Voluntary Retirement scheme are charged to the Profit
and Loss account in the year incurred. Actuarial gains/losses are
immediately taken to the Profit and Loss account and are not deferred.
I. Valuation of inventories
a) Inventories are valued at lower of cost or net realisable value,
cost being ascertained on the following basis.
i) Stores and spares, raw-materials on weighted average basis.
ii) Stock-in-process, Finished goods cost includes applicable
production overheads.
iii) Traded goods - Cost at present location and condition.
b) Obsolete / non-moving Inventories are provided for to the extent of
requirement and are stated at net realisable value.
J. Investment being long term are valued at Cost. Provision for
permanent dimunition in value is made, when considered necessary.
K. Taxes on Income - Current Tax is determined on the basis of taxable
income for the year. Deferred tax is recognised for all timing
differences, subject to the consideration of prudence.
L. Cash Flow Statement
i) Cashflow are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accurals of past or future operating cash
receipts or payments. The cash flows from regular revenue generating,
investing and financing activities of the company are segregated.
M. Impairment of Fixed Assets :
Consideration is given at each Balance Sheet date to determine whether
there is any impairment of the carrying amount of the companys fixed
assets. Impairment loss is recognised as and when required.
N. Earnings per share :
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect on any extra ordinary items.
The number of shares used in computing basic and diluted equity shares
is the weighted average number of shares outstanding during the year.
O. Provisions and contingent liabilities :
The Company creates a provision when there is a present obligation as a
result of an event that requires an outflow of resources and a reliable
estimate can be made of the amount. A disclosure for a contingent
liability is made when there is a possible obligation or a present
obligation that may, but probably will not require an outflow of
resources.
P. SEGMENT REPORTING:
SEGMENT INFORMATION :
a) The company has identified three reportable business segments as
primary segments viz:yarn, cloth and garments.
b) The secondary segment information are identified on the basis of
geographical segments viz. Europe, Asia and Others.
c) The Accounting policies adopted for segment reporting are in line
with the accounting policy of the company with the following additional
policies for segment reporting.
i) Revenue and expenses have been identified to a segment on the basis
of relationship to operating activities of the segment. Expenses
incurred on behalf of other segments and not directly identifiable to
each reportable segment have been allocated to each segment on the
basis of associated revenues of each segment.
ii) Pricing for Inter segment transfers has been made, considering the
normal internal business reporting system of the company at estimated
realisable value.
iii) Operating assets and liabilities represent assets / liabilities in
respective segments.
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