Mar 31, 2018
a) Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
Judgements:
The estimates and judgments used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the Company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/ materialised.
The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.
Revenue recognition and presentation
The Company assesses its revenue arrangements against specific criteria, i.e. whether it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services, in order to determine if it is acting as a principal or as an agent. The Company has concluded that they operating on a principal to principal basis in all its revenue arrangements.
When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Company and its business partners are reviewed to determine each partyâs respective role in the transaction.
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest income
For all debt instruments measured either at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Estimates and Assumptions:
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Income taxes
The Company is subject to income tax laws as applicable in India. Significant judgment is required in determining provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Recoverability of deferred taxes
In assessing the recoverability of deferred tax assets, management considers whether it is probable that taxable profit will be available against which the losses can be utilised. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment.
Defined benefit plans
The present value of the gratuity is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
b) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
Assets:
An asset is treated as current when it is:
a) Expected to be realised or intended to be sold or consumed in normal operating cycle.
b) Held primarily for the purpose of trading
c) Expected to be realised within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
Liabilities:
A liability is current when:
(a) It is expected to be settled in normal operating cycle
(b) It is held primarily for the purpose of trading
(c) It is due to be settled within twelve months after the reporting period, or
(d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
Operating cycle: The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
c) Property, Plant and Equipment
Property, plant and equipment and capital work in progress are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Such cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct services, any other costs directly attributable to bringing the assets to its working condition for their intended use and cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (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 within other income.
Depreciation is provided on a pro-rata basis on the straight-line basis on the estimated useful life prescribed under Schedule II to Companies Act , 2013 with the following exception :
- Fixed asset costing upto Rs. 5000 has been fully depreciated during the financial year
- Leasehold land has been amortised over the lease term.
- Freehold Land is not depreciated.
Subsequent costs: The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item of property, plant and equipment, if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably with the carrying amount of the replaced part getting derecognised. The cost for day-to-day servicing of property, plant and equipment are recognised in statement of profit and loss as and when incurred.
Decommissioning Costs: The present value of the expected cost for the decommissioning of an asset, if any, after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Capital work in progress: Capital work in progress comprises the cost of fixed assets that are not ready for their intended use at the reporting date.
Elimination: Property, plant and equipments are eliminated from financial statements, either on disposal or when retired from active use. Losses/gains arising in case retirement/disposals of property, plant and equipment are recognized in the statement of profit and loss in the year of occurrence.
Transition to Ind AS: On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment as at 1st April 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.
d) Investment Properties
Property that is held for rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured at its cost, including related transaction costs and where applicable borrowing costs less depreciation and impairment if any.
The company , based on technical assessment made by management, depreciates the building over estimated useful life of 60 years. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
e) Intangible assets Recognition and measurement
Intangible assets that are acquired by the Company are measured initially at cost. Intangible assets with finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. All expenditures, qualifying as Intangible Assets are amortized over estimated useful life. Specialized softwares are amortized over a period of 3 years or license period whichever is earlier.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its intangible assets recognized as at 1st April 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
Amortisation and useful lives: Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. Amortisation is calculated over the cost of the asset, or other amount substituted for cost.
f) Borrowing costs
Borrowing costs consists of interest and amortization of ancillary costs that an entity incurs in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
g) Foreign currencies Functional and presentational currency
The Companyâs financial statements are presented in Indian Rupees (?) which is also the Companyâs functional currency. Functional currency is the currency of the primary economic environment in which a Company operates and is normally the currency in which the Company primarily generates and expends cash. All the financial information presented in â except where otherwise stated.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at the functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in statement of profit and loss.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
h) Revenue Recognition
Revenue is recognized to the extent that it is probable that economic benefits will flow to the Compay and the revenue can be reliably measured. Following are the specific revenue recognition criteria:
i) Export sale is recognized on transfer of risks and rewards to the customer and on the basis of date of Airway Bill/ Bill of lading.
ii) Sales are shown as net of trade discount and include Freight & Insurance recovered from buyers as per the terms of sale.
iii) Interest income is recognized on time proportion basis.
iv) Dividend income is recognized when the right to receive is established.
v) In case of High Sea Sales revenues are recognized on transfer of title of goods to the customer.
vi) Sale of software/ SAP income is recognized at the delivery of complete module & patches (through reimbursement from group companies).
vii) Income from job work is recognized on the basis of proportionate completion method. However, where job work income is subject to minimum assured profit, it is recognised based on that specific contract.
viii) Commission income is recognized when the services are rendered.
ix) Purchase are recognized upon receipt of such goods by the company.Purchases of imported goods are recognized after completion of custom clearance formalities and upon receipt of such goods by the company.
i) Inventories
i) Inventories of finished goods manufactured by the company are valued style-wise and at lower of cost and estimated net realizable value. Cost includes material cost on weighted average basis and appropriate share of overheads incurred in bringing them to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.
ii) Inventories of finished goods (traded) are valued at lower of procurement cost (FIFO method) or estimated net realizable value.
iii) Inventories of raw material, work in progress, accessories & consumables are valued at cost (weighted average method) or at estimated net realizable value whichever is lower. WIP cost includes appropriate portion of allocable overheads. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
iv) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
j) 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 fulfilment 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.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All the lease other than Finance lease are classified as operating lease.
For arrangements entered into prior to the Ind AS transition date i.e. April 01, 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company as a lessor
Finance lease: Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases.
Operating lease: Rental income from operating leases is recognised on a straightline basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
Company as a lessee Finance lease
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. 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.
Operating lease
A lease where risks and rewards incidental to ownership of an asset substantially vest with the lessor is classified as operating lease. Lease payments under operating leases are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term.
The Company has ascertained that the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases and therefore are not straight-lined. Hence, the lease payments are recognised on an accrual basis as per terms of the lease agreement.
k) Employeeâs benefits
Short term employee benefits: All employee benefits expected to be settled wholly within twelve months of rendering the service are classified as short-term employee benefits. When an employee has rendered service to the Company during an accounting period, the Company recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as an expense unless another Ind AS requires or permits the inclusion of the benefits in the cost of an asset. Benefits such as salaries, wages and short-term compensated absences, bonus and ex-gratia etc. are recognised in statement of profit and loss in the period in which the employee renders the related service.
A liability is recognised for the amount expected to be paid after deducting any amount already paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. If the amount already paid exceeds the undiscounted amount of the benefits, the Company recognises that excess as an asset /prepaid expense to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund.
Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a statutory authority and will have no legal or constructive obligation to pay further amounts.
Retirement benefits in the form of Provident Fund is a defined contribution scheme and contributions paid/ payable towards Provident Fund are recognised as an expense in the statement of profit and loss during the period in which the employee renders the related service. There are no other obligations other than the contribution payable to the respective trusts.
Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employeeâs salary and the tenure of employment. Vesting occurs upon completion of five years of service. The Company accounts for the liability for gratuity benefits payable in future based on an independent actuarial valuation report using the projected unit credit method as at the year end.
The obligations are measured at the present value of the estimated future cash flows. The discount rate is generally based upon the market yields available on Government bonds at the reporting date with a term that matches that of the liabilities.
Re-measurements, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest and if applicable), is reflected immediately in Other Comprehensive Income in the statement of profit and loss. All other expenses related to defined benefit plans are recognised in statement of profit and loss as employee benefit expenses. Re-measurements recognised in Other Comprehensive Income will not be reclassified to statement of profit and loss hence it is treated as part of retained earnings in the statement of changes in equity. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Curtailment gains and losses are accounted for as past service costs.
Other long term employee benefits
As per the Companyâs policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during the service, on early retirement, on withdrawal of scheme, at resignation by employee and upon death of employee. The scale of benefits is determined based on the seniority and the respective employeeâs salary. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest and if applicable), is reflected immediately in Other Comprehensive Income in the statement of profit and loss. All other expenses related to defined benefit plans are recognised in statement of profit and loss as employee benefit expenses. Re-measurements recognised in Other Comprehensive Income will not be reclassified to statement of profit and loss hence it is treated as part of retained earnings in the statement of changes in equity. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Curtailment gains and losses are accounted for as past service costs.
l) Provisions General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, 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.
When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. The unwinding of discount is recognised in the statement of profit and loss as a finance cost.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.
m) Financial instruments
A financial instrument is a contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
(i) Financial assets Initial recognition and measurement
A financial asset is initially recognised at fair value. In case of financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction cost are recognised in the statement of profit and loss. In other cases, the transaction cost are attributed to the acquisition value of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial Asset carried at amortised cost
- Financial Asset at fair value through other comprehensive income (FVTOCI)
- Financial Asset at fair value through profit and loss (FVTPL)
Financial asset 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.
Financial asset 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.
Financial asset at fair value through profit and loss (FVTPL)
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
De-recognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the Companyâs Balance Sheet) when:
(i) The contractual rights to receive cash flows from the asset has expired, or
(ii) The Company has transferred its contractual rights to receive cash flows from the financial asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
(ii) Financial liabilities Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Companyâs financial liabilities include borrowings, trade and other payables, security deposits received etc.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
- Financial liabilities at amortised cost
- Financial liabilities at fair value through profit and loss (FVTPL)
Financial liabilities at amortized cost Loans and borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss. This category generally applies to borrowings.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously
(iv) Derivative financial instruments
The Company uses derivative financial instruments, such as forward currency contracts, interest rate swaps, full currency swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit and loss.
n) Impairment of financial assets
In accordance with Ind-AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
Financial assets that are debt instruments, and are initially measured at fair value with subsequent measurement at amortised cost e.g., trade and other receivables, security deposits, loan to employees, etc.
The Company follows âsimplified approachâ for recognition of impairment loss allowance for trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
ECL is the difference between all contractual cash flows that are due to the group in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historically observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss.
o) Impairment of non-financial assets
The carrying amounts of the Companyâs non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit (âCGUâ) is the greater of its value in use or its fair value less costs to sell. 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 or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (âCGUâ).
An impairment loss is recognized, if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount and is recognised in statement of profit and loss.
Impairment losses recognised in prior periods are assessed at end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
p) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(a) In the principal market for the asset or liability, or
(b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses 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.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
q) Taxes Current income tax
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.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income (OCI) or in equity). Current tax items are recognized 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.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized 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 assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. 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.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period 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 Balance Sheet date. Tax relating to items recognized directly in the equity/other comprehensive income is recognized in respective head and not in the statements of profit & loss.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is adjusted to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
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.
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.
r) Investment in subsidiaries
Investment in subsidiaries
There is an option to measure investments in subsidiaries at cost in accordance with Ind AS 27 at either:
(a) Fair value on date of transition; or
(b) Previous GAAP carrying values
The Company has decided to use the previous GAAP carrying values to value its investments in its subsidiaries as on the date of transition, April 01, 2016.
s) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash balance on hand, cash balance at banks and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
t) Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the year attributable to the shareholders of the Company by the weighted average number of equity shares outstanding as at the end of reporting period.
Diluted EPS amounts are calculated by dividing the profit attributable to the shareholders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
u) Government grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to Profit and Loss on a straight - line basis over the expected lives of related assets and presented within other income.
v) Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
w) Research & development costs
Research and development costs that are in nature of tangible assets and are expected to generate probable future economic benefits are capitalised as tangible assets. Revenue expenditure on research and development is charged to the statement of profit and loss in the year in which it is incurred.
Mar 31, 2015
NOTE 1: CORPORATE INFORMATION
Pearl Global Industries Limited is a public limited company domiciled
in India and has its registered office at A-3, Community Centre,
Naraina Industrial Area, Phase-II, New Delhi-110028. The company is
primarily engaged in manufacturing, sourcing and export of ready to
wear apparels through its facilities and operations in India and
overseas. The Company has its primary listings on Bombay Stock Ex-
change and National Stock Exchange in India.
2.1 Accounting Convention
The financial statements have been prepared in accordance with
applicable accounting standards and relevant presentation requirements
of the Companies Act, 2013 and are based on the historical cost
convention and on an accrual basis of accounting except investment
available for sale and held for trading is measured at fair value and
land and building which is measured at revalued cost. The Company has
complied in all material respects with Accounting Standard notified
under section 133 of the Companies Act, 2013 read with Rule 7 of
Company (Accounts) Rules, 2014, the provisions of the Act (to the
extent notified) and guidelines issued by the Securities and Exchange
Board of India (SEBI). The accounting policies adopted in the
preparation of financial statements are consistent with those of
previous year 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.
2.2 Uses of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires the management to make
judgment, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets & liabilities and disclosure of contingent
liabilities at the end of the reporting period. Although these
estimates are based on the management's best knowledge of current
events and actions, uncertainty about these assumptions and estimates
could results in the outcomes requiring a material adjustment to the
carrying amount(s) of assets or liabilities in future periods.
Differences between the actual results and estimates are recognized in
the year in which the results are known / materialized. Changes in
estimates are reflected in the financial statements in the period in
which changes are made and, if material, their effects are disclosed in
the notes to the financial statements.
2.3 Summary of Significant Accounting Policies
a) Inventories
i) Inventories of fnished goods manufactured by the company are valued
style-wise and at lower of cost and estimated net realizable value.
Cost includes material cost on weighted average basis and appropriate
share of overheads.
ii) Inventories of finished goods (traded) are valued at lower of
procurement cost (FIFO Method) or estimated net realizable value.
iii) Inventories of Raw Material, Work in Progress, Accessories &
Consumables are valued at cost (weighted average method) or at
estimated net realizable value whichever is lower. WIP cost includes
appropriate portion of allocable overheads.
b) Tangible Assets and Capital Work-In-Progress
Tangible Assets are stated at cost less accumulated depreciation and
impairment loss. Cost comprises the purchase price and any attributable
cost including borrowing costs of bringing the asset to its working
condition for its intended use and related pre-operative expenses are
capitalized over the total project at the commencement of project/on
start of commercial production. However, certain land and building are
measured at revalued cost. Gain or loss arising on the sale of fixed
assets are measured as the difference between the net proceeds and the
carrying amount of the asset and are recognized in the Statement of
Profit & Loss in the year in which the asset is sold. Capital
work-in-progress comprises the cost of fixed assets that are not yet
ready for their intended use at the reporting date.
c) Intangible Assets
Intangible assets are recorded at the consideration paid for
acquisition of such assets and are carried at cost less accumulated
amortization and impairment. All expenditures, qualifying as Intangible
Assets are amortized over estimated useful life.
d) Depreciation / Amortization
i) Depreciation on tangible assets is provided on the straight-line
method over the useful lives of assets estimated by the management.
Depreciation for assets purchased / sold during a period is
proportionately charged to Statement of Profit & Loss. Intangible
assets are amortized over their respective individual estimated useful
lives on a straight-line basis, commencing from the date the asset is
available to the Company for its use. The management estimates the
useful lives for the other fixed assets as follows:
ii) Leasehold assets are amortized over the period of lease agreed upon
in the lease agreement entered.
e) Revenue/ Purchase Recognition
Revenue is recognized to the extent that it is probable that economic
benefits Will fowl to the Company and the revenue can be reliably
measured. Following are the specific revenue recognition criteria:
i) Export sale is recognized on transfer of risks and rewards to the
customer and on the basis of date of Airway Bill/ Bill of lading.
ii) Sales are shown as net of trade discount and include Freight &
Insurance recovered from buyers as per the terms of sale.
iii) Interest income is recognized on time proportion basis.
iv) Dividend income is recognized when the right to receive is
established.
v) In case of High Sea Sales revenues are recognized on transfer of
title of goods to the customer.
vi) Sale of software/ SAP income is recognized at the delivery of
complete module & patches (through reimbursement from group companies).
vii) Income from job work is recognized on the basis of proportionate
completion method. However, where job work income is subject to minimum
assured profit, it is recognized based on that specific contract.
viii) Commission income is recognized when the services are rendered.
ix) Purchase are recognized upon receipt of such goods by the company.
Purchases of imported goods are recognized after com- pollution of
custom clearance formalities and upon receipt of such goods by the
company.
f) Foreign Currency Transactions
Initial Recognition: Transactions denominated in foreign currencies are
recorded at an exchange rate prevailing at the time of the transaction.
Sales made in foreign currency are translated on average exchange rate.
Conversion: Monetary items denominated in foreign currency are reported
using the closing exchange rate on each Balance Sheet Date. Non Â
monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
Exchange difference: The exchange difference arising on the settlement
of monetary items or reporting these items at rates different from
rates at which these were initially recorded / reported in previous
financial statements are recognized as income/expense in the period in
which they arise.
g) Investment and Financial Assets
The company has classified its investments as under:- Held for trading
: Trading securities are those (both debt & equity) that are bought and
held principally for the purpose of selling them in near term. Such
securities are valued at fair value and gain/loss is recognized in the
Statement of Profit & Loss. Held to Maturity : The investments are
classified as held to maturity only if the company has the positive
intent and ability to hold these securities to maturity. Such
securities are held at historical cost.
Available-for-sale financial assets : Available-for-sale financial
assets are non-derivative financial assets in listed and unlisted
equity & debt instruments that are designated as available for sale and
are initially recognized at their value. Subsequent to initial
recognition, available-for-sale financial assets are measured at fair
value, with gains or loss recognized as a separate component of equity
as "Investment Revaluation Reserve" until the investment is
de-recognized or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement. When the fair value of unlisted
equity securities cannot be reliably measured because; firstly the
variability in the range of reasonable fair value estimates is
significant for that investment or, secondly the probabilities of the
various estimates within the range cannot be reasonably assessed and
used in estimating fair value. Such securities are stated at cost less
any impairment.
Fair value : The fair value of investments that are actively traded in
organized financial markets is determined by reference to quoted market
bid prices at the close of business at the balance sheet date.
h) Derivative financial instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative con- tract is
entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative. Any gains or losses
arising from changes in fair value on derivatives that do not qualify
for hedge accounting are taken directly to the Statement of Profit &
Loss.
For the purpose of hedge accounting, hedges are classified as:
i) Fair value hedges: A hedge of the exposure to changes in the fair
value of recognized asset or liability or an unrecognized from
commitment (except for foreign risk); or identified portion of such
asset, liability or from commitment (except for foreign risk),or an
identified portion of such asset, liability or from commitment that is
attributable to a particular risk and could affect profit or loss.
ii) Cash few hedges: A hedge of the exposure to variability in cash
flows that is either attributable to a particular risk associated with
a recognized asset or liability or a highly probable forecast
transaction, and could affect proof or loss.
The effective portion of the gain or loss on the hedging instrument is
recognized directly in the equity, while the ineffective portion is
recognized in the Statement of Profit & Loss.
i) Employee Benefits
Expense and Liabilities in respect of employee benefits are recorded in
accordance with Accounting Standard 15 Â Employee Ben- lefts (Revised
2005) :
Short term Employee benefit
Short term employee benefits including short term compensated absences
are recognized as an expense at an undiscounted amount in the Statement
of Profit & Loss of the year in which the related service is rendered.
Terminal Benefits are recognized as an expense immediately.
Defend Contribution Plan
Contributions payable to recognized Provident Fund and Employee State
Insurance scheme, which are substantially defend con- attribution
plans, are recognized as expense in the Statement of Profit & Loss, as
they are incurred.
Defend Benefit Plan
The cost of providing defend benefits is determined using the Projected
Unit Credit Method, with actuarial valuations being carried out at each
balance sheet date. Actuarial gains and losses are recognized in full
in the Statement of Profit and Loss for the period in which they occur.
Past service cost is recognized immediately to the extent that the
benefits are already vested, and other- wise is amortized on a straight
line basis over the average period until the benefit become vested. The
retirement benefit obligation recognized in the balance sheet
represents the present value of the defend bereft obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the scheme.
Other Long term Benefits
Long term compensated absences are provided for on the basis of
actuarial valuation, using the projected unit credit method, at the end
of each financial year. Actuarial gains/ losses, if any, are recognized
immediately in the Statement of Profit and Loss.
j) Borrowing Costs
Borrowing costs include interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost. Borrowing costs
that are attributable to the acquisition or construction of qualifying
fixed assets are capitalized as part of the cost of assets. All other
borrowing costs are recognized as expense in the year in which they are
incurred."
k) Leases
i) The Lease under which the company assumes substantially all the
risks and rewards of ownership are classified as finance leases. Such
assets are capitalized at the inception of the lease at the lower of
the fair value or the present value of mini- mum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost, so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period. ii) Assets acquired under leases where a
significant portion of the risks and rewards of ownership are retained
by the lessor are classified as operating leases. Lease rentals are
charged to the Statement of Profit & Loss on accrual basis on straight
line basis. iii) Assets leased out under operating leases are
capitalized. Rental income is recognized on accrual basis over the
lease term.
l) Taxes On Income
Tax expense comprises current tax and deferred tax.
Current Tax
Current Tax is measured and expected to be paid to the tax authorities
in accordance with the provisions of the Income Tax Act, 1961, and
based on the expected outcome of assessment/appeals. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date. Current Income Tax
relating to the items recognized directly in equity is recognized in
equity and not in the Statement of Profit and Loss.
Deferred Tax
Deferred tax prefect the impact of timing differences between taxable
income and accounting income originating during the cur- rent year and
reversal of timing differences for the earlier years. Deferred tax is
measured using the tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting
date. Deferred tax assets subject to consideration of prudence, are
recognized and carried forward only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realized. Such
assets are reviewed as at each balance sheet date to re-assess
realization.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) paid in the year is charged to the
statement of proof and loss as current tax. The company recognizes MAT
credit available as an asset only to the extent that there is
convincing evidence that the company will pay normal income tax during
the specified period, i.e., the period for which MAT credit is allowed
to be carried forward. In the year in which company rec- onuses MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Al- ternate Tax under the
Income Tax Act, 1961, the said asset is created by way of credit to the
statement of Profit and Loss and shown as "MAT Credit entitlement ".
The company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the company does
not have convincing evidence that it will pay normal tax during the
specified period.
m) Impairment of Assets
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, the
recoverable amount is determined. Where 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. 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 risks specific to the asset.
After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
A previously recognized impairment loss is reversed in Statement of
Profit & Loss only if there has been a change in the assumptions used
to determine the asset's recoverable amount since the last impairment
loss was recognized. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years.
n) Provision, Contingent Liabilities And Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Account. Contingent assets are neither recognized nor
disclosed in the financial statements.
o) Earnings per Share (EPS)
In determining earnings per share, the company considers the net proof
after tax and includes the post tax effect of any extra ordinary items.
i) Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
ii) For the purpose of calculating Diluted Earnings per share, the
number of shares comprises of weighted average shares con- side red for
deriving basic earnings per share and also the weighted average number
of equity share which could have been issued on the conversion of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period, unless they have
been issued at a later date. A transaction is considered to be ant
dilutive if its effect is to increase the amount of EPS, either by
lowering the share count or increasing the earnings.
p) Cash Flow Statement
Cash fows are reported using the indirect method, whereby profit before
tax is adjusted for the effects of transactions of a non-cash nature,
any deferrals or accruals of past or future operating cash receipts or
payments and item of income or expenses associated with investing or
financing cash fows. The cash fows from operating, investing and
financing activities of the Company are segregated as specified in
Accounting Standard -3 (AS-3) " Cash Flow Statement".
q) Cash and Cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks
and corporations. The Company considers all highly liquid investments
with a remaining maturity at the date of purchase of three months or
less and that are readily convertible to known amounts of cash to be
cash equivalents.
Mar 31, 2014
A) Inventories
i) Inventories of finished goods manufactured by the company are valued
at lower of cost and estimated net realizable value. Cost includes
material cost on weighted average basis and appropriate share of
overheads.
ii) Inventories of finished goods traded are valued at lower of
procurement cost (FIFO Method) or estimated net realizable value).
iii) Inventories of Raw Material, Work in Progress, Accessories &
Consumables are valued at cost (weighted average method) or at
estimated net realizable value whichever is lower. WIP cost includes
appropriate overheads.
b) Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) ''Cash Flow Statement'' as issued by the
Companies (Accounting Standards) Rules, 2006.
c) Depreciation / Amortisation
i) Depreciation on fixed assets is provided on Straight Line Method at
the rates and in the manner as prescribed in Schedule XIV of the
Companies Act. Fixed Assets Costing upto Rs. 5,000/- are depreciated
fully in the year of purchase.
ii) Software is amortized over the period of 5 years which in the
opinion of the management is the estimated economic life.
iii) Leasehold land is amortised over the period of lease.
d) Revenue Recognition
i) Export sale is recognized on transfer of risks and rewards to the
customer and the basis of date of Airway Bill/ Bill of lading.
ii) Sales are shown as net of trade discount and include Freight &
Insurance recovered from buyers as per the terms of sale.
iii) Interest income is recognized on time proportion basis.
iv) Dividend income is recognized when the right to receive is
established.
v) In case of High Sea Sales revenues are recognized on transfer of
title of goods to the customer.
vi) Sale of software is recognized at the delivery of complete module &
patches through transfer of code.
vii) Income from job work is recognized on the basis of proportionate
completion method. However, where job work income is subject to Minimum
Assured Profit, it is recognised based on that specific contract.
viii) Commission income is recognized when the services are rendered.
ix) Purchase are recognized upon receipt of such goods by the company.
Purchases of imported goods are recognized after completion of custom
clearance formalities and upon receipt of such goods by the company.
e) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss. Cost comprises the purchase price and any
attributable cost including borrowing costs of bringing the asset to
its working condition for its intended use. and related pre-operative
expenses are capitalized over the total project at the commencement of
project/on start of commercial production. However, certain land and
building are measured at revalued cost. Gain or less arising on the
sale of fixed assets are measured as the difference between the net
proceeds and the Carrying amount of the assets and are recognised in
the statement of Profit & Loss in the year in which the asset is sold.
f) Intangible Assets
Intangible assets such as technical know how fees, etc. which do not
meet the criterions laid down, in the terms of Accounting Standard 26
on "Intangible Assets" as issued by the Companies (Accounting
Standards) Rules,2006 , are written off in the year in which they are
incurred. If such costs/ expenditure meet the criterion, it is
recognized as an intangible asset and is measured at cost. It is
amortized by way of a systematic allocation of the depreciable amount
over its useful life and recognized in the balance sheet at net of any
accumulated amortization and accumulated impairment losses thereon.
g) Foreign Currency Transactions
i) Initial Recognition: Transactions denominated in foreign currencies
are recorded at an exchange rate prevailing at the time of the
transaction.Sales made in foreign currency are translated on average
exchange rate.
Conversion: Monetary items denominated in foreign currency are reported
using the closing exchange rate on each Balance Sheet Date. Non -
monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
Exchange difference: The exchange difference arising on the settlement
of monetary items or reporting these items at rates different from
rates at which these were initially recorded / reported in previous
financial statements are recognized as income/expense in the period in
which they arise.
ii) Investments in foreign entities are recorded at the exchange rates
prevailing on the date of making the investments.
h) Investment and Financial Assets
As per AS-30, the company has classified its investments as follows:-
Held for trading: Trading securities are those (both debt & equity)
that are bought and held principally for the purpose of selling them in
near term. Such securities are valued at fair value and gain/loss is
recognised in the Statement of Profit & Loss. Held to Maturity: The
investments are classified as held to maturity only if the company has
the positive intent and ability to hold these securities to maturity.
Such securities are held at historical cost.
Available-for-sale financial assets: Available-for-sale financial
assets are non- derivative financial assets in listed and unlisted
equity & debt instruments that are designated as available for sale and
are initially recognized at their value. Subsequent to initial
recognition, available-for-sale financial assets are measured at fair
value, with gains or loss recognised as a separate component of equity
as "Investment Revaluation Reserve" until the investment is
derecognised or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement.
When the fair value of unlisted equity securities cannot be reliably
measured because, first the variability in the range of reasonable fair
value estimates is significant for that investment or, secondly the
probabilities of the various estimates within the range cannot be
reasonably assessed and used in estimating fair value, such securities
are stated at cost less any impairment.
Fair value: The fair value of investments that are actively traded in
organised financial markets is determined by rereference to quoted
market bid prices at the close of business at the balance sheet date.
i) Derivative financial instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives
that do not qualify for hedge accounting are taken directly to the
Statement of Profit & Loss. The fair value of forward currency
contracts is calculated by reference to current forward exchange rates
for contracts with similar maturity profiles.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges: A hedge of the exposure to changes in the fair value
of recognized asset or liability or an unrecognized firm commitment
(except for foreign risk); or identified portion of such asset,
liability or firm commitment (except for foreign risk),or an identified
portion of such asset, liability or firm commitment that is
attributable to a particular risk and could affect profit or loss.
Cash flow hedges: A hedge of the exposure to variability in cash flows
that is either attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast
transaction, and could affect profit or loss.
The effective portion of the gain or loss on the hedging instrument is
recognized directly in the equity, while the ineffective portion is
recognized in the Statement of Profit & Loss.
j) Employee Benefit
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employees Benefits
(Revised 2005) as issued by the Companies (Accounting Standards) Rules,
2006.
i) Short term Employee benefit
Short term employee benefits including short term compensated absences
are recognised as an expense at an undiscounted amount in the Statement
of Profit & Loss of the year in which the related service is rendered.
Terminal Benefits re recognized as an expense immediately.
ii) Defined Contribution Plan
Contributions payable to recognized Provident Fund and Employee State
Insurance scheme, which are substantially defined contribution plans,
are recognised as expense in the Statement of Profit & Loss, as they
are incurred.
iii) Defined Benefit Plan
The cost of providing defined benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried
out at each balance sheet date. Actuarial gains and losses are
recognized in full in the Statement of Profit and Loss for the period
in which they occur. Past service cost is recognized immediately to the
extent that the benefits are already vested, and otherwise is amortized
on a straight line basis over the average period until the benefit
become vested. The retirement benefit obligation recongnised in the
balance sheet represents the present value of the defined benefit
obligation as adjusted for unrecognized past service cost and as
reduced by the fair value of scheme assets. Any asset resulting from
this calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions to
the scheme.
(iv) Other Long term Benefits
Long term compensated absences are provided for on the basis of
acturial valuation, using the projected unit credit method, at the end
of each financial year. Acturial gains/ losses, if any are recognised
immediately in the Statement of Profit and Loss.
k) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to the Statement of Profit & Loss.
L) Leases
i) In respect of lease transactions entered into prior to April 1,
2001, lease rentals of assets acquired are charged to the Statement of
Profit & Loss.
ii) Lease transactions entered into on or after April,1,2001:
- Assets acquired under leases where the company has substantially
all the risks and rewards of ownership are classified as finance
leases. Such assets are capitalized at the inception of the lease at
the lower of the fair value or the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
- Assets acquired under leases where a significant portion of the
risks and rewards of ownership are retained by the lessor are
classified as operating leases. Lease rentals are charged to the
Statement of Profit & Loss on accrual basis on straight line basis.
iii) Assets leased out under operating leases are capitalized. Rental
income is recognized on accrual basis over the lease term.
m) Taxes On Income
i) Current tax is amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
ii) Deferred tax is recognized on timing differences being the
differences between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized if there is a virtual certainty that
there will be sufficient future taxable income available to reverse
such losses.
n) Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit & Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
o) Provision, Contingent Liabilities And Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Account. Contingent assets are neither recognized nor
disclosed in the financial statements.
p) Earning per Share (EPS)
In determining earnings per share, the company considers the net profit
after tax and includes the post tax effect of any extra ordinary items.
Basic earning per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating Diluted Earning per share, the number of
shares comprises of weighted average shares considered for deriving
basic earning per share and also the weighted average number of equity
share which could have been issued on the conversion of all dilutive
potential equity shares. Dilutive potential equity shares are deemed
converted as of the beginning of the period, unless they have been
issued at a later date. A transaction is considered to be antidilutive
if its effect is to increase the amount of EPS, either by lowering the
share count or increasing the earnings.
(b) Terms/rights attached to equity shares
The company has only one class of equity shares having per value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The company declares and pays dividends in Indian rupees. For
the year ended March 31, 2014, the amount of Rs. 2 per (March 31,2013: Rs.
1 per share) share has been proposed to be declared as dividend for
distribution to equity shareholders. The dividend proposed by the Board
of Directors is subject to the approval of the shareholders in the
ensuing Annual General Meeting.
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
a. In case of secured loans, the nature of security are:
(i) The Loan from Kotak Mahindra bank was secured by exclusive first
charge on immovable property located at Plot No. 10; Sector - 5 ,
Growth center, Bawal. However, during the year ended March 31,2014 the
bank released the charge from such property and presently the loan is
(with effect from Aug 2013) secured by charge on immvobale property
situated at Plot No. 446, Phase-V, Udyog Vihar Industrial Estate,
Haryana. The loan is also secured by personal guaranter of the
Promoter director.
(ii) Term loan from Axis bank is secured by equitable mortgage on
property situated at plot no. 21/13-X, Block-A, Naraina Industrial
Area, Phase-II, New Delhi owned and guaranteed by the promoter
directors of the company. The account was repayable Rs. 909,600 p.m. by
January 2016. However, the loan account is preclosed and outstanding
amount is fully paid before the reporting date. Accordingly, the
security corresponding to this loan has also been released as of the
reporting date.
(iii) Vehicle loans are secured against hypothecation of respective
vehicles.
Note 8: Provisions
a) In case of secured loans, the nature of security are:
Working Capital Loan including bill discounting under consortium of
banks are secured by first pari-passu charge on present and future
movable fixed assets comprising vehicle, furniture and fixtures,
disposable fixed assts, stocks of raw material, stocks in process,
stores & spares, bill receivable & book debts, mortgage of the
properties situated at Plot No.H-597-603, RICCO Industrial Area,
Bhiwadi, Alwar and Plot No.16-17, Phase-VI, Udyog Vihar, Gurgaon and
personal guarantee by promotor director of the company.
b) Loan from Directors: Loan from directors is repayable on demand,
taken during ordinary course of business.
2. The Depreciation of Rs. 97,461,842 for the year includes depreciation
of Rs. 19,690,911 on assets transferred under scheme of Demerger through
column "Depreciation- Deletion on account of Demerger" in the above
chart. Therefore, depreciation for the year charged to statement of
Profit & Loss is Rs. 77,770,931.
3 In the earlier years, the company had initiated the process of
converting its leasehold land into freehold land. However, the deed is
yet to be transferred in the name of the Company as at March 31, 2014.
4. Opening balance of land includes Rs. 45,229,131 on account of
revaluation on 31.03.2002.
5 Opening balance of building includes Rs. 5,932,276 on account of
reduction in revaluation on 31.03.2002.
6. Cost of Land Include Rs. 3,070,006 (March 31, 2013: Nil) being
borrowing cost capitalised in accordance with Accounting Standard AS-16
on "Borrowing Cost" as specified in the Companies Accounting Standard
Rules 2006.
7. The above includes the amount of Land of Rs. 15,954,319 (March 31,2013
: Rs. 15,954,319) & Building of Rs. 23,434,599 (March 31, 2013 : Rs.
23,434,599) situated at Narshingpur, Tehsil District gurgaon for which
the company has executed an agreement for the construction of
commercial project with DLF Retail Developers Ltd. on November 30th
2007. However, as certified by the Management, the work has not started
during the financial year 2013-14.
Mar 31, 2013
A) Inventories
i) Inventories of finished goods manufactured by the company are valued
at lower of cost and estimated net realizable value. Cost includes
material cost on weighted average basis and appropriate share of
overheads.
ii) Inventories of finished goods traded are valued at lower of
procurement cost (FIFO Method) or estimated net realizable value).
iii) Inventories of Raw Material, Work in Progress, Accessories &
Consumables are valued at cost (weighted average method) or at
estimated net realizable value whichever is lower. WIP cost includes
appropriate overheads.
b) Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (ASÂ3) ''Cash Flow Statement'' as issued by the
Companies (Accounting Standards) Rules,2006.
c) Depreciation / Amortisation
i) Depreciation on fixed assets is provided on Straight Line Method at
the rates and in the manner as prescribed in Schedule XIV of the
Companies Act. Fixed Assets Costing upto Rs. 5,000/Â are depreciated
fully in the year of purchase.
ii) Software is amortized over the period of 5 years which in the
opinion of the management is the estimated economic life.
iii) Leasehold land is amortised over the period of lease.
d) Revenue Recognition
i) Export sale is recognized on the basis of date of Airway Bill/ Bill
of lading.
ii) Sales are shown as net of trade discount and include Freight &
Insurance recovered from buyers as per the terms of sale.
iii) Interest income is recognized on time proportion basis.
iv) Dividend income is recognized when the right to receive is
established.
v) In case of High Sea Sales revenues are recognized on transfer of
title of goods to the customer.
vi) Sale of software is recognized at the delivery of complete module &
patches through transfer of code.
vii) Income from job work is recognized on the basis of proportionate
completion method. However, where job work income is subject to Minimum
Assured Profit, it is recognised based on that specific contract
viii) Commission income is recognized when the services are rendered.
ix) Purchase are recognized upon receipt of such goods by the company.
Purchases of imported goods are recognized after completion of custom
clearance formalities and upon receipt of such goods by the company."
e) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss. Cost comprises the purchase price and any attributable
cost including borrowing costs of bringing the asset to its working
condition for its intended use. and related preÂoperative expenses are
capitalized over the total project at the commencement of project/on
start of commercial production. However, certain land and building are
measured at revalued cost. Gains or losses arising from sale of fixed
assets are measured as the difference between the net proceeds and the
carrying amount of the asset and are recognised in the Statement of
Profit & Loss in the year in which the asset is sold.
f) Intangible Assets
Intangible assets such as technical know how fees, etc. which do not
meet the criterions laid down, in the terms of Accounting Standard 26
on "Intangible Assets" as issued by the Companies (Accounting
Standards) Rules, 2006, are written off in the year in which they are
incurred. If such costs/ expenditure meet the criterion, it is
recognized as an intangible asset and is measured at cost. It is
amortized by way of a systematic allocation of the depreciable amount
over its useful life and recognized in the balance sheet at net of any
accumulated amortization and accumulated impairment losses thereon.
g) Foreign Currency Transactions
i) Investments in foreign entities are recorded at the exchange rates
prevailing on the date of making the investments.
ii) Sales made in foreign currency are translated on Average exchange
rate . Gain/Loss arising out of fluctuation in the exchange rate on
settlement of the transaction is recognized in Statement of profit and
loss.
iii) Foreign Currency monetary items are reported using the closing
rate. The resultant exchange gain/loss are dealt with in Statement of
profit & loss.
h) Investment and Financial Assets
As per ASÂ30, the company has classified its investments as follows:Â
Held for trading : Trading securities are those (both debt & equity)
that are bought and held principally for the purpose of selling them in
near term. Such securities are valued at fair value and gain/loss is
recognised in the Statement of Profit & Loss.
Held to Maturity : The investments are classified as held to maturity
only if the company has the positive intent and ability to hold these
securities to maturity. Such securities are held at historical cost.
AvailableÂforÂsale financial assets : AvailableÂforÂsale financial
assets are non derivative financial assets in listed and unlisted
equity & debt instruments that are designated as available for sale and
are initially recognized at their value. Subsequent to initial
recognition, availableÂforÂsale financial assets are measured at fair
value, with gains or loss recognised as a separate component of equity
as "Investment Revaluation Reserve" until the investment is
derecognised or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement.
When the fair value of unlisted equity securities cannot be reliably
measured because, first the variability in the range of reasonable fair
value estimates is significant for that investment or, secondly the
probabilities of the various estimates within the range cannot be
reasonably assessed and used in estimating fair value, such securities
are stated at cost less any impairment.
Fair value : The fair value of investments that are actively traded in
organised financial markets is determined by rereference to quoted
market bid prices at the close of business at the balance sheet date.
i) Derivative financial instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative contract is
entered into and are subsequently reÂmeasured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives
that do not qualify for hedge accounting are taken directly to the
Statement of Profit & Loss.
The fair value of forward currency contracts is calculated by reference
to current forward exchange rates for contracts with similar maturity
profiles.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges: A hedge of the exposure to changes in the fair value
of recognized asset or liability or an unrecognized firm commitment
(except for foreign risk); or identified portion of such asset,
liability or firm commitment (except for foreign risk), or an
identified portion of such asset, liability or firm commitment that is
attributable to a particular risk and could affect profit or loss.
Cash flow hedges: A hedge of the exposure to variability in cash flows
that is either attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast
transaction, and could affect profit or loss.
The effective portion of the gain or loss on the hedging instrument is
recognized directly in the equity, while the ineffective portion is
recognized in the Statement of Profit & Loss.
j) Employee Benefit
(i) Short term Employee benefit
ShortÂterm employee benefits including short term compansated absences
are recognized as an expense at the undiscounted amount in the
Statement of Profit and Loss of the year in which related service is
rendered. Terminal benefits are recognized as an expense immediately.
(ii) Defined Contribution Plan
Contributions payable to recognised Provident Fund and Employee State
Insurance scheme, which are substantially defined contribution plans,
are recognised as expense in the Statement of Profit and Loss, as they
incurred.
(iii) Defined Benefit Plan
The obligation in respect of defined benefit plans, which cover
Gratuity and Levae Encashment are provided for on the basis of
Actuarial valuation, using the projected unit credt method, at the end
of each financial year. Actuarial gains/ losses, if any, are recognised
immediately in the Statement of Profit and Loss.
For the employees at Gurgaon unit, company has taken an Employees''
Gratuity Scheme under defined benefit plan and the fund status is being
managed by Life Insurance Corporation of India.
(iv) Other Long Term Benefits
Long term compensated absences are provided for on the basis of
actuarial valuation, using the projected unit credit method, at the end
of each financial year. Actuarial gains/losses, if any, are recognised
immediately in the Statement of Profit and Loss.
k) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
l) Leases
i) In respect of lease transactions entered into prior to April 1,
2001, lease rentals of assets acquired are charged to the Statement of
Profit & Loss.
ii) Lease transactions entered into on or after April,1, 2001:
- Assets acquired under leases where the company has substantially all
the risks and rewards of ownership are classified as finance leases.
Such assets are capitalized at the inception of the lease at the lower
of the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost, so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period.
- Assets acquired under leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the Statement of Profit
& Loss on accrual basis.
iii) Assets leased out under operating leases are capitalized. Rental
income is recognized on accrual basis over the lease term.
m) Taxes On Income
Current tax is amount of tax payable on the taxable income for the year
as determined in accordance with the provisions of the Income Tax Act,
1961. Deferred tax is recognized on timing differences being the
differences between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
periods. Deferred tax assets in respect of unabsorbed depreciation and
carry forward of losses are recognized if there is a virtual certainty
that there will be sufficient future taxable income available to
reverse such losses.
n) Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Statement of Profit & Loss in the year in which an asset is identified
as impaired. The impairment loss recognized in prior accounting period
is reversed if there has been a change in the estimate of recoverable
amount.
o) Provision, Contingent Liabilities And Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Account. Contingent assets are neither recognized nor
disclosed in the financial statements.
Mar 31, 2012
A. Change in Accounting Policy
Presentation and disclosure of financial statements
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements, the adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
b) Inventories
i) Inventories of finished goods manufactured by the company are valued
at lower of cost and estimated net realizable value. Cost includes
material cost on weighted average basis and appropriate share of
overheads.
ii) Inventories of finished goods traded are valued at lower of
procurement cost (FIFO Method) or estimated net realizable value).
iii) Inventories of Raw Material, Work in Progress, Accessories &
Consumables are valued at cost (weighted average method) or at
estimated net realizable value whichever is lower. WIP cost includes
appropriate overheads.
c) Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) 'Cash Flow Statement' as issued by the
Companies (Accounting Standards) Rules,2006.
d) Depreciation I Amortisation
i) Depreciation on fixed assets is provided on Straight Line Method at
the rates and in the manner as prescribed in Schedule XIV of the
Companies Act. Fixed Assets Costing upto Rs. 5,000/- are depreciated
fully in the year of purchase.
ii) Software is amortized over the period of 5 years which in the
opinion of the management is the estimated economic life.
iii) Leasehold land is amortised over the period of lease.
e) Revenue Recognition
i) Export sale is recognized on the basis of date of Airway Bill/ Bill
of lading.
ii) Sales are shown as net of trade discount and include Freight &
Insurance recovered from buyers as per the terms of sale.
iii) Interest income is recognized on time proportion basis.
iv) Dividend income is recognized when the right to receive is
established.
v) In case of High Sea Sales revenues are recognized on transfer of
title of goods to the customer.
vi) Sale of software is recognized at the delivery of complete module &
patches through transfer of code.
vii) Income from job work is recognized on the basis of proportionate
completion method. However, where job work income is subject to Minimum
Assured Profit, it is recognised based on that specific contract.
viii) Commission income is recognized when the services are rendered.
ix) Purchase are recognized upon receipt of such goods by the company.
Purchases of imported goods are recognized after completion of custom
clearance formalities and upon receipt of such goods by the company.
x) Handling Fee income is recognized in the period in which the
services are rendered.
f) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss. Cost comprises the purchase price and any
attributable cost including borrowing costs of bringing the asset to
its working condition for its intended use and related pre-operative
expenses are capitalized over the total project at the commencement of
project/on start of commercial production. However, certain land and
building are measured at revalued cost.
g) IntangibleAssets
Intangible assets such as technical know how fees, etc. which do not
meet the criterion laid down, in the terms of Accounting Standard 26 on
"Intangible Assets" as issued by the Companies (Accounting
Standards) Rules,2006 , are written off in the year in which they are
incurred. If such costs/ expenditure meet the criterion, it is
recognized as an intangible asset and is measured at cost. It is
amortized by way of a systematic allocation of the depreciable amount
over its useful life and recognized in the balance sheet at net of any
accumulated amortization and accumulated impairment losses thereon.
h) Foreign Currency Transactions
i) Investments in foreign entities are recorded at the exchange rates
prevailing on the date of making the investments.
ii) Sales made in foreign currency are translated on average monthly
exchange rate. Gain/Loss arising out of fluctuation in the exchange
rate on settlement of the transaction is recognized in the profit and
loss account.
iii) Foreign Currency monetary items are reported using the closing
rate. The resultant exchange gain/loss are dealt with in profit & loss
account.
i) investment and Financial Assets
As per AS-30, the company has classified its investments as follows:-
Held for trading : Trading securities are those (both debt & equity)
that are bought and held principally for the purpose of selling them in
near term. Such securities are valued at fair value and gain/loss is
recognised in the income statement.
Held to Maturity : The investments are classified as held to maturity
only if the company has the positive intent and ability to hold these
securities to maturity. Such securities are held at historical cost.
Available-for-sale financial assets : Available-for-sale financial
assets are non- derivative financial assets in listed and unlisted
equity & debt instruments that are designated as available for sale and
are initially recognized at their value. Subsequent to initial
recognition, available-for-sale financial assets are measured at fair
value, with gains or loss recognised as a separate component of equity
as "Investment Revaluation Reserve" until the investment is
derecognised or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement.
When the fair value of unlisted equity securities cannot be reliably
measured because, first the variability in the range of reasonable fair
value estimates is significant for that investment or, secondly the
probabilities of the various estimates within the range cannot be
reasonably assessed and used in estimating fair value, such securities
are stated at cost less any impairment.
Fair value: The fair value of investments that are actively traded in
organised financial markets is determined by reference to quoted market
bid prices at the close of business at the balance sheet date.
j) Derivative financial instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative. Any gains or losses
arising from changes in fair value on derivatives that do not qualify
for hedge accounting are taken directly to the income statement.
The fair value of forward currency contracts is calculated by reference
to current forward exchange rates for contracts with similar maturity
profiles.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges: A hedge of the exposure to changes in the fair value
of recognized asset or liability or an unrecognized firm commitment
(except for foreign risk); or identified portion of such asset,
liability or firm commitment (except for foreign risk), or an
identified portion of such asset, liability or firm commitment that is
attributable to a particular risk and could affect profit or loss.
Cash flow hedges: A hedge of the exposure to variability in cash flows
that is either attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast
transaction, and could affect profit or loss.
The effective portion of the gain or loss on the hedging instrument is
recognized directly in the equity, while the ineffective portion is
recognized in the income statement,
k) Employee Benefit
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employees Benefits
(Revised 2005 as issued by the Companies (Accounting Standards)
Rules,2006.
I) Post Employment Benefit Plans
Payments to Defined Contribution Retirements Benefit Schemes are
charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefit become vested.
The retirement benefit obligation recongnised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the scheme.
ii) Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
m) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue,
n) Leases
i) In respect of lease transactions entered into prior to April 1,
2001, lease rentals of assets acquired are charged to profit & loss
account.
ii) Lease transactions entered into on or after April,1, 2001:
- Assets acquired under leases where the company has substantially
all the risks and rewards of ownership are classified as finance
leases. Such assets are capitalized at the inception of the lease at
the lower of the fair value or the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
- Assets acquired under leases where a significant portion of the
risks and rewards of ownership are retained by the lessor are
classified as operating leases. Lease rentals are charged to the profit
& Loss Account on accrual basis.
iii) Assets leased out under operating leases are capitalized. Rental
income is recognized on accrual basis over the lease term, o) Taxes On
Income
Current tax is amount of tax payable on the taxable income for the year
as determined in accordance with the provisions of the Income Tax Act,
1961.
Deferred tax is recognized on timing differences being the differences
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized if there is a virtual certainty that
there will be sufficient future taxable income available to reverse
such losses.
p) Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit & Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount,
q) Provision, Contingent Liabilities And Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Account. Contingent assets are neither recognized nor
disclosed in the financial statements.
Mar 31, 2011
1. Accounting Convention
The financial statements have been prepared to comply with the
mandatory Accounting Standards issued by the Companies (Accounting
Standards) Rules,2006 and the relevant provisions of the Companies Act,
1956 (the 'Act'). The financial statements have been prepared under the
historical cost convention on accrual basis. The accounting policies
have been consistently applied by the company unless otherwise stated.
2. Use of Estimates
The preparation of financial statements is in conformity with generally
accepted accounting principles which requires making of estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets & liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting year. Differences between the actual results and estimates
are recognized in the year in which the results are known /
materialized.
3. Inventories
(a) Inventories of finished goods manufactured by the company are
valued at lower of cost and estimated net realizable value. Cost
includes material cost on weighted average basis and appropriate share
of overheads.
(b) Inventories of finished goods traded are valued at lower of
procurement cost (FIFO Method) or estimated net realizable value.
(c) Inventories of Raw Material, Work in Progress, Accessories &
Consumables are valued at cost (weighted average method) or at
estimated net realizable value whichever is lower. For WIP, cost
included appropriate overheads.
4. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) 'Cash Flow Statement' as issued by the
Companies (Accounting Standards) Rules, 2006.
5. Depreciation
Depreciation on fixed assets is provided on Straight Line Method at the
rates and in the manner as prescribed in Schedule XIV of the Companies
Act. Fixed Assets Costing upto Rs. 5,000/- are depreciated fully in the
year of purchase.
Software is amortized over the period of 5 years which in the opinion
of the management is the estimated economic life.
6. Revenue Recognition
(a) Export sale is recognized on the basis of date of Airway Bill/ Bill
of lading.
(b) Sales are shown as net of trade discount and include Freight &
Insurance recovered from buyers as per the terms of sale.
(c) Interest income is recognized on time proportion basis.
(d) Dividend income is recognized when the right to receive is
established.
(e) In case of High Sea Sales revenues are recognized on transfer of
title of goods to the customer.
7. Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss. Cost comprises the purchase price and any attributable
cost including borrowing costs of bringing the asset to its working
condition for its intended use.
8. Intangible Assets
Intangible assets such as technical know how fees, etc. which do not
meet the criterions laid down, in the terms of Accounting Standard 26
on "Intangible Assets" as issued by the Companies (Accounting
Standards) Rules, 2006 , are written off in the year in which they are
incurred. If such costs/ expenditure meet the criterion, it is
recognized as an intangible asset and is measured at cost. It is
amortized by way of a systematic allocation of the depreciable amount
over its useful life and recognized in the balance sheet at net of any
accumulated amortization and accumulated impairment losses thereon.
9. Foreign Currency Transactions
a) Investments in foreign entities are recorded at the exchange rates
prevailing on the date of making the investments.
b) Sales made in foreign currency are translated on average monthly
exchange rate. Gain/ Loss arising out of fluctuation in the exchange
rate on settlement of the transaction is recognized in the profit and
loss account.
c) Foreign Currency monetary items are reported using the closing rate.
The resultant exchange gain/loss are dealt with in profit & loss
account
10. Investment and Financial Assets
As per AS-30, the company has classified its investments as follows:-
Held for trading : Trading securities are those (both debt & equity)
that are bought and held principally for the purpose of selling them in
near term. Such securities are valued at fair value and gain/loss is
recognised in the income statement.
Held to Maturity : The investments are classified as held to maturity
only if the company has the positive intent and ability to hold these
securities to maturity. Such securities are held at historical cost.
Available-for-sale financial assets : Available-for-sale financial
assets are non-derivative financial assets in listed and unlisted
equity & debt instruments that are designated as available for sale and
are initially recognized at their value. Subsequent to initial
recognition, available- for-sale financial assets are measured at fair
value, with gains or loss recognised as a separate component of equity
as "Investment Revaluation Reserve" until the investment is
derecognised or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement.
Fair value
The fair value of investments that are actively traded in organised
financial markets is determined by reference to quoted market bid
prices at the close of business at the balance sheet date.
11. Derivative financial instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives
that do not qualify for hedge accounting are taken directly to the
income statement.
The fair value of forward currency contracts is calculated by reference
to current forward exchange rates for contracts with similar maturity
profiles.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges: A hedge of the exposure to changes in the fair value
of recognized asset or liability or an unrecognized firm commitment
(except for foreign risk); or identified portion of such asset,
liability or firm commitment (except for foreign risk), or an
identified portion of such asset, liability or firm commitment that is
attributable to a particular risk and could affect profit or loss.
Cash flow hedges: A hedge of the exposure to variability in cash flows
that is either attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast
transaction, and could affect profit or loss.
The effective portion of the gain or loss on the hedging instrument is
recognized directly in the equity, while the ineffective portion is
recognized in the income statement.
12. Employee Benefit
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 Ã Employees Benefits
(Revised 2005 as issued by the Companies (Accounting Standards) Rules,
2006.
(i) Post Employment Benefit Plans
Payments to Defined Contribution Retirements Benefit Schemes are
charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefit become vested. The retirement benefit obligation
recongnised in the balance sheet represents the present value of the
defined benefit obligation as adjusted for unrecognized past service
cost and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the scheme.
(ii) Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
13. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
14. Leases
a) In respect of lease transactions entered into prior to April 1,
2001, lease rentals of assets acquired are charged to profit & loss
account.
b) Lease transactions entered into on or after April,1, 2001:
- Assets acquired under leases where the company has substantially all
the risks and rewards of ownership are classified as finance leases.
Such assets are capitalized at the inception of the lease at the lower
of the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost, so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period.
- Assets acquired under leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the profit & Loss
Account on accrual basis.
c) Assets leased out under operating leases are capitalized. Rental
income is recognized on accrual basis over the lease term.
15. Taxes On Income
Current tax is amount of tax payable on the taxable income for the year
as determined in accordance with the provisions of the Income Tax Act,
1961.
Deferred tax is recognized on timing differences being the differences
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized if there is a virtual certainty that
there will be sufficient future taxable income available to reverse
such losses.
16. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit & Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
17. Provision, Contingent Liabilities And Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes to Account. Contingent assets are neither recognized nor
disclosed in the financial statements.
Mar 31, 2010
1. Accounting Convention
The consolidated financial statements relate to House Of Pearls
Fashions Limited (the Company) & its subsidiary companies. The Company
and its subsidiaries constitute the Group.
a) Basis of Accounting
i) The financial statements of the Group have been prepared under the
historical cost convention on an accrual basis of accounting in
accordance with Generally Accepted Accounting Principles (GAAP),
Accounting Standards notified in Section 211 (3C) and the relevant
provisions thereof except investment available for sale and held for
trading which is measured at fair value and in case of one Indian
subsidiary Pearl Global Limited; where land & building are measured at
revalued cost. However the accounts of foreign subsidiaries have been
prepared in compliance with the local laws and applicable accounting
standards. Necessary adjustments for material variances in the
accounting policies, wherever applicable have been made in the
consolidated financial statements.
ii) The Financial statements of the entities used for the purpose of
consolidation as drawn up to the same reporting period as the company
i.e. financial year ended March 31,2010.
b) Principles of Consolidation
The consolidated financial statements have been prepared on the
following basis.
i) The financial statements of the company and its subsidiary companies
have been combined on a line-by-line basis by adding together the book
values of like items of assets, liabilities, income, and expenses,
after eliminating intra-group balances and intra-group transactions
resulting in unrealized profits or losses.
ii) As far as possible, the consolidated financial statements have been
prepared using uniform accounting policies for like transactions and
other events in similar circumstances and are presented to the extent
possible, in the same manner as the Companys separate financial
statements. Inconsistency, if any, between the accounting policies of
the subsidiary, have been disclosed in the notes to accounts.
iii) The difference of the cost to the company of its investment in
subsidiaries over its share in the equity of the investee company as at
the date of acquisition of stake is recognized in financial statements
as Goodwill or Capital Reserve, as the case may be.
iv) Minority interest in the Equity & Results of the entities that are
controlled by the company is shown as a separate item in the
Consolidated Financial Statement.
v) The CFS are presented, to the extent possible, in the same format as
that adopted by the parent company for its separate financial
statement.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires making of estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets & liabilities at the date of
financial statements and the reported amounts of revenues and expenses
during the reporting year. Differences between the actual results and
estimates are recognized in the year in which the results are known
/materialized.
3. The effect of Changes In Foreign Exchange Rates.
a) Translation of Financial Statements of Foreign Operations
In view of Accounting Standard-"11" Changes in Foreign Exchange Rates
issued by the Companies (Accounting Standards) Rules,2006, the
operations of the foreign subsidiaries are identified as non integral
subsidiaries of the company, and translated into Indian Rupee.
- The Assets and Liabilities of Foreign operations, including
Goodwill/Capital Reserve arising on consolidation, are translated in
Indian Rupee (INR) at foreign exchange rate at closing rate ruling as
at the balance sheet date.
The revenue and expenses of foreign operations are translated in Indian
Rupee (INR) at yearly average currency exchange rate, of the respective
years,
- Foreign exchange differences arising on translation are recognized
as, foreign exchange translation reserve in balance sheet under the
head Reserve & Surplus.
b) Foreign Currency Transactions
- In case of parent company & its Indian subsidiaries sales made in
foreign
currencies are translated on average monthly exchange rate.
- In case of foreign subsidiaries the sales made in foreign currency
are translated at the rate ruling at the date of transaction.
Gain/Loss arising out of fluctuation in the exchange rate on settlement
of the transaction is recognized in the profit and loss account. Other
transactions in foreign currency are recognized on initial recognition
at the exchange rate prevailing at the time of transaction.
- Foreign Currency monetary items are reported using the closing rate
as on balance sheet date. The resultant exchange gain/loss is dealt
with in profit & loss account.
Premium or discount on forward contracts is amortized in the profit and
loss account over the period of the contract. Exchange differences on
such contracts are recognized in the statement of Profit and loss in
the year in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognized
as income or as expense for the period.
4. Inventories
i) Inventories of traded goods are valued at lower of procurement cost
(FIFO Method) or estimated net realizable value. Cost includes expenses
incurred in acquiring the inventories and bringing them to their
existing location and condition.
ii) Inventory of manufactured goods, WIP and raw material are valued at
lower of cost (on weighted average basis) or net realizable value,
except in case of foreign subsidiaries inventories are valued at lower
of cost or net realizable value on FIFO basis. Cost includes an
appropriate share of overheads.
5. Cash Flow Statement
Cash Flow is reported using the indirect method as specified in the
Accounting Standard (AS)-3, Cash Flow Statement issued by the
Companies (Accounting Standards) Rules, 2006.
6. Revenue Recognition
a) Revenue is recognized when significant risk and rewards of ownership
transferred to the buyer.
b) Export Sales is recognized on the basis of date of Airway Bill/Bill
of Lading/Forwarder Cargo receipt.
c) Sales are shown net of sales return/rejection & trade discounts and
include freight & insurance recovered from buyers as per terms of
sales.
d) Income from job work is recognized on the basis of proportionate
completion method.
e) Interest income is recognized on time proportion basis. In case of
Multinational Textile Group Limited and its subsidiaries interest
income is recognized on an accrual basis using the effective interest
method by applying the rate that discounts the estimated future cash
receipts through the expected life of the financial instrument to the
net carrying amount of financial asset.
f) Investment income is recognized as and when the right to receive the
same is established.
g) Handling Fee income, in the period in which the services are
rendered.
h) Commission Income is recognized when the services are rendered.
i) Dividend Income is recognized when the right to receive is
established. In case of Nor Pearl Knitwear Limited (foreign subsidiary)
dividend is accounted for when it is received.
j) Sales in case of high sea sales are recognized on transfer of title
of goods to the customer.
k) Sale of software is recognized at the delivery of complete module &
patches through transfer of code.
7. Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation except in
case of Pearl Global Limited; where land and building are measured at
revalued cost. The cost comprises the purchase price/ Construction cost
and any attributable cost including borrowing cost of bringing the asset
to its working condition for its intended use. In the case of Multinat
-ional Textile Group Limited and its subsidiaries cost also may include
transfers from equity of any gain or loss on qualifying cash flow
hedges of foreign currency purchases of fixed assets.
Purchased software that is integral to the functionality of the related
equipment is capitalized as part of that equipment.
When parts of an item of an asset have different useful lives, they are
accounted for as separate items (major components) of fixed assets.
8. Depreciation
Depreciation on fixed asset is provided on Straight Line Method In
accordance with and in the manner specified in the statute governing
the respective companies. In case of Hopp Fashions (a Partnership Firm),
depreciation on fixed assets have been provided on written down value
(WDV) method, as prescribed under Income Tax Act, 1961.
In case of Indian companies except Hopp Fashions (a Partnership firm)
fixed assets costing up to Rs. 5,000 are depreciated fully in the year
of purchase.
Cost of Leasehold land is amortized over the period of lease.
Software and Trademark is amortized over the period of 5 years which In
the opinion of the management is the estimated economic life.
9. Investments
Except Nor Pearl Knitwear Limited (a foreign subsidiary) where
Investments are stated at cost, the investments are classified as
follows:
Held tor trading : Trading securities are those (both debt & equity)
that are bought and held principally for the purpose of selling them in
near term, such securities are value at fair value and gain/loss is
recognized in the income statement. Held to Maturity : Investment in
debt & capital guard products are classified as held to maturity only
if the company has the positive intent and ability to hold these
securities to maturity, such securities are held at historical cost.
Avallable-for-sale financial assets : Available-tor-sale financial
assets are non- derivative financial assets in listed and unlisted
equity & debt Instruments that are designated as available for sale or
are not classified In any of the other three categories, being
investments at fair value through profit or loss for trading, loans and
receivables and held-to-maturity investments. Subsequent to initial
recognition, avallable-for-sale financial assets are measured at fair
value, with gains or loss recognized as a separate component of equity
as "Investment Revaluation Reserve" until the Investment is
derecognlzed or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is
included in the income statement. When the fair value of unlisted
equity securities cannot be reliably measured because, first the
variability in the range of reasonable fair value estimates is
significant for that investment or, secondly the probabilities of the
various estimates within the range cannot be reasonably assessed and
used in estimating fair value, such securities are stated at cost less
any impairment.
The fair value of investments that are actively traded In organized
financial markets is determined by reference to quoted market bid
prices at the close of business at the balance sheet date.
10. Financial Instruments and hedging
The Company uses derivative financial instruments such as forward
currency contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially
recognized at cost on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value Is negative.
Any gains or losses arising from changes in fair value on derivatives
that do not qualify for hedge accounting are taken directly to the profit
& Loss Account.
The fair value of forward currency contracts is calculated by reference
to current forward exchange rates for contracts with similar maturity
profiles.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges: A hedge of the exposure to changes in the fair value
of recognized asset or liability or an unrecognized firm commitment
(except for foreign risk); or Identified portion of such asset, liability
or firm commitment (except tor foreign risk), or an IdentWeo" portion of
such asset, liability or firm commitment that is attributable to a
particular risk and could affect profit or loss.
Cash flow hedges: A hedge of the exposure to variability In cash flows
that Is either attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast transaction,
and could affect profit or loss.
The effective portion of the gain or loss on the hedging Instrument is
recognized directly in the equity, while the ineffective portion is
recognized In the profit & loss account.
11. Employee Benefits
Except in case of Norp Knit Industries limited (one of the foreign
subsidiary) where the retirement benefits plan has not been introduced,
the following policy Is applicable. a) Pott Employment Benefit Plant
i) Defined Contribution Plan: The companys /state governed provident
fund scheme, insurance scheme and employee pension scheme are defined
contribution plans. Payments to Defined Contribution Retirements
Benefit Schemes are charged as expenses when they fall due.
ii) Defined Benefit Schemes: The employee gratuity fund scheme,
long-term compensated absences and provident fund scheme managed by
trust are the Companys defined benefit plans. The cost of providing
benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognized in full in the profit and
loss account for the period in which they occur. Past service cost is
recognized immediately to the extent that the benefits are already
vested, and otherwise Is amortized on a straight line basis over the
average period until the benefit become vested. The retirement benefit
obligation recognized in the balance sheet represents the present value
of the defined benefit obligation as adjusted for unrecognized past
service cost and as reduced by the fair value of scheme assets. Any
asset resulting from this calculation is limited to past service cost,
plus the present value of available refunds and reductions in future
contributions to the scheme. b) Short Term Employee Benefits
The undlscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
12. Borrowing Coat
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
13. Leases
a) In respect of lease transactions entered into prior to April 1,
2001, lease rentals of assets acquired are charged to profit 4 loss
account.
b) Lease transactions entered into on or after April, 1,2001:
- Assets acquired under leases where the company has substantially all
the risks and rewards of ownership are classified as finance leases.
Such assets an capitalized at the Inception of the lease at the lower
of the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the Interest cost, so as to
obtain a constant periodic rate of Interest on the outstanding
liability for each period.
- Assets acquired under leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the profit & Loss
Account on accrual basis.
- Assets leased out under operating leases are capitalized. Rental
Income is recognized on accrual basis over the lease term.
14. Taxee On Income
a) Indian Companies
I) Income tax on the profit or loss for the year comprises current tax.
The current tax Is the expected tax payable on the taxable income for
the year, using tax rates enacted at the balance sheet date.
II) The Deferred tax Is recognized on timing differences; being the
differences between taxable Incomes and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods.
III) The Deferred tax assets In respect of unabsorbed depreciation and
carry forward of losses are recognized if there Is a virtual certainty
that there will be sufficient future taxable Income available to
reverse such losses.
b) Foreign Companies
Foreign companies recognize tax liabilities and assets In accordance
with applicable local laws.
15. Impairment of Assets
An asset other than Inventories Is treated as impaired when the
carrying cost of assets exceeds Its recoverable value. An Impairment
loss is charged to the Profit & Loss Account in the year in which an
asset is Identified as impaired. The Impairment loss recognized In
prior accounting period Is reversed If there has been a change in the
estimate of recoverable amount,
16 Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there Is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed In the
notes. Contingent assets are neither recognized nor disclosed in the
financial statements.