Mar 31, 2022
1. CORPORATE AND GENERAL INFORMATION
Rupa & Company Limited (the Company) was incorporated in India in the year 1985 and having its registered office in Metro Towers, 8th Floor, 1, Ho Chi Minh Sarani, Kolkata - 700071 .
The Company is a Public Limited Company domiciled in India & is incorporated under provision of Companies Act applicable in India. Its shares are listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. The Company is primarily engaged in manufacture of hosiery products in knitted undergarments, casual wears and thermal wears. It also has a Power Generation Unit operated on Windmill process.
2. BASIS OF ACCOUNTING2.1 Statement of Compliance
These financial statements have been prepared in accordance with the Indian Accounting Standards ("Ind ASâ) as prescribed by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 ("the Actâ), read with the Companies (Indian Accounting Standards) Rules, 2015 (as amended), other relevant provisions of the Act and other accounting principles generally accepted in India.
The standalone financial statements are approved for issue by the Company''s Board of Directors at their meeting held on May 23, 2022.
The Financial Statements have been prepared on historical cost basis, except for following:
> Financial assets and liabilities (including derivative instruments) that is measured at Fair value/ Amortised cost;
> Non-current assets held for sale - measured at the lower of the carrying amounts and fair value less cost to sell;
> Defined benefit plans - plan assets measured at fair value.
2.3 Functional and Presentation Currency
The Financial Statements have been presented in Indian Rupees (INR), which is also the Company''s functional currency. All financial information presented in (?) has been rounded off to the nearest lakhs as per the requirements of Schedule III, unless otherwise stated.
2.4 Use of Estimates and Judgements
The preparation of financial statements requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the 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 result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
2.5 Current Vs non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is classified as current when it is:
> Expected to be realized or intended to sold or consumed in normal operating cycle;
> Held primarily for the purpose of trading;
> Expected to be realized within twelve months after the reporting period; or
> 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 the other assets are classified as non-current.
A liability is current when:
> It is expected to be settled in normal operating cycle;
> It is held primarily for the purpose of trading;
> It is due to be settled within twelve months after the reporting period; or
> There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current. Deferred Tax Assets and Liabilities are classified as noncurrent assets and liabilities respectively.
2.6 Adoption of new accounting standards
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Ministry of Corporate Affairs ("MCAâ) issued notifications dated March 24, 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by the company in its financial statements. These amendments are applicable to the company for the period starting April 1,2021.
Ministry of Corporate Affairs ("MCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1,2022, as below:
> Ind AS 103 - Reference to Conceptual Framework - The amendments specify that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103.
> Ind AS 16 - Proceeds before intended use - The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognized in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment.
> Ind AS 37 - Onerous Contracts - Costs of Fulfilling a Contract - The amendments specify that the cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts.
> Ind AS 109 - Annual Improvements to Ind AS (2021) - The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognize a financial liability.
Based on preliminary assessment, the Company does not expect the amendments listed above to have any significant impact in its financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the financial statements are as given below. These accounting policies have been applied consistently to all the periods presented in the financial statements 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.
Raw materials and packing materials are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials is determined on weighted average basis including packing materials, accessories and dyes and chemicals.
Work-in-progress and Finished Goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of Work-in-progress (measured in kgs) is determined on weighted average basis and cost of work-in-progress (measured in pieces) and cost of finished goods is determined on Retail sales price method.
Traded Goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost of traded goods is determined on weighted average basis.
Adequate provision is made for obsolete and slow-moving stocks, wherever necessary.
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. Net realisable value of work-in-progress is determined with reference to the selling prices of related finished goods.
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand, cheques in hand and short term deposits with an original maturity of three months or less, which are subject to an insignificant risk of change in value.
Income Tax comprises current and deferred tax. It is recognized in The Statement of Profit and Loss except to the extent that it relates to an item recognized directly in equity or in other comprehensive income.
Current tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities using the tax rates (and tax laws) that have been enacted or substantively enacted, at the end of the reporting period.
> Deferred Tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
> Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (i.e., tax base). Deferred tax is also recognized for carry forward of unused tax losses and unused tax credits.
> Deferred tax assets are recognized 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 utilized.
> The carrying amount of deferred tax assets is reviewed at the end of each reporting period. The Company reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or that entire deferred tax asset to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.
> Deferred tax relating to items recognized outside the Statement of Profit and Loss is recognized either in other comprehensive income or in equity. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
> Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
3.4 Property, Plant and Equipment3.4.1. Recognition and Measurement:
> Property, plant and equipment held for use in the production or/and supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost, less any accumulated depreciation and accumulated impairment losses (if any).
> Cost of an item of property, plant and equipment acquired comprises its purchase price including import duties and non-refundable purchase taxes, after deducting any trade discounts and rebates, borrowing cost, if capitalization criteria is met, any directly attributable costs of bringing the assets to its working condition and location for its intended use and present value of any estimated cost of dismantling and removing the item and restoring the site on which it is located.
> In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of directly attributable overheads, directly attributable borrowing costs incurred in bringing the item to working condition for its intended use, and estimated cost of dismantling and removing the item and restoring the site on which it is located. The costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling items produced while bringing the asset to that location and condition are also added to the cost of self-constructed assets.
> If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
> Profit or loss arising on the disposal of property, plant and equipment are recognized in the Statement of Profit and Loss.
> Subsequent costs are included in the asset''s carrying amount, only when it is probable that future economic benefits associated with the cost incurred will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced.
> Major Inspection/ Repairs/ Overhauling expenses are recognized in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any Unamortized part of the previously recognized expenses of similar nature is derecognized.
3.4.3. Depreciation and Amortization
> Depreciation on Property, Plant & Equipment is provided under Straight Line basis using the rates arrived at based on the useful lives as per Schedule II of the Companies Act, 2013. The management has estimated, supported by independent assessment by professionals, the useful lives of certain plant and machinery in the range of 10 - 30 years as against useful life of 15 years stipulated under Schedule II of the Act. The identified components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset. The company has used the following rates to provide depreciation on its Property Plant & Equipment.
Class of Property Plant & Equipment |
Useful Lives estimated by the management (Years) |
Factory Buildings |
30 |
Non-factory Buildings |
60 |
Plant and Equipments |
10 to 30 |
Computer and Data Processing Equipments |
3 to 6 |
Furniture and Fixtures |
10 |
Vehicles |
8 |
Office Equipments |
5 |
> Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
> Depreciation on additions (disposals) during the year is provided on a pro-rata basis i.e., from (up to) the date on which asset is ready for use (disposed of).
> Depreciation on assets built on leasehold land, which is transferrable to the lessor on expiry of lease period, is amortized over the period of lease.
> Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between net disposal proceeds and the carrying amount of the asset and is recognized in the statement of profit and loss.
3.4.5. Reclassification to Investment Property
When the use of a property changes from owner-occupied to investment property, the property is reclassified as investment property at its carrying amount on the date of reclassification.
3.4.6. Capital Work in Progress
Capital work-in-progress is stated at cost which includes expenses incurred during construction period, interest on amount borrowed for acquisition of qualifying assets and other expenses incurred in connection with project implementation in so far as such expenses relate to the period prior to the commencement of commercial production. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under "Other Non-Current Assetsâ.
3.5 Leases3.5.1. Company as a lessor
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises the lease payments as an operating expense on a straightline basis over the lease term, unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Contingent and variable rentals are recognized as expense in the periods in which they are incurred.
(i) Right-of-use Assets (ROU Assets)
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in Note 3.12 Impairment of nonfinancial assets.
Extension and termination options are included in many of the leases. In determining the lease term the management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. Lease payments included in the measurement of the lease liability comprise:
⢠Fixed lease payments (including in-substance fixed payments) payable during the lease term and under reasonably certain extension options, less any lease incentives;
⢠Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
⢠The amount expected to be payable by the lessee under residual value guarantees;
⢠The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
⢠Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
(iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of Property, Plant & Equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Ind AS 115 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Revenue is measured at the fair value of the consideration received / receivable taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the Government.
The specific recognition criteria for revenue recognition are as follows:
Sale of goods is recognised at the point in time when control of the goods is transferred to the customer. The revenue is measured on the basis of the consideration defined in the contract with a customer, including variable consideration, such as discounts, volume rebates, or other contractual reductions. As the period between the date on which the Company transfers the promised goods to the customer and the date on which the customer pays for these goods is generally one year or less, no financing components are taken into account.
Certain contracts provide a customer with a right to return the goods within a specified period. The company uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration to which the company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of return asset (and corresponding adjustment to change in inventory is also recognised for the right to recover products from a customer.
In contracts involving the rendering of services, revenue is measured using the completed service method.
Revenue from sale of Energy (Power) is recognised on the basis of Electrical Units generated net of transmission loss as applicable when no significant uncertainty as to measurability & collectability exists.
For all financial instruments measured at amortized cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset.
Dividend Income from investments is recognized when the Company''s right to receive payment has been established.
3.6.6. Other Operating Revenue
Export incentive and subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions and the incentive will be received. Insurance & other claims, where quantum of accruals cannot be ascertained with reasonable certainty are recognized as income only when revenue is virtually certain which generally coincides with receipt / acceptance.
3.7 Employee Benefits3.7.1. Short Term Benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related services are provided. Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period.
The Company operates the following post employment schemes:
The liability or asset recognized in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods. The defined benefit obligation is calculated annually by Actuaries using the projected unit credit method.
The liability recognized for defined benefit plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. The benefits are discounted using the government securities (G-Sec) at the end of the reporting period that have terms approximating to the terms of related obligation.
Remeasurements of the net defined benefit obligation, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling, are recognized in other comprehensive income. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
Retirement benefits in the form of Provident and Pension Funds are defined contribution schemes and are charged to the statement of profit and loss of the period when the contributions to the respective funds are due. The Company has no obligation other than contributions to the respective funds. The Company recognises contribution payable to the provident fund scheme as expenditure, when an employee renders the selected service.
Government grants are recognized at their fair values when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. Grants related to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to statement of profit or loss on a straight line basis over the expected useful life of the related asset and presented within other operating revenue or netted off against the related expenses.
3.9 Foreign Currency Transactions
> Foreign currency transactions are translated into the functional currency using the spot rates of exchanges at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchanges at the reporting date.
> Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are generally recognized in profit or loss in the year 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 qualifying assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings, the balance is presented in the Statement of Profit and Loss within finance costs.
> Non monetary items are not retranslated at period end and are measured at historical cost (translated using the exchange rate at the transaction date).
> Borrowing cost includes 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 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 capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. The Company considers a period of twelve months or more as a substantial period of time.
> Transaction costs in respect of long term borrowing are amortized over the tenure of respective loans using Effective Interest Rate (EIR) method. All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
Investments in subsidiaries are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the statement of profit and loss.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
> Recognition and Initial Measurement:
All financial assets are initially recognized when the company becomes a party to the contractual provisions of the instruments. A financial asset is initially measured at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
> Classification and Subsequent Measurement:
For purposes of subsequent measurement, financial assets are classified in four categories: o Measured at Amortized Cost;
o Measured at Fair Value Through Other Comprehensive Income (FVTOCI);
o Measured at Fair Value Through Profit or Loss (FVTPL); and
o Designated Equity Instruments measured at Fair Value through Other Comprehensive Income (FVTOCI).
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
o Measured at Amortized Cost : A debt instrument is measured at the amortized cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is achieved by both collecting 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 (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method.
o Measured at FVTOCI : A debt instrument is measured at the FVTOCI if both the following conditions are met:
⢠The objective of the business model is achieved by both collecting contractual cash flows and selling the financial assets; and
⢠The asset''s contractual cash flows represent SPPI.
Debt instruments meeting these criteria are measured initially at fair value plus transaction costs. They are subsequently measured at fair value with any gains or losses arising on remeasurement recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains or losses. Interest calculated using the effective interest method is recognized in the statement of profit and loss in investment income.
o Measured at FVTPL : FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as FVTPL. In addition, the company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
o Equity Instruments measured at FVTOCI : All equity investments in scope of Ind AS - 109 are measured at fair value. Equity instruments which are, held for trading are classified as at FVTPL. For all other equity instruments, the company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. In case the company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment.
> Derecognition
The Company derecognizes a financial asset on trade date only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
> Impairment of Financial Assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS - 109 requires expected credit losses to be measured through a loss allowance. The company recognizes lifetime expected losses for all contract assets and/ or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
> Recognition and Initial Measurement:
Financial liabilities are classified, at initial recognition, as at fair value through profit or loss, loans and borrowings, payables or as derivatives, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
> Subsequent Measurement:
Financial liabilities are measured subsequently at amortized cost or FVTPL. A financial liability is classified as
FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
> Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
> Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparty.
3.13 Impairment of Non-Financial Assets
> The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable value being higher of value in use and net selling price. Value in use is computed at net present value of cash flow expected over the balance useful lives of the assets. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (Cash Generating Units - CGU).
> An impairment loss is recognized as an expense in the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in earlier accounting period is reversed if there has been an improvement in recoverable amount.
3.14 Provisions, Contingent Liabilities and Contingent Assets3.14.1. Provisions
Provisions are recognized when there is a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist when a contract under which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received from it.
3.14.2. Contingent Liabilities
Contingent liability is a possible obligation arising from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognized because it is not possible that an outflow of resources embodying economic benefit will be required to settle the obligations or reliable estimate of the amount of the obligations cannot be made. The Company discloses the existence of contingent liabilities in Other Notes to Financial Statements.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits. Contingent Assets are not recognized though are disclosed, where an inflow of economic benefits is probable.
3.15 Intangible AssetsRecognition and Measurement
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful economic lives.
Subsequent costs are included in the asset''s carrying amount, only when it is probable that future economic benefits associated with the cost incurred will flow to the Company and the cost of the item can be measured reliably. All other expenditure is recognized in the Statement of Profit & Loss.
The useful lives over which intangible assets are amortized are as under:
Assets |
Useful Life (In Years) |
Copyrights & Trade marks |
10 |
Computer software |
5 |
Business Rights |
Over the tenure of the agreement (on straight line basis) |
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit & Loss.
Intangible Assets under Development
Intangible Assets under development is stated at cost which includes expenses incurred in connection with development of Intangible Assets in so far as such expenses relate to the period prior to the getting the assets ready for use.
3.16 Non-current assets (or disposal groups) held for sale and discontinued operations
> Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of the carrying amount and the fair value less cost to sell.
> An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is recognized at the date of de-recognition.
> Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Non-current assets (or disposal group) classified as held for sale are presented separately in the balance sheet. Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part of a single line item in statement of profit and loss.
The identification of operating segment is consistent with performance assessment and resource allocation by the chief operating decision maker (CODM). An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the other components of the Company and for which discrete financial information is available. Based on assessment of CODM in terms of Indian Accounting Standard - 108, the Company is predominantly engaged in a single segment of Garments & Hosiery goods and related services. The analysis of geographical segments is based on the areas in which customers of the Company are located.
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
3.19 Measurement of Fair Values
A number of the Company''s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
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:
> In the principal market for the asset or liability, or
> 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 participant''s 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 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 Inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
> Level 3 â Inputs which are unobservable inputs for the asset or liability.
External valuers are involved for valuation of significant assets & liabilities. Involvement of external valuers is decided by the management of the company considering the requirements of Ind As and selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
3.20 Business combination under common control
Business combinations involving entities or businesses under common control are accounted for using the pooling of interest method. Under pooling of interest method, the assets and liabilities of the combining entities or businesses are reflected at their carrying amounts after making adjustments necessary to harmonise the accounting policies. The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. The identity of the reserves is preserved in the same form in which they appeared in the financial statements of the transferor and the difference, if any, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve.
The scheme of arrangement between the company and it''s wholly owned subsidiary, M/s Oban Fashions Pvt. Ltd. (OFPL) has been accounted under the ''pooling of interests'' method in accordance with Appendix C of Ind AS 103 ''Business Combinations'' and impact has been considered from the beginning of the preceding year i.e. April 1, 2020 as detailed in Note 51 to these standalone financial statements.
3.21 Significant accounting judgements and key sources of estimation:
Information about Significant judgements and Key sources of estimation made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:
> Recognition of Deferred Tax Assets : The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company''s future taxable income against which the deferred tax assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits.
> Useful lives of depreciable/ amortisable assets (tangible and intangible) : Management reviews its estimate of the useful lives of depreciable/ amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to actual normal wear and tear that may change the utility of plant and equipment.
> Extension and termination option in leases : Extension and termination options are included in many of the leases. In determining the lease term the Management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.
This assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the Company.
> Defined Benefit Obligation (DBO) : Employee benefit obligations are measured on the basis of actuarial assumptions which include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, medical cost trends, anticipation of future salary increases and the inflation rate. The Company considers that the assumptions used to measure its obligations are appropriate. However, any changes in these assumptions may have a material impact on the resulting calculations.
> Provisions and Contingencies : The assessments undertaken in recognising provisions and contingencies have been made in accordance with Indian Accounting Standards (Ind AS) 37, ''Provisions, Contingent Liabilities
and Contingent Assets''. The evaluation of the likelihood of the contingent events is applied best judgement by management regarding the probability of exposure to potential loss.
> Impairment of Assets (Investment in Subsidiaries) : Ind AS 36 requires the Company reviews its carrying value of investments in subsidiaries carried at cost annually, or more frequently when there is indication of impairment. If recoverable amount is less than its carrying amount, the impairment loss is accounted for. The values in use (considering discounted cash flows) have been determined by external valuation experts based on management''s financial projections. The determination of the value in use / fair value involves significant management judgement and estimates on the various assumptions including relating to growth rates, discount rates, terminal value, etc.
> Allowances for Doubtful Debts : The Company makes allowances for doubtful debts through appropriate estimations of irrecoverable amount. The identification of doubtful debts requires use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debts expenses in the period in which such estimate has been changed.
> Fair value measurement of financial Instruments : When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow model. The input to these models are taken from observable markets where possible, but where this not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
> Estimation uncertainty relating to the global health pandemic on COVID-19 : The Company has considered internal and certain external sources of information up to the date of approval of the standalone financial statements in determining the impact of COVID-19 pandemic on various elements of its financial statements. The management has used the principles of prudence in applying judgments, estimates and assumptions and based on the current estimates, the management expects to fully recover the carrying amount of inventories, trade receivables, investments and other assets. However, the eventual outcome of the impact of the COVID-19 pandemic may be differen
Mar 31, 2018
1. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the financial statements are as given below. These accounting policies have been applied consistently to all the periods presented in the financial statements.
1.1 Inventories
Raw materials and packing materials are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials is determined on weighted average basis including packing materials, accessories and dyes and chemicals.
Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of Work-in-progress (measured in kgs) is determined on weighted average basis and cost of work-in-progress (measured in pieces) and cost of finished goods is determined on Retail Sales Price Method.
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.
1.2 Cash and Cash Equivalents
Cash and cash equivalents 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 change in value.
1.3 Income Tax
Income Tax comprises current and deferred tax. It is recognized in the Statement of Profit and Loss except to the extent that it relates to an item recognized directly in equity or in other comprehensive income.
Current Tax
Current tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities using the tax rates (and tax laws) that have been enacted or substantively enacted, at the end of the reporting period.
Deferred Tax
- Deferred Tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
- Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (i.e., tax base). Deferred tax is also recognized for carry forward of unused tax losses and unused tax credits.
- Deferred tax assets are recognized 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 utilized.
- The carrying amount of deferred tax assets is reviewed at the end of each reporting period. The Company reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or that entire deferred tax asset to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.
- Deferred tax relating to items recognized outside the Statement of Profit and Loss is recognized either in other comprehensive income or in equity. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
- Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
1.4 Property, Plant and Equipment
1.4.1. Recognition and Measurement:
- Property, plant and equipment held for use in the production or/and supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost, less any accumulated depreciation and accumulated impairment losses (if any).
- Cost of an item of property, plant and equipment acquired comprises its purchase price including import duties and non-refundable purchase taxes, after deducting any trade discounts and rebates, borrowing cost, if capitalization criteria is met, any directly attributable costs of bringing the assets to its working condition and location for its intended use and present value of any estimated cost of dismantling and removing the item and restoring the site on which it is located.
- In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of directly attributable overheads, directly attributable borrowing costs incurred in bringing the item to working condition for its intended use, and estimated cost of dismantling and removing the item and restoring the site on which it is located. The costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling items produced while bringing the asset to that location and condition are also added to the cost of self-constructed assets.
- If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
- Profit or loss arising on the disposal of property, plant and equipment are recognized in the Statement of Profit and Loss.
1.4.2.Subsequent Expenditure
- Subsequent costs are included in the assetâs carrying amount, only when it is probable that future economic benefits associated with the cost incurred will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced.
- Major Inspection/ Repairs/ Overhauling expenses are recognized in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any Unamortized part of the previously recognized expenses of similar nature is derecognized.
1.4.3. Depreciation and Amortization
- Depreciation on Property Plant & Equipment is provided under Straight Line basis using the rates arrived at based on the useful lives estimated by the management. The identified components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset. The company has used the following rates to provide depreciation on its Property Plant & Equipment.
- Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
- The management has estimated, supported by independent assessment by professionals, the useful lives of certain plant and machinery as 10 years. These lives are lower than those indicated in schedule II of Companies Act, 2013.
- Depreciation on additions (disposals) during the year is provided on a pro-rata basis i.e., from (up to) the date on which asset is ready for use (disposed of).
- Depreciation on assets built on leasehold land, which is transferrable to the lessor on expiry of lease period, is amortized over the period of lease.
- Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
- Lease hold land is amortized on a straight line basis over the period of lease i.e ,90 years.
1.4.4. Disposal of Assets
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between net disposal proceeds and the carrying amount of the asset and is recognized in the statement of profit and loss.
1.4.5. Reclassification to Investment Property
When the use of a property changes from owner-occupied to investment property, the property is reclassified as investment property at its carrying amount on the date of reclassification.
1.4.6.Capital Work-in-Progress
Capital work-in-progress is stated at cost which includes expenses incurred during construction period, interest on amount borrowed for acquisition of qualifying assets and other expenses incurred in connection with project implementation in so far as such expenses relate to the period prior to the commencement of commercial production. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under âOther Non-Current Assetsâ.
1.5 Leases
1.5.1.Determining whether an arrangement contains a lease
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered prior to the date of transition, the company has determined whether the arrangement contains a lease on the basis of facts and circumstances existing on the date of transition.
1.5.2.Company as lessor
- Finance Lease
Leases which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased item are classified and accounted for as finance lease. Lease rental receipts are apportioned between the finance income and capital repayment based on the implicit rate of return. Contingent rents are recognized as revenue in the period in which they are earned.
- Operating Lease
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease except where scheduled increase in rent compensates the Company with expected inflationary costs.
1.5.3.Company as Lessee
- Finance Lease
Finance Leases, which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease Payments under such leases are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly to the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the ownership by the end of lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
- Operating Lease
Assets acquired on leases where a significant portion of risk and reward is retained by the lessor are classified as operating leases. Lease rental are charged to statement of profit and loss on a straight-line basis over the lease term, except where scheduled increase in rent compensates the Company with expected inflationary costs.
1.6 Revenue Recognition
- Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the Government.
- The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the companyâs activities as described below. The company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specific of each arrangement.
1.6.1. Sale of Goods
Revenue from the sale of goods is recognized when significant risks and rewards of ownership are transferred to customers and the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Revenue from the sale of goods is measured at the fair value of the consideration received or receivables, net of returns and allowances, trade discounts and volume rebates.
1.6.2. Sale of Services
In contracts involving the rendering of services, revenue is measured using the completed service method.
1.6.3. Sale of Power
Revenue from sale of Energy (Power) is recognised on the basis of Electrical Units generated net of transmission loss as applicable when no significant uncertainty as to measurability & collectability exists.
1.6.4. InterestIncome
For all financial instruments measured at amortized cost, interest income is recorded using the Effective Interest Rate (EIR). EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset.
1.6.5. Dividend Income
Dividend Income from investments is recognized when the Companyâs right to receive payment has been established.
1.6.6. Other Operating Revenue
Export incentive and subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions and the incentive will be received. Insurance & other claims, where quantum of accruals cannot be ascertained with reasonable certainty are recognized as income only when revenue is virtually certain which generally coincides with receipt/ acceptance.
1.7 Employee Benefits
1.7.1. Short Term Benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related services are provided. Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are recognized in respect of employeesâ services up to the end of the reporting period.
1.7.2. Post Employment Benefits
The Company operates the following post employment schemes:
- Defined Benefit Plans
The liability or asset recognized in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods. The defined benefit obligation is calculated annually by Actuaries using the projected unit credit method.
The liability recognized for defined benefit plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. The benefits are discounted using the government securities (G-Sec) at the end of the reporting period that have terms approximating to the terms of related obligation.
Remeasurements of the net defined benefit obligation, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling, are recognized in other comprehensive income. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
- Defined Contribution Plan
Retirement benefits in the form of Provident and Pension Funds are defined contribution schemes and are charged to the statement of profit and loss of the period when the contributions to the respective funds are due. The Company has no obligation other than contributions to the respective funds. The Company recognises contribution payable to the provident fund scheme as expenditure, when an employee renders the selected service.
1.8 Government Grants
Government grants are recognized at their fair values when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. Grants related to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to statement of profit or loss on a straight line basis over the expected useful life of the related asset and presented within other operating revenue or netted off against the related expenses.
1.9 Foreign Currency Transactions
- Foreign currency transactions are translated into the functional currency using the spot rates of exchanges at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchanges at the reporting date.
- Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are generally recognized in profit or loss in the year 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 qualifying assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings, the balance is presented in the Statement of Profit and Loss within finance costs.
- Non monetary items are not retranslated at period end and are measured at historical cost (translated using the exchange rate at the transaction date).
1.10 Borrowing Cost
- Borrowing cost includes 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 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 capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. The Company considers a period of twelve months or more as a substantial period of time.
- Transaction costs in respect of long term borrowing are amortized over the tenure of respective loans using Effective Interest Rate (EIR) method. All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
1.11 Interest in Subsidiaries
Investments in subsidiaries are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the statement of profit and loss.
1.12 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
1.12.1. Financial Assets
- Recognition and Initial Measurement:
All financial assets are initially recognized when the company becomes a party to the contractual provisions of the instruments. A financial asset is initially measured at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
- Classification and Subsequent Measurement:
For purposes of subsequent measurement, financial assets are classified in four categories: o Measured at Amortized Cost;
- Measured at Fair Value Through Other Comprehensive Income (FVTOCI); o Measured at Fair Value Through Profit or Loss (FVTPL); and
- Designated Equity Instruments measured at Fair Value through Other Comprehensive Income (FVTOCI).
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
- Measured at Amortized Cost: A debt instrument is measured at the amortized cost if both the following conditions are met:
- The asset is held within a business model whose objective is achieved by both collecting 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 (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method.
- Measured at FVTOCI: A debt instrument is measured at the FVTOCI if both the following conditions are met:
- The objective of the business model is achieved by both collecting contractual cash flows and selling the financial assets; and
- The assetâs contractual cash flows represent SPPI.
Debt instruments meeting these criteria are measured initially at fair value plus transaction costs. They are subsequently measured at fair value with any gains or losses arising on remeasurement recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains or losses. Interest calculated using the effective interest method is recognized in the statement of profit and loss in investment income.
- Measured at FVTPL: FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as FVTPL. In addition, the company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
- Equity Instruments measured at FVTOCI: All equity investments in scope of Ind AS - 109 are measured at fair value. Equity instruments which are, held for trading are classified as at FVTPL. For all other equity instruments, the company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. In case the company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment.
- Derecognition
The Company derecognizes a financial asset on trade date only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
- Impairment of Financial Assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS - 109 requires expected credit losses to be measured through a loss allowance. The company recognizes lifetime expected losses for all contract assets and/ or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
1.12.2. Financial Liabilities
- Recognition and Initial Measurement:
Financial liabilities are classified, at initial recognition, as at fair value through profit or loss, loans and borrowings, payables or as derivatives, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
- Subsequent Measurement:
Financial liabilities are measured subsequently at amortized cost or FVTPL. A financial liability is classified as FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
- Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
- Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparty.
1.13 Impairment of Non-Financial Assets
- The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable value being higher of value in use and net selling price. Value in use is computed at net present value of cash flow expected over the balance useful lives of the assets. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (Cash Generating Units - CGU).
- An impairment loss is recognized as an expense in the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in earlier accounting period is reversed if there has been an improvement in recoverable amount.
1.14 Provisions, Contingent Liabilities and Contingent Assets
1.14.1. Provisions
Provisions are recognized when there is a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
- Onerous Contracts:
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist when a contract under which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received from it.
1.14.2. Contingent Liabilities
Contingent liability is a possible obligation arising from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognized because it is not possible that an outflow of resources embodying economic benefit will be required to settle the obligations or reliable estimate of the amount of the obligations cannot be made. The Company discloses the existence of contingent liabilities in Other Notes to Financial Statements.
1.14.3. Contingent Assets
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits. Contingent Assets are not recognized though are disclosed, where an inflow of economic benefits is probable.
1.15 Intangible Assets Recognition and Measurement
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful economic lives.
Subsequent Expenditure
Subsequent costs are included in the assetâs carrying amount, only when it is probable that future economic benefits associated with the cost incurred will flow to the Company and the cost of the item can be measured reliably. All other expenditure is recognized in the Statement of Profit & Loss.
Amortization
The useful lives over which intangible assets are amortized are as under:
Disposal
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit & Loss.
Intangible Assets under Development
Intangible Assets under development is stated at cost which includes expenses incurred in connection with development of Intangible Assets in so far as such expenses relate to the period prior to the getting the assets ready for use.
1.16 Non-current assets (or disposal groups) held for sale and discontinued operations
- Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of the carrying amount and the fair value less cost to sell.
- An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is recognized at the date of de-recognition.
- Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Non-current assets (or disposal group) classified as held for sale are presented separately in the balance sheet. Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part of a single line item in Statement of Profit and Loss.
1.17 Operating Segment
The identification of operating segment is consistent with performance assessment and resource allocation by the Chief Operating Decision Maker (CODM). An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the other components of the Company and for which discrete financial information is available. Based on assessment of CODM in terms of Indian Accounting Standard - 108, the Company is predominantly engaged in a single segment of Garments & Hosiery goods and related services. The analysis of geographical segments is based on the areas in which customers of the Company are located.
1.18 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
1.19 Measurement of Fair Values
A number of the Companyâs accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
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:
- In the principal market for the asset or liability, or
- 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 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 Inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 â Inputs which are unobservable inputs for the asset or liability.
External valuers are involved for valuation of significant assets & liabilities. Involvement of external valuers is decided by the management of the company considering the requirements of Ind As and selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
1.20 Significant accounting judgements and key sources of estimation:
Information about Significant judgements and Key sources of estimation made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:
- Recognition of Deferred Tax Assets: The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Companyâs future taxable income against which the deferred tax assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits.
- Useful lives of depreciable/ amortisable assets (tangible and intangible): Management reviews its estimate of the useful lives of depreciable/ amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to actual normal wear and tear that may change the utility of plant and equipment.
- Classification of Leases: The Company enters into leasing arrangements for various assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lesseeâs option to purchase and estimated certainty of exercise of such option, proportion of lease term to the assetâs economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.
- Defined Benefit Obligation (DBO): Employee benefit obligations are measured on the basis of actuarial assumptions which include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, medical cost trends, anticipation of future salary increases and the inflation rate. The Company considers that the assumptions used to measure its obligations are appropriate. However, any changes in these assumptions may have a material impact on the resulting calculations.
- Provisions and Contingencies: The assessments undertaken in recognising provisions and contingencies have been made in accordance with Indian Accounting Standards (Ind AS) 37, âProvisions, Contingent Liabilities and Contingent Assetsâ. The evaluation of the likelihood of the contingent events is applied best judgement by management regarding the probability of exposure to potential loss.
- Impairment of Financial Assets: The Company reviews its carrying value of investments carried at amortized cost annually, or more frequently when there is indication of impairment. If recoverable amount is less than its carrying amount, the impairment loss is accounted for.
- Allowances for Doubtful Debts: The Company makes allowances for doubtful debts through appropriate estimations of irrecoverable amount. The identification of doubtful debts requires use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debts expenses in the period in which such estimate has been changed.
- Fair value measurement of financial Instruments: When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow model. The input to these models are taken from observable markets where possible, but where this not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
1.21 New Standards/ Amendments to Existing Standard issued but not yet effective upto the date of issuance of the Companyâs Financial Statement are disclosed below.
Ind AS 115-Revenue from Contracts with Customers:
The Ministry of Corporate Affairs (MCA) on March 28, 2018 has notified new Indian Accounting Standard as mentioned above. The new standard will come to into force from accounting period commencing on or after April 01, 2018.
It replaces existing recognition guidance, including Ind AS 18 Revenue and Ind AS 11 Construction contract. The Company has evaluated and there is no material impact of this amendment on the Financial Statement of the Company except disclosure. The Company will adopt theInd AS 115 on the required effective date.
Mar 31, 2017
1.1 Basis of preparation
The Financial Statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP). The Company has prepared these Financial Statements to comply in all material respects with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. The Financial Statements have been prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of Financial Statements are consistent with those of previous year.
1.2 Use of Estimates
The preparation of Financial Statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
1.3 Tangible Fixed Assets
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs, if capitalization criteria are met, and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
Depreciation on tangible fixed assets is provided under straight line basis using the rates arrived at based on the useful lives estimated by the management. The identified components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset. The Company has used the following rates to provide depreciation on its tangible fixed assets:
The management has estimated, supported by independent assessment by professionals, the useful lives of certain plant and machinery as 10 years. These lives are lower than those indicated in Schedule II to the Companies Act, 2013.
Leasehold land is amortized on a straight line basis over the period of lease, i.e., 90 years.
1.4 Intangible Assets
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful economic lives.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit & Loss. The useful lives over which intangible assets are amortised are as under:
1.5 Borrowing Costs
Borrowing cost includes 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 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 capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
1.6 Impairment
The carrying amount of assets (tangible and intangible) is reviewed at each Balance Sheet date, to determine if there is any indication of impairment based on the internal/external factors. An impairment loss is recognized wherever the carrying amount of assets exceeds its recoverable amount which is the greater of net selling price and value in use of the respective assets. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and risk specific to the asset. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
1.7 Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are carried in the Financial Statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the long-term investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
1.8 Inventories
Raw materials and packing materials are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials is determined on specific identification basis except packing materials, accessories and dyes and chemicals which are determined on weighted average basis.
Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of work-in-progress (measured in kgs) is determined on specific identification basis and cost of work-in-progress (measured in pieces) and cost of finished goods is determined on Retail Sales Price Method.
Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost of traded goods is determined on First in First out basis.
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.
1.9 Foreign Currency Transactions Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.
Exchange differences arising on the settlement/conversion of monetary items are recognized as income or expenses in the period in which they arise.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit & Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract are recognised as income or as expense for the period.
1.10 Revenue Recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods: Revenue from sale of goods is recognised upon passage of title to the customers, in accordance with the Sales of Goods Act, 1930. Sales are net of discounts, rebates and sales taxes. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenues.
Sale of Services: In contracts involving the rendering of services, revenue is measured using the completed service method.
Interest: Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head âOther Incomeâ in the Statement of Profit and Loss.
Dividend: Dividend income is recognized when the Companyâs right to receive dividend is established by the reporting date.
Export Incentives: Export incentives are recognised when the right to receive such incentives as per the applicable terms is established in respect of the exports made and when there is no significant uncertainty regarding the ultimate realisation / utilisation of such incentives.
Insurance and other claims due to uncertainty in realisation are accounted for on acceptance basis.
1.11 Retirement and Other Employee Benefits
(i) Provident & Pension Fund: Retirement benefits in the form of Provident and Pension Funds are defined contribution schemes and are charged to the Statement of Profit and Loss of the period when the contributions to the respective funds are due. The Company has no obligation other than contributions to the respective funds. The Company recognises contribution payable to the Provident Fund Scheme as an expenditure, when an employee renders the selected service.
(ii) Gratuity: The Company operates Defined Benefit Plan for its employees, viz., Gratuity. The costs of providing benefits under this plan is determined on the basis of actuarial valuation at each year-end. Actuarial valuation is carried out using the Projected Unit Credit Method. Actuarial gains and losses is recognized in full in the period in which they occur in the Statement of Profit and Loss.
(iii) The leave balances of the employees are only encashable during the year and cannot be accumulated and carried forwarded to next year
1.12 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences 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. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
1.13 Provisions, Contingent Liabilities and Contingent Assets
Provisions: A provision is recognized when the Company has a present obligation as a result of 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. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Contingent Liabilities: A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the Financial Statements.
Contingent Assets: A contingent asset is neither provided for nor disclosed
1.14 Operating Lease
Leases where the lessor effectively retains substantially all the risks and benefits of the ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
1.15 Government Grants
Grants and subsidies from the government are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them, and the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs, which they are intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset.
Government grants of the nature of promoterâs contribution are credited to Capital Reserve and treated as a part of Shareholderâs Funds.
1.16 Segment Reporting
Based on the synergies, risks and returns associated with business operations and in terms of Accounting Standard - 17, the Company is predominantly engaged in a single segment of Garments & Hosiery goods and related services. The analysis of geographical segments is based on the areas in which customers of the Company are located.
1.17 Cash and Cash Equivalents
Cash and cash equivalents for the purposes of Cash Flow Statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
1.18 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2016
1. Corporate Information
Rupa & Company Limited (the Company) is a public company domiciled in
India. Its shares are listed on the National Stock Exchange of India
Ltd. and Bombay Stock Exchange Ltd. The Company is primarily engaged in
manufacture of hosiery products in knitted undergarments, casual wears
and thermal wears. It also has a Power Generation Unit operated on
Windmill process.
2. Summary of Significant Accounting Policies
2.1 Basis of preparation
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP) The Company has prepared these financial statements to
comply in all material respects with the Accounting Standards notified
under Section 133 of the Companies Act, 2013, read together with
paragraph 7 of the Companies (Accounts) Rules, 2014. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year.
2.2 Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the 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 result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
2.3 Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs, if capitalization criteria are met, and
directly attributable cost of bringing the asset to its working
condition for the intended use. Each part of an item of property, plant
and equipment with a cost that is significant in relation to the total
cost of the item is depreciated separately. This applies mainly to
components for machinery. When significant parts of fixed assets are
required to be replaced at intervals, the Company recognizes such parts
as individual assets with specific useful lives and depreciates them
accordingly.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Depreciation on fixed assets is provided under Straight Line basis
using the rates arrived at based on the useful lives estimated by the
management. The identified components are depreciated over their useful
lives; the remaining asset is depreciated over the life of the
principal asset. The Company has used the following rates to provide
depreciation on its fixed assets.
The management has estimated, supported by independent assessment by
professionals, the useful lives of certain plant and equipment as 10
years. These lives are lower than those indicated in schedule II.
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 90 years.
2.4 Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful economic lives. Gains or losses arising from the retirement or
disposal of an intangible asset are determined as the difference
between the net disposal proceeds and the carrying amount of the asset
and recognised as income or expense in the Statement of Profit & Loss.
The useful lives over which intangible assets are amortised are as
under:
2.5 Borrowing Costs
Borrowing cost includes 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 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 capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
2.6 Impairment
The carrying amount of assets (tangible and intangible) is reviewed at
each balance sheet date, to determine if there is any indication of
impairment based on the internal/external factors. An impairment loss
is recognized wherever the carrying amount of assets exceeds its
recoverable amount which is the greater of net selling price and value
in use of the respective assets. In assessing the value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessment of the
time value of money and risk specific to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows. After impairment,
depreciation is provided on the revised carrying amount of the asset
over its remaining useful life.
2.7 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the long-term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.8 Inventories
Raw materials and packing materials are valued at lower of cost and net
realizable value. However, materials and other items held for use in
the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost of raw materials is determined on specific
identification basis except packing materials, accessories and dyes and
chemicals which are determined on weighted average basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of Work-in-progress (measured in kgs) is determined on
specific identification basis and cost of work-in-progress (measured in
pieces) and cost of finished goods is determined on Retail sales price
method.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost of traded
goods is determined on First in First out basis.
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.
2.9 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences arising on the settlement/conversion of monetary
items are recognized as income or expenses in the period in which they
arise.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
2.10 Revenue Recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Sale of goods : Revenue from sale of goods is recognised upon passage
of title to the customers, in accordance with the Sales of Goods Act,
1930. Sales are net of discounts, rebates and sales taxes. The Company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to
the Company. Hence, they are excluded from revenues.
Sale of Services : In contracts involving the rendering of services,
revenue is measured using the completed service method.
Interest : Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the applicable interest
rate. Interest income is included under the head "other income" in the
statement of profit and loss.
Dividend : Dividend income is recognized when the company''s right to
receive dividend is established by the reporting date.
Export Incentives : Export incentives are recognised when the right to
receive such incentives as per the applicable terms is established in
respect of the exports made and when there is no significant
uncertainty regarding the ultimate realisation / utilisation of such
incentives.
Insurance and other claims due to uncertainty in realisation are
accounted for on acceptance basis.
2.11 Retirement and Other Employee Benefits
(i) Provident & Pension Fund : Retirement benefits in the form of
Provident and Pension Funds are defined contribution schemes and are
charged to the statement of profit and loss of the period when the
contributions to the respective funds are due. The Company has no
obligation other than contributions to the respective funds. The
Company recognises contribution payable to the provident fund scheme as
an expenditure, when an employee renders the selected service.
(ii) Gratuity : The company operates defined benefit plan for its
employees, viz., gratuity. The costs of providing benefits under this
plan is determined on the basis of actuarial valuation at each
year-end. Actuarial valuation is carried out using the projected unit
credit method. Actuarial gains and losses is recognized in full in the
period in which they occur in the statement of profit and loss.
(iii) The leave balances of the employees are only encashable during
the year and cannot be accumulated and carried forwarded to next year
2.12 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences 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. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
2.13 Provisions and Contingent Liabilities
Provisions : A provision is recognized when the company has a present
obligation as a result of 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. Provisions are not discounted to their present value and
are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to reflect the current best estimates.
Contingent Liabilities : A contingent liability is a possible
obligation that arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain
future events beyond the control of the company or a present obligation
that is not recognized because it is not probable that an outflow of
resources will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where there is a
liability that cannot be recognized because it cannot be measured
reliably. The company does not recognize a contingent liability but
discloses its existence in the financial statements.
2.14 Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased assets are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight line basis over the
lease term.
2.15 Government Grants
Grants and subsidies from the government are recognized when there is
reasonable assurance that the company will comply with the conditions
attached to them, and the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
Government grants of the nature of promoter''s contribution are credited
to Capital reserve and treated as a part of Shareholder''s funds.
2.16 Segment Reporting
Based on the synergies, risks and returns associated with business
operations and in terms of Accounting Standard - 17, the Company is
predominantly engaged in a single segment of Garments & Hosiery goods
and related services during the year. The analysis of geographical
segments is based on the areas in which customers of the Company are
located.
2.17 Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
2.18 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
Mar 31, 2015
Change in Accounting Policy
Depreciation on Fixed Assets
Till the year ended 31 March 2014, Schedule XIV to the Companies Act,
1956 prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV has been replaced by Schedule II to
the Companies Act, 2013. Effective from 1st April, 2014, the Company
has provided depreciation on fixed assets based on useful lives as
provided in Schedule II of the Companies Act, 2013 or as re-assessed by
the Company. The management believes that depreciation rates currently
used fairly reflect its estimate of the useful lives and residual value
of fixed assets, though these rates in certain cases are different from
the rates based on the useful lives prescribed under Schedule II.
Further, on application of Schedule II to the Companies Act, 2013, the
Company has changed the manner of providing depreciation for its fixed
assets. Now, the Company identifies and determines separate useful life
for each major component of the fixed asset, if they have useful life
that is materially different from that of the remaining asset.
Based on transitional provision given in Schedule II to the Companies,
2013, the carrying value of assets whose useful lives are already
exhausted amounting to Rs. 40,57,179 (net of deferred tax of Rs.
20,89,131 ) has been adjusted with opening balance of General Reserve.
Had there been no change in useful lives of fixed assets, the charge to
the Statement of Profit and Loss would have been lower by Rs.
3,73,36,576.
2.2 Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the 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 result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
2.3 Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs, if capitalization criteria are met, and
directly attributable cost of bringing the asset to its working
condition for the intended use. Each part of an item of property, plant
and equipment with a cost that is significant in relation to the total
cost of the item is depreciated separately. This applies mainly to
components for machinery. When significant parts of fixed assets are
required to be replaced at intervals, the company recognizes such parts
as individual assets with specific useful lives and depreciates them
accordingly.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Depreciation on fixed assets is provided under Straight Line basis
using the rates arrived at based on the useful lives estimated by the
management. The company has used the following rates to provide
depreciation on its fixed assets.
Class of Assets Useful Lives estimated by the
management (Years)
Factory Buildings 30
Non-factory Buildings 60
Plant and Equipments 10 to 15
Computer and Data Processing Equipments 3 to 6
Furnitures and Fixtures 10
Vehicles 8
Office Equipments 5
The management has estimated, supported by independent assessment by
professionals, the useful lives of certain plant and equipment as 10
years. These lives are lower than those indicated in schedule II.
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 86 years.
2.4 Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful economic lives.
Gains or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset and recognised
as income or expense in the Statement of Profit & Loss. The useful
lives over which intangible assets are amortised are as under:
Assets Useful Life
(in years)
Copyrights & Trade marks 10
Computer software 5
2.5 Borrowing Costs
Borrowing cost includes 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 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 capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
2.6 Impairment
The carrying amount of assets (tangible and intangible) is reviewed at
each balance sheet date, to determine if there is any indication of
impairment based on the internal/external factors. An impairment loss
is recognized wherever the carrying amount of assets exceeds its
recoverable amount which is the greater of net selling price and value
in use of the respective assets. In assessing the value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessment of the
time value of money and risk specific to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows. After impairment,
depreciation is provided on the revised carrying amount of the asset
over its remaining useful life.
2.7 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the long-term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.8 Inventories
Raw materials and packing materials are valued at lower of cost and net
realizable value. However, materials and other items held for use in
the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost of raw materials is determined on specific
identification basis and packing materials is determined on moving
transaction average basis
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of Work-in-progress is determined on First in First out
basis and cost of finished goods is determined on Retail sales price
method.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost of traded
goods is determined on First in First out basis.
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.
2.9 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences arising on the settlement/conversion of monetary
items are recognized as income or expenses in the period in which they
arise.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
2.10 Revenue Recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Sale of goods: Sales are recognised when the substantial risks and
rewards of ownership in the goods are transferred to the buyer and
goods are unconditionally handed over to the transporters for delivery
as per the terms of the contract. Sales are net of discounts,
incentives, rebates and sales taxes. The Company collects sales taxes
and value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenues.
Sale of Services: In contracts involving the rendering of services,
revenue is measured using the completed service method.
Interest: Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the applicable interest
rate. Interest income is included under the head "other income" in the
statement of profit and loss.
Dividend: Dividend income is recognized when the company''s right to
receive dividend is established by the reporting date.
Export Incentives: Export incentives are recognised when the right to
receive such incentives as per the applicable terms is established in
respect of the exports made and when there is no significant
uncertainty regarding the ultimate realisation / utilisation of such
incentives.
Insurance and other claims due to uncertainty in realisation are
accounted for on acceptance basis.
2.11 Retirement and Other Employee Benefits
(i) Provident & Pension Fund: Retirement benefits in the form of
Provident and Pension Funds are defined contribution schemes and are
charged to the statement of profit and loss of the period when the
contributions to the respective funds are due. The Company has no
obligation other than contributions to the respective funds. The
Company recognises contribution payable to the provident fund scheme as
an expenditure, when an employee renders the selected service.
(ii) Gratuity:The company operates defined benefit plan for its
employees, viz., gratuity. The costs of providing benefits under this
plan is determined on the basis of actuarial valuation at each
year-end. Actuarial valuation is carried out using the projected unit
credit method. Actuarial gains and losses is recognized in full in the
period in which they occur in the statement of profit and loss.
(iii) The leave balances of the employees are only encashable during
the year and cannot be accumulated and carried forwarded to next year
2.12 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences 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. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
2.13 Provisions and Contingent Liabilities
Provisions: A provision is recognized when the company has a present
obligation as a result of 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. Provisions are not discounted to their present value and
are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to reflect the current best estimates.
Contingent Liabilities: A contingent liability is a possible obligation
that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
beyond the control of the company or a present obligation that is not
recognized because it is not probable that an outflow of resources will
be required to settle the obligation. A contingent liability also
arises in extremely rare cases where there is a liability that cannot
be recognized because it cannot be measured reliably. The company does
not recognize a contingent liability but discloses its existence in the
financial statements.
2.14 Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased assets are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight line basis over the
lease term.
2.15 Government Grants
Grants and subsidies from the government are recognized when there is
reasonable assurance that the company will comply with the conditions
attached to them, and the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
Government grants of the nature of promoter''s contribution are credited
to Capital reserve and treated as a part of Shareholder''s funds.
2.16 Segment Reporting
Based on the synergies, risks and returns associated with business
operations and in terms of Accounting Standard - 17, the Company is
predominantly engaged in a single segment of Garments & Hosiery goods
and related services during the year. The analysis of geographical
segments is based on the areas in which customers of the Company are
located.
2.17 Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
2.18 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2014
1.1 Basis of preparation
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
under the historical cost convention on accrual basis. These financial
statements have been prepared to comply in all material respects with
the accounting standards notified under the Companies Act, 1956, read
with General Circular 8/2014 dated 4th April, 2014, issued by the
Ministry of Corporate Affairs. The accounting policies adopted in the
preparation of financial statements are consistent with those of
previous year.
2.2 Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the 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 result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
2.3 Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs, if capitalization criteria are met, and
directly attributable cost of bringing the asset to its working
condition for the intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
"Depreciation is provided on a pro-rata basis on the straight-line
method at the rates prescribed in Schedule XIV of the Companies Act,
1956, or at the rates determined based on the useful lives of the
respective assets, as estimated by the management, whichever is higher.
The rates determined based on the useful lives coincides with the rates
prescribed in Schedule XIV of the Companies Act, 1956.
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 86 years."
2.4 Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful economic lives.
Gains or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset and recognised
as income or expense in
Notes to the Financial Statements (Amount in Rs.)
the Statement of Profit & Loss. The useful lives over which intangible
assets are amortised are as under:
Assets Useful Life
(in years)
Copyrights & Trade marks 10
Computer Software 5
2.5 Borrowing Costs
Borrowing cost includes 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 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 capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
2.6 Impairment
The carrying amount of assets (tangible and intangible) is reviewed at
each balance sheet date, to determine if there is any indication of
impairment based on the internal/external factors. An impairment loss
is recognized wherever the carrying amount of assets exceeds its
recoverable amount which is the greater of net selling price and value
in use of the respective assets. In assessing the value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessment of the
time value of money and risk specific to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows. After impairment,
depreciation is provided on the revised carrying amount of the asset
over its remaining useful life.
2.7 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.8 Inventories
Raw materials and packing materials are valued at lower of cost and net
realizable value. However, materials and other items held for use in
the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost of raw materials and packing materials is
determined on a first in first out basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of Work-in-progress is determined on First in First out
basis and cost of finished goods is determined on Retail sales price
method.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost of traded
goods is determined on First in First out basis.
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.
2.9 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit & Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
2.10 Revenue Recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Sale of Goods : Sales are recognised when the substantial risks and
rewards of ownership in the goods are transferred to the buyer and
goods are unconditionally handed over to the transporters for delivery
as per the terms of the contract. Sales are net of discounts,
incentives, rebates and sales taxes. The Company collects sales taxes
and value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenues.
Sale of Services : In contracts involving the rendering of services,
revenue is measured using the proportionate completion method.
Interest : Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the applicable interest
rate. Interest income is included under the head "other income" in the
statement of profit and loss.
Dividend : Dividend income is recognized when the company''s right to
receive dividend is established by the reporting date.
Export Incentives : Export incentives are recognised when the right to
receive such incentives as per the applicable terms is established in
respect of the exports made and when there is no significant
uncertainty regarding the ultimate realisation / utilisation of such
incentives.
Insurance and other claims due to uncertainty in realisation are
accounted for on acceptance basis.
2.11 Employee Benefits
(i) Provident Fund : Retirement benefit in the form of provident fund
is a defined contribution scheme. The company has no obligation, other
than the contribution payable to the provident fund. The company
recognizes contribution payable to the provident fund scheme as an
expenditure, when an employee renders the related service.
(ii) Gratuity : The company operates defined benefit plan for its
employees, viz., gratuity. The costs of providing benefits under this
plan is determined on the basis of actuarial valuation at each
year-end. Actuarial valuation is carried out using the projected unit
credit method. Actuarial gains and losses is recognized in full in the
period in which they occur in the statement of profit and loss.
2.12 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences 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. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
2.13 Provisions and Contingent Liabilities
Provisions : A provision is recognized when the company has a present
obligation as a result of 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. Provisions are not discounted to their present value and
are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to reflect the current best estimates.
Contingent Liabilities : A contingent liability is a possible
obligation that arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain
future events beyond the control of the company or a present obligation
that is not recognized because it is not probable that an outflow of
resources will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where there is a
liability that cannot be recognized because it cannot be measured
reliably. The company does not recognize a contingent liability but
discloses its existence in the financial statements.
2.14 Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased assets are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight line basis over the
lease term.
2.15 Government Grants
Grants and subsidies from the government are recognized when there is
reasonable assurance that the company will comply with the conditions
attached to them, and the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
Government grants of the nature of promoter''s contribution are credited
to Capital reserve and treated as a part of Shareholder''s funds.
2.16 Segment Reporting
Based on the synergies, risks and returns associated with business
operations and in terms of Accounting Standard - 17, the Company is
predominantly engaged in a single segment of Garments & Hosiery goods
and related services during the year. The analysis of geographical
segments is based on the areas in which customers of the Company are
located.
2.17 Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short- term investments with an
original maturity of three months or less.
2.18 Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
a) There is no change in the number of shares in the current year and
last year.
b) Terms / Rights attached in Equity Shares
The Company has only one class of equity shares having a par value of Rs.
1/- per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividend in Indian Rupee. 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.
During the year ended March 31, 2014 the Company has proposed a final
dividend of Rs. 2.50 per share (31st March, 2013 : Rs. 2 per share).
c) Aggregate number of shares issued for consideration other than cash
during the period of five year immediately preceeding the reporting
date.
The shares were issued other than cash in the year 2008-09.
Accordingly, the disclosure for the same is not made in 2013-14.
d) Details of shareholders holding more than 5% shares in the Company
As per records of the Company, including its register of shareholders /
members as on 31st March, 2014, the above shareholding represents legal
ownership of shares.
Term loan from a bank is secured by first charge by way of
hypothecation of movable fixed assets and mortgage of immovable fixed
assets of Domjur Unit. Further term loan of Rs. 80,000,000 (31st March,
2013 : Rs. 160,000,000) is secured by personal guarantee of 3 Directors
of the Company and Corporate Guarantee given by Rupa Global Private
Limited and term loan of Rs. 72,222,222 (31st March, 2013 : Rs. 94,444,444)
is secured by personal guarantee of 3 Directors of the Company.
Term loan of Rs. 80,000,000 (31st March, 2013 : Rs. 160,000,000) is
repayable in quarterly installments of Rs. 20,000,000 by 13th March, 2015
and carries interest @12.50% per annum. Term Loan ofRs. 72,222,222 (31st
March, 2013 : Rs. 94,444,444) is repayable in 18 equal quarterly
installments of Rs. 5,555,556 by 14th June, 2017 and carries interest @
12.40% per annum. Term Loan ofRs. 70,000,000 (31st March, 2013 : Rs. NIL)
is repayable in 18 equal quarterly installments ofRs. 3,888,889 starting
from 28th June, 2014 and ending on 28th September, 2019 and carries
interest @ 12.30% per annum.
Cash Credit including Working Capital Demand Loan from banks are
secured by hypothecation of inventories, book debts and other current
assets and further secured by second charge of movable and immovable
fixed assets of Domjur Unit.
Working Capital Demand Loans are repayable in 7 days to 360 days and
carries interest @4.16% p.a. to 10.85% p.a. (31st March, 2013 : 4.00%
p.a. to 11.50% p.a.)
Cash Credit are repayable on demand and carries interest @ 10.50% p.a.
to 12.50% p.a. (31st March, 2013: 11.25 % p.a. to 13.25% p.a.)
The Income Tax Department had conducted a search and seizure operation
on the Company''s various locations from 7th November, 2013 to 8th
November, 2013 under section 132 of the Income Tax Act, 1961. No
order/demand, consequent to search operation, has so far been received
by the Company from the Income Tax Department and thus liability, if
any, arising out of such search and seizure is not presently
ascertainable. The Income Tax Department has seized Rs. 1,900,000 during
the search and seizure which is disclosed under Cash on Hand in Note
19.
Mar 31, 2013
1.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. These financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and the other relevant provisions
of the Companies Act, 1956.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
1.2 Use of Estimates
The preparation of the Financial Statement requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures relating to contingent liabilities and
assets as at the Balance Sheet date and the reported amounts of Income
and Expenses during the reporting period. Difference between the actual
results and the estimates are recognized in the year in which the
results are known/materialized.
1.3 Tangible Asset
Tangible assets are stated at acquisition cost, net of accumulated
depreciation and accumulated impairment losses, if any.
Subsequent expenditures related to an item of fixed asset are added to
its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
net realisable value and are shown separately in the financial
statements. Any expected loss is recognised immediately in the
Statement of Profit & Loss.
Losses arising from the retirement of, and gains or losses arising from
disposal of fixed assets which are carried at cost are recognised in
the Statement of Profit & Loss.
Depreciation is provided on a pro-rata basis on the straight-line
method over the estimated useful lives of the assets at the rates
prescribed under Schedule XIV of the Companies Act, 1956.
1.4 Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful lives.
Gains or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset and recognised
as income or expense in the Statement of Profit & Loss. The
amortization rates used are :
Assets Rates
Copyrights & Trade marks 10%
Computer software 20%
1.5 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit & Loss in the period in which they are incurred.
1.6 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.7 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments. Current investments are carried at
cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.8 Inventories
Inventories are stated at lower of cost and net realisable value. Cost
is determined using the first-in, first-out (FIFO) method. The cost of
finished goods and work in progress comprises raw materials, direct
labour, other direct costs and related production overheads.Net
realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
1.9 Foreign Currency Transactions
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting 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. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit & Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
Forward exchange contracts outstanding as at the year end on account of
firm commitment / highly probable forecast transactions are marked to
market and the losses, if any, are recognised in the Statement of
Profit & Loss and gains are ignored in accordance with the Announcement
of Institute of Chartered Accountants of India on ''Accounting for
Derivatives''issued in March 2008.
1.10 Revenue Recognition
Sale of goods : Sales are recognised when the substantial risks and
rewards of ownership in the goods are transferred to the buyer and
goods are unconditionally handed over to the transporters for delivery
as per the terms of the contract and are recognised net of discounts
(including cash discounts and other schemes, as per trade practices
followed by the industry), rebates, sales taxes and excise duties.
Sale of Services : In contracts involving the rendering of services,
revenue is measured using the proportionate completion method.
1.11 Other Income
Interest: Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend : Dividend income is recognised when the right to receive
dividend is established.
1.12 Export Incentives
Benefits on account of duty drawback are accounted in the year of
export.
1.13 Employee Benefits
(i) Provident Fund : Contribution towards provident fund for certain
employees is made to the regulatory authorities, where the Company has
no further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis.
Company''s Contributions to Provident Fund are charged to Statement of
Profit & Loss as and when they become payable.
(ii) Gratuity: The Company provides for gratuity, a defined benefit
plan (the "Gratuity Plan") covering eligible employees in accordance
with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a
lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee''s salary and the tenure of employment. The
Company''s liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses/ gains are
recognised in the
Statement of Profit & Loss in the year in which they arise. Gratuity
Liability is a Fund maintained with the Life Insurance Corporation of
India (LICI) under the Group Gratuity Scheme).
1.14 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the taxation laws prevailing in
the respective jurisdictions.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
company reassess unrecognised deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the company will pay
normal income tax during the specified period.
Such asset is reviewed at each Balance Sheet date and the carrying
amount of the MAT credit asset is written down to the extent there is
no longer a convincing evidence to the effect that the Company will pay
normal income tax during the specified period.
1.15 Provisions and Contingent Liabilities
Provisions : Provisions are recognised when there is a present
obligation 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 there is a reliable estimate of the amount of the
obligation.
Provisions are measured at the best estimate of the expenditure
required to settle the present obligation at the Balance sheet date and
are not discounted to its present value.
Contingent Liabilities : Contingent liabilities are disclosed when
there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non occurrence of
one or more uncertain future events not wholly within the control of
the company or a present obligation that arises from past events where
it is either not probable that an outflow of resources will be required
to settle or a reliable estimate of the amount cannot be made.
1.16 Government Grants
i) Government Grants of the nature of project subsidy on Capital Assets
is recognized as capital subsidy when there is a reasonable assurance
that the subsidy will be received.
ii) Revenue Grant is recognized in the Statement of Profit & Loss on
confirmation of reasonable assurance of the receipt.
1.17 Segment Reporting
The accounting policies adopted for segment reporting are in conformity
with the accounting policies adopted for the Company. Revenue and
expenses have been identified to segments on the basis of their
relationship to the operating activities of the segment.
Revenue and expenses, which relate to the Company as a whole and are
not allocable to segments on a reasonable basis, have been included
under "Unallocated corporate expenses".
The Company has identified business segment as its primary segment. The
Company has also identified as its reportable geographical segment, the
sales to Indian market and export sales.
1.18 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short- term highly liquid
investments with original maturities of three months or less.
1.19 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company''s earnings per share is the net
profit for the period after deducting preference dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
1.20 Prior Period Adjustments/Extraordinary Items
Prior period items which arise in the current period as a result of
error or omission in preparation of prior period''s financial statement
are separately disclosed in the Statement of Profit & Loss. However,
differences in actual Income/expenditure arising out of over/under
estimation pertaining to prior periods are not treated as "Prior Period
Adjustment".
Extraordinary items, i.e. gains or losses which arise from events or
transactions which are distinct from ordinary activities of the company
which are material are separately disclosed in the Statement of Profit
& Loss.
Mar 31, 2012
1.1 Basis of Preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. These financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and the other relevant provisions
of the Companies Act, 1956.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
1.2 Use of Estimates
The Preparation of Financial Statement requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures relating to contingent liabilities and
assets as at the Balance Sheet date and the reported amounts of Income
and Expenses during the reporting period. Difference between the actual
results and the estimates are recognized in the year in which the
results are known/materialized.
1.3 Tangible Asset
Tangible Assets are stated at acquisition cost, net of accumulated
depreciation and accumulated impairment losses, if any.
Subsequent expenditures related to an item of fixed asset are added to
its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
net realisable value and are shown separately in the financial
statements. Any expected loss is recognised immediately in the
Statement of Profit & Loss.
Losses arising from the retirement of, and gains or losses arising from
disposal of fixed assets which are carried at cost are recognised in
the Statement of Profit & Loss.
Depreciation is provided on a pro-rata basis on the straight-line
method over the estimated useful lifes of the assets at the rates
prescribed under Schedule XIV of the Companies Act, 1956.
1.4 Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortisation and accumulated impairment losses, if any. Intangible
Assets are amortised on a straight line basis over their estimated
useful lives.
Gains or Losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset and recognised
as income or expense in the Statement of Profit & Loss. The
amortization rates used are :
Assets Rates
Copyrights & Trade Marks 10%
Computer Software 20%
1.5 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit & Loss in the period in which they are incurred.
1.6 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset's or cash generating unit's
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.7 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as Current Investments. All other investments are
classified as Long-term Investments. Current Investments are carried at
cost or fair value, whichever is lower. Long-term Investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.8 Inventories
Inventories are stated at lower of cost and net realisable value. Cost
is determined using the first-in, first-out (FIFO) method. The cost of
finished goods and work-in-progress comprises raw materials direct
labour, other direct costs and related production overheads.
Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale.
1.9 Foreign Currency Transactions
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting 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. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit & Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
Forward exchange contracts outstanding as at the year end on account of
firm commitment/highly probable forecast transactions are marked to
market and the losses, if any, are recognised in the Statement of
Profit & Loss and gains are ignored in accordance with the Announcement
of Institute of Chartered Accountants of India on 'Accounting for
Derivatives'issued in March, 2008.
1.10 Revenue Recognition
Sale of goods : Sales are recognised when the substantial risks and
rewards of ownership in the goods are transferred to the buyer and
goods are unconditionally handed over to the transporters for delivery
as per the terms of the contract and are recognised net of discounts,
rebates, sales taxes and excise duties.
Sale of Services : In contracts involving the rendering of services,
revenue is recognised using the proportionate completion method.
1.11 Other Income
Interest: Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend : Dividend income is recognised when the right to receive
dividend is established.
1.12 Exports Incentives
Benefits on account of duty drawback are accounted in the year of
export.
1.13 Employee Benefits
(i) Provident Fund : Contribution towards provident fund for certain
employees is made to the regulatory authorities, where the Company has
no further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis.
Company's Contributions to Provident Fund are charged to Statement of
Profit & Loss as and when they become payable.
(ii) Gratuity : The Company provides for gratuity, a defined benefit
plan (the "Gratuity Plan") covering eligible employees in accordance
with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a
lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee's salary and the tenure of employment. The
Company's liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses/gains are
recognised in the Statement of Profit & Loss in the year in which they
arise. Gratuity Liability is a Fund maintained with the Life Insurance
Corporation of India (LICI) under the Group Gratuity Scheme.
iii) Leave encashment: Leave encashment benefits are accrued and
settled on a 12 month period of September to August and are accounted
for accordingly.
1.14 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current Tax is measured at the amount expected to be paid to
the tax authorities in accordance with the taxation laws prevailing in
the respective jurisdictions.
Deferred Tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred Tax Assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
Company reassess unrecognised deferred tax assets, if any.
Current Tax Assets and Current Tax Liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred Tax Assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period.
Such asset is reviewed at each Balance Sheet date and the carrying
amount of the MAT credit asset is written down to the extent there is
no longer a convincing evidence to the effect that the Company will pay
normal income tax during the specified period.
1.15 Provisions and Contingent Liabilities
Provisions : Provisions are recognised when there is a present
obligation 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 there is a reliable estimate of the amount of the
obligation.
Provisions are measured at the best estimate of the expenditure
required to settle the present obligation at the Balance Sheet date and
are not discounted to its present value.
Contingent Liabilities : Contingent Liabilities are disclosed when
there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non occurrence of
one or more uncertain future events not wholly within the control of
the Company or a present obligation that arises from past events where
it is either not probable that an outflow of resources will be required
to settle or a reliable estimate of the amount cannot be made.
1.16 Government Grants
i) Government Grants of the nature of project subsidy on Capital Assets
is recognized as capital subsidy when there is a reasonable assurance
that the subsidy will be received.
ii) Revenue Grant is recognized in the Statement of Profit & Loss on
confirmation of reasonable assurance of the receipt.
1.17 Segment Reporting
The accounting policies adopted for segment reporting are in conformity
with the accounting policies adopted by the Company.
Revenue and Expenses have been identified to segments on the basis of
their relationship to the operating activities of the segment.
Revenue and Expenses, which relate to the Company as a whole and are
not allocable to segments on a reasonable basis, have been included
under "Unallocated corporate expenses".
The Company has identified business segment as its primary segment. The
Company has also identified as its reportable geographical segment, the
sales to Indian market and export sales.
1.18 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short- term highly liquid
investments with original maturities of three months or less.
1.19 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company's earnings per share is the net
profit for the period after deducting preference dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
1.20 Prior Period Adjustments/Extra ordinary Items
Prior period items which arise in the current period as a result of
error or omission in preparation of prior period's financial statement
are separately disclosed in the statement of profit & loss. However,
differences in actual Income/expenditure arising out of over/under
estimation pertaining to prior periods are not treated as "Prior Period
Adjustment".
Extraordinary items, i.e. gains or losses which arise from events or
transactions which are distinct from ordinary activities of the company
which are material are separately disclosed in the statement of profit
& loss.